---

ANNUAL INFORMATION FORM

FOR THE FISCAL YEAR ENDED OCTOBER 31, 2010



Suite 1920  1188 West Georgia Street Vancouver, British
Columbia V6E 4A2 January 20, 2011

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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                                         | 18  
|                                                                 |     
|ITEM 5: NARRATIVE DESCRIPTION OF THE BUSINESS                    | 18  
|General                                                          | 18  
|Risk Factors                                                     | 21  
|Material Mineral Projects                                        | 28  
|                                                                 |     
|ITEM 6: DIVIDENDS                                                | 39  
|                                                                 |     
|ITEM 7: DESCRIPTION OF CAPITAL
      STRUCTURE                   | 39  
|General Description of Capital Structure                         | 39  
|                                                                 |     
|ITEM 8: MARKET FOR SECURITIES                                    | 39  
|Trading Price and Volume                                         | 39  
|                                                                 |     
|ITEM 9: ESCROWED SECURITIES                                      | 40  
|                                                                 |     
|ITEM 10: DIRECTORS AND EXECUTIVE
      OFFICERS                  | 40  
|Name, Occupation and Security Holding                            | 40  
|Cease Trade Orders, Bankruptcies,
      Penalties or Sanctions   | 42  
|Conflicts of Interest                                            | 43  
|                                                                 |     
|ITEM 11: PROMOTERS                                               | 44  
|                                                                 |     
|ITEM 12: LEGAL PROCEEDINGS AND REGULATORY ACTIONS                | 44  
|Legal Proceedings                                                | 44  
|Regulatory Actions                                               | 44  
|Interest of Management and Others in
      Material Transactions | 44  
|                                                                 |     
|ITEM 13: TRANSFER AGENT AND
      REGISTRAR                      | 45  
|                                                                 |     
|ITEM 14: MATERIAL CONTRACTS                                      | 45  

i

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TABLE OF CONTENTS (continued)

|                                              | Page
|--------------------------------------------- | ----
|                                              |     
|ITEM 15: NAMES AND INTERESTS OF
      EXPERTS | 45  
|Names and Interests of Experts                | 45  
|                                              |     
|ITEM 16: ADDITIONAL INFORMATION               | 46  
|Audit Committee Information                   | 46  
|Additional Information                        | 46  
|                                              |     
|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, 2010;                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                 
| | (b) | Management Discussion and Analysis of the Company for the
      year ended October 31, 2010 dated January 26, 2011 (MD&A);                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                 
| | (c) | Management Information Circular dated May 25, 2010 in
      respect of the 2010 Annual General Meeting (Information Circular);                                                                                                                                
| |     |                                                                                                                                                                                                                                                                 
| | (d) | Technical report dated September 10, 2009 entitled Pampa
      El Toro Mineral Resource Technical Report prepared by SRK Consulting
      (South Africa) (Pty) Ltd. (the Iron Sands Report); and                                                            
| |     |                                                                                                                                                                                                                                                                 
| | (e) | Technical report dated January 27, 2011 entitled
      Longnose and Titac Iron Titanium Exploration Project, Minnesota, USA 
      Exploration Results 2010 prepared by EurGeol Keith J. Henderson and
      Stephen (Jayson) Ripke (the Minnesota 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, 2010 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.

|                                 |  | Year Ended October 31 | 
|-------------------------------- |  | --------------------- | 
|Canadian Dollars to U.S. Dollars |  | 2010                  | 
|Rate at end of period            |  | USD 0.9784            | 
|Average rate for period          |  | USD 0.9636            | 
|High for period                  |  | USD 1.0039            | 
|Low for period                   |  | USD 0.9278            | 

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- 4 -

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 by
|------------------------------ | ----------- | -----------
|Acres                          | Hectares    | 0.404686   
|Feet                           | Metres      | 0.30480    
|Miles                          | Kilometres  | 1.609344   
|Tons                           | Tonnes      | 0.907185   
|Ounces (troy)/ton              | Grams/Tonne | 34.2857    

|1 mile = 1.609 kilometres                | 2000 pounds (1 short ton) = 0.907 tonnes
|---------------------------------------- | ----------------------------------------
|1 acre = 0.405 hectares                  | 1 ounce (troy) = 31.103 grams           
|2,204.62 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 Pampa el Toro and the Minnesota Iron/Titanium properties;
- the potential for the expansion of the estimated resources at Pampa el
  Toro;
- 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 properties, and the timing of the receipt of results
  therefrom;
- the Companys future cash requirements;
- the potential for further upgrading of the concentrate from Pampa el Toro
  and the potential for the commercial production of pig iron from Pampa el Toro
  concentrate;

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- 5 -

- the potential for the commercial recovery of titanium and vanadium from
  the slag resulting from the processing of Pampa el Toro concentrate to make
  pig iron;
- general business and economic conditions; and
- 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.

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 gold, silver,
  copper, iron ore, coal and 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
  properties;
- 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
  Minnesota Iron/Titanium properties;
- 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;

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- 6 -

- 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 any operation at Pampa el Toro; 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 Pampa el Toro project, as described
under Narrative Description of the Business - Material Mineral Projects - Pampa
el Toro Iron Sands Project, Peru 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. As 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.

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- 7 -

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.

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 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                                                                                                                                                                                                                          
|             |                                                                                                                                                                                                                               
|Board      | The Board of Directors of Cardero                                                                                                                                                                                             

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- 8 -

|breccia                | Angular broken rock fragments held together by
      a mineral cement or a fine- grained matrix                                                                                                                                                                                                                                                                                                     
|------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|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 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 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                                                                                                                                                                                                                                                                                                                                                                                              
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Common Shares          | The common shares without par value in the
      capital stock of Cardero as the same are constituted on the date hereof                                                                                                                                                                                                                                                                            

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- 9 -

|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                                                                                                                                                                                                                                                                                                                                                                   
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|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                                                                                                                                                                                                                                                                            

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- 10 -

|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                                                                                                                                                                           
|               |                                                                                                                                                                                                                                                                                     
|hydrothermal | A term pertaining to hot aqueous solutions of
      magmatic origin which may transport metals and minerals in solution                                                                                                                                                             

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- 11 -

|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                                                                                                                                                                                                                                          
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|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)                                                                                                                                                                                                                                

---

- 12 -

|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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- 13 -

|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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- 14 -

|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 1920  1188 West Georgia Street,
Vancouver, British Columbia, Canada V6E 4A2, 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 Argentina, Cardero Peru, Cardero Iron, Cardero Chile,
CCDL, MMC, Cardero Iron USA, Cardero Management USA, Cardero Iron BVI,
Cardero Hierro BVI and Cardero Hierro Peru, 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 and the
United States of America. 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 Pampa el Toro
property, there are currently no identified mineral resources, on any of the
Companys mineral properties.

Over the past three financial
years, the Company has focussed on the acquisition and exploration of mineral
properties primarily in Argentina, Mexico and Peru and, more recently, the
United States. During the 2008, 2009 and 2010 financial years, the Company has
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 and/or iron ore/titanium/vanadium 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 associated with the Baja IOCG project in Mexico due to disappointing
exploration results  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 the Company is reviewing the
results to determine the next step in respect of this property. While the
Company has not carried out any further work on the Iron Sands Project since the
preparation of the initial resource estimate in September, 2009, the Company
continues active discussions towards a joint venture or outright sale with a
number of companies which continue 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 will be the subject of follow-up work programs by the
Company in 2011. During fiscal 2010, the Company optioned out its Corrales and
Santa Teresa properties in Mexico and its Pirquitas property in Argentina, and
in 2011 will continue to seek joint venture partners for its Los Manantiales
(Mina Angela) property in Argentina and its Corongo property in Peru.

During the financial year ended
October 31, 2008, the Company determined to consider other significantly
unexplored regions which held the potential for significant to world class base
and precious metal porphyry and epithermal deposits. It identified the Caucasian
Region (consisting of Republics of Georgia, Armenia and Azerbaijan, the
north-east region of Turkey and certain divisions, republics and territories in
Russia) as such a region, particularly the Republic of Georgia where the
Georgian Government is seeking to put in place a new mining law and promote the
exploitation of the countrys mineral resources. Accordingly, 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 has the right to acquire up to a
30% interest in IMM Gold Limited (IMMG), a subsidiary of IMM which is
presently engaged in reconnaissance exploration programs in the Caucasian
Region. The Company is the manager of the exploration programs on behalf of
IMMG. Although a number of prospective areas have been identified, no properties
have yet been acquired by 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 (issued on November 24, 2008, at which time
the Company received 123,530 ordinary shares of IMMG, representing a 15%
interest). The Company has calculated that it has an obligation to issue an
additional 214,813 additional Common Shares in respect of the acquisition of the
initial 15% interest, and is currently in discussions with IMM to reduce or
eliminate such obligation. The Company determined not to acquire an additional
15% interest in IMMG and did not therefore issue the additional 1,000,000 common
shares on or before December 31, 2009 as required in order to acquire such
additional 15% interest. In light of the lack of progress in acquiring any
mineral properties and after consideration of current market conditions and
IMMGs operating loss, the Company has recorded an impairment charge of $795,000
to reduce the carrying value of the investment to $Nil and wrote off $468,099 in
amounts owed to the Company by IMMG in respect of work carried out by the
Company on behalf of IMMG. However, the Company continues to work with IMMG in
reviewing potential acquisitions.

---

- 17 -

In fiscal 2004 the Company
identified iron ore as a commodity for which there was a significant demand,
and, since then, has, on an ongoing basis, evaluated a number of prospective
iron ore properties, some of which have been acquired. The Pampa de Pongo Iron
property (sold for USD 100 million in January, 2010) and the Iron Sands Project,
both in Peru, are examples of this. The Company continues to evaluate on an
ongoing basis a number of potential iron deposits, not only in Peru and
Argentina, but also in other countries (including Africa), as well as the iron
ore potential of its existing IOCG properties such as the Ursula property in
Mexico. 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 pig iron and titanium/vanadium rich
slag. Work in this regard is ongoing, primarily with respect to the Pampa el
Toro Iron sands project in Peru. In addition, in fiscal 2008 the Company entered
into option agreements to acquire leasehold interests in two
iron/titanium/vanadium properties located on the western margin of the Duluth
Complex near the Mesabi Iron Range in north-eastern Minnesota (the TiTac (100%
interest) and Longnose (85% interest) properties), and is currently implementing
follow-up work programs on both such properties (including drilling), which
programs are scheduled to be complete by the middle of fiscal 2011. It is
anticipated that the results from such programs will enable the Company to
calculate initial resource estimates for each of the Titac and Longnose
deposits. Following the completion of the drilling programs, it is anticipated
that metallurgical testwork on the resulting core will then commence.

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 has been received. 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

---

- 18 -

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 is effective as at, July 21,
2009 (see Narrative Description of the Business - Material Mineral Projects 
Pampa el Toro Iron Sands Project, Peru).

In keeping with bulk-commodity
focus, in June, 2010, Cardero acquired an interest (initially 49.9%, now 45.5%)
in Coalhunter Mining Corp. (Coalhunter). Coalhunter is a private British
Columbia company which has successfully negotiated a joint venture to explore
and, if warranted, develop, certain coal deposits in the Carbon Creek coal field
located in British Columbias northeast coalfield. The joint venture property
consists of a lease of freehold coal and certain coal licenses 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). Cardero has a right to
maintain its interest in Coalhunter on an ongoing basis, and a one-time right to
increase its position to 51% in certain circumstances. This strategic
acquisition provides Cardero with a significant exposure in the metallurgical
coal market, and the potential to establish itself as an operator in that market
by electing to acquire 51% of Coalhunter.

The Companys focus through the
fiscal year ending October 31, 2011 will be to realise the considerable value it
believes is locked in the Iron Sands Project and in the Titac and Longnose
Iron/Titanium properties in Minnesota, USA. It will continue to negotiate for
the joint venture or outright sale of the Iron Sands Project, and proceed with
the next phase of exploration, leading to an initial resource estimate, at TiTac
and Longnose. With the successful completion of the sale of the Pampa de Pongo
project, the Company possesses considerable financial resources. Management is
actively reviewing and assessing advanced mineral projects, primarily iron ore
and copper/gold, that may be suitable for acquisition, development and/or sale
and intends to aggressively seek out and potentially acquire new advanced stage
projects. In this regard, it is also considering synergistic partnerships with
major mining companies that will permit the Company to be part of a consortium
seeking to secure larger projects than the Company has the resources to acquire
on its own, but where it can contribute significant advantages in country
expertise and acquisition/exploration experience.

Significant Acquisitions

Since November 1, 2009, being the
commencement of the Companys last completed fiscal year, the Company has not
entered into any significant acquisitions for which disclosure is required under
Part 8 of National Instrument 51-102.

ITEM 5:NARRATIVE DESCRIPTION OF THE BUSINESS

General

Summary

The Company currently holds, or
has rights to acquire, interests (ranging from 85% 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 and the United
States. 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.

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- 19 -

With the completion of the sale
of the Pampa de Pongo Iron Project in January 2010, the Company considers that
the Iron Sands Project in Peru and the Titac/Longnose Iron Titanium properties
in Minnesota 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 Mineral Projects section of this AIF.

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 Iron Sands Project) or mineral reserves. The Company
does not propose any method of production at this time, although it is
conducting extensive work on the Iron Sands Project 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, 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
lead 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.

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- 20 -

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, 2010, Cardero
had five full-time employees and eight part-time employees and Cardero
Management USA had two 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.

Reorganizations

There have been no
reorganizations of or involving Cardero within the three most recently completed
financial years or completed or 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.

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- 21 -

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.

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 Iron Sands Project, 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.

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- 22 -

Recent market events and
conditions:From 2007 into early 2010, 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.

While these conditions appear to
have improved slightly in later 2010, 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
2008 and 2009, 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 new share 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 trading price
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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- 23 -

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 and Argentina 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 and Peru, 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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- 24 -

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 and the United States. 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.

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- 25 -

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. 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 and Peruvian nuevo soles. The Companys
operations in the United States, Mexico, Argentina and Peru 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.

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- 26 -

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.

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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- 27 -

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 most 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.

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- 28 -

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.

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

Titac & Longnose Iron
Titanium Projects, Minnesota, USA

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

The Longnose and Titac properties are both located in
northeastern Minnesota, roughly 25.5 miles (41 km) apart. The Longnose property
is located in St. Louis County, Township 59N, Range 13W, Section 30; and the
Titac property is located in St. Louis County, Township 55N, Range 14W, Section
34, and Township 54N, Range 14W, Section 3. The Longnose property is centered
at: (Coordinate system: Universal Trans Mercator, Zone 15 North, North American
1983 Datum) 572200 metres East, 5268300 metres North. The Titac property is
approximately centered at: (Coordinate system: Universal Trans Mercator, Zone 15
North, North American 1983 Datum) 568000 metres East, 5228000 metres North (see
Figure 1).

The Company holds an option to acquire up to an 85% interest in
the Longnose property by incurring USD 1,850,000 in expenditures (to acquire
70%) and delivering a feasibility study (to acquire an additional 15%). Upon the
Company earning its 70% or 85% interest, the optionee of the Longnose property
has the option to maintain its 30% or 15% interest and enter into a joint
venture with the Company, 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 lessors of the properties (see Figure 2).

The Company holds a 100% leasehold interest in the Titac
property 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) (see Figure 3).

The Company 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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- 29 -

The Longnose and Titac properties contain known areas of
mineralization, which are being explored further in order to enable a resource
estimation to be prepared.

Topographic relief on both properties is generally low, and the
surface is flat-laying. Elevations on both properties range between 465 and 490
metres above mean sea level. The ground cover at both properties 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 to 30 metres from surface.

Accessibility of both projects is excellent, with the Titac
property located along a paved county highway, and the Longnose property 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 (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.

Eighteen diamond drill core holes have been drilled at the
Longnose property, including six holes drilled by the Company in 2010. Two bulk
samples for metallurgical testing and TiO2 recovery have been collected from the Longnose property by prior operators. The first bulk
sample measured 32+ tons of material and the second bulk sample measured 60
tons. The University of Minnesota, Natural Resources Research Institute,
Coleraine Minerals Research Laboratory houses what remains of both bulk samples.
BHP Minerals International Inc. (BHP) held the Longnose property for some time
in the 1990s. Most of the work completed by BHP centered on metallurgy, and TiO2 recovery. Their first investigation 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 Murso. A pre-NI 43-101 (non-NI
43-101 compliant) historical resource calculation was completed at Longnose by
BHP. A BHP report dated November 11, 1992 estimates probable reserves of 27.57
MT (30.36 million short tons) grading 21.3% TiO2. However, the authors of the Minnesota Report caution that both the BHP report and the included resource
estimate were prepared before the introduction of NI 43-101, and are therefore
historical in nature and the Company is not treating such resources as a current
resource under NI 43-101. Investors are further cautioned that a qualified
person has not yet completed sufficient work to be able to verify the historical
resources, and therefore they should not be relied upon.

Exploration of the Titac property, historically known as
Section 34, has been limited, though several exploratory bore holes and
geophysical surveys have been completed. Six holes were drilled historically and
the Company completed 30 holes in 2010. A ground magnetic survey conducted in
the mid 1960s.

The Longnose and Titac Properties are located within the
Superior Province of the Canadian Shield, and are underlain by intrusive rocks
generated during the formation of the Midcontinent Rift. Mineralization is
hosted by Oxide-bearing Ultramafic Intrusions (OUIs) that intruded into layered
series intrusions of the Duluth Complex. OUIs are dominantly composed of
coarse-grained to pegmatitic pyroxenite, peridotite, and dunite that contains
roughly 15-40% titanium-iron oxide mineralization. Typically, zones of massive
and semi-massive oxide are also present throughout the stratigraphy. Locally,
some OUIs also contain abundant copper-nickel sulfide mineralization as well
(but this style of mineralization has not been intersected within the Companys
properties). Most OUIs 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).

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- 30 -

The Longnose and Titac OUls contain disseminated, semi-massive,
and massive titanium-iron oxide mineralization. The Longnose property hosts a
single intrusion which is at least 150 metres thick, dipping shallowly to the
southeast. The Titac property contains at least two mineralized OUIs (Titac
North & Titac South). Titac North is at least 450 metres thick (open at
depth) and has a vertical pipe-like geometry. Titac South is at least 490 metres
thick, and also has a pipe-like geometry.

Mineralization at Longnose dominantly consists of disseminated
to net-textured, medium to coarse-grained, magnetite and ilmenite, with some
fraction of titaniferous 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 Longnose. 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 Longnose 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.

Titaniferous-iron oxide mineralization at the Titac property
shares many similar characteristics of mineralization at the Longnose property.
When mineralization is hosted by olivine-rich ultramafic rocks it is typically
medium to coarse-grained, disseminated to net-textured, and interstitial to
silicate minerals. The largest difference occurs with mineralization hosted by
pyroxenite, in which the oxide mineralization typically occurs as medium to
coarse-grained clumps or clots up to roughly 5 cm in size (typically 2-4 cm) at
Titac.

The Titac intrusion also contains abundant copper-sulfide
mineralization. Up to five modal percent (typically 1-2%) copper-sulfide
mineralization has been observed, dominantly consisting of chalcopyrite and
bornite. Two distinct types of chalcopyrite seem to be present including a
bright, golden, metallic colored chalcopyrite and a second duller,
brownish-bronze colored chalcopyrite. Bornite exhibits a deep blue-purple
metallic color. Copper sulfides typically occur as medium to coarse-grained
disseminations interstitial to silicates and oxides, but also occur as
pegmatitic clots up to roughly 5 cm in size (typically 2-3 cm). Very
fine-grained disseminations of pyrrhotite can occur near the contacts of the OUI
and the country rock (in both OUI rocks and country rocks), and rarely
fine-grained pyrite will fill micro-fractures (<1 to 2 mm thick) within the
OUI.

The Longnose intrusion was partially defined by historical
drilling. As a result, the internal stratigraphy and general attitude of the
intrusion are relatively simple, and the overall attitude of the intrusion lends
itself to shallow, regularly-spaced drilling. Drilling at the Titac property is
much more complex because of the attitude, orientation, and stratigraphy of the
Titac intrusions. Both Titac North and Titac South appear to be sub-vertical,
pipe-like intrusions, with sub-vertical lithological zonation. Here it is more
appropriate to drill multiple holes from a single drilling platform in a
fan-like pattern. This drilling method was successful in defining the boundaries of the
intrusion during drilling of the Titac South intrusion, and is recommended for
any additional drilling on the remaining intrusions at Titac.

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- 31 -

Both properties are at an advanced exploration stage.

During 2010, a total of 948.6 metres were completed at Longnose
for six drillholes. At Titac North and South, a total of 10,557.9 metres were
completed for thirty drillholes. All assay results from the 2010 drilling
campaign have been received and are included in this report as comprehensive
tables. A second drilling campaign is slated to begin in February 2011.

Both the Longnose and Titac OUIs 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 drilling program conducted by the Company in 2010 confirmed
strong titanium-iron-oxide mineralization at both the Longnose and Titac
properties, and determined that the Titac property contains at least two
intrusions with large zones of titanium-iron-oxide mineralization (Titac North
and Titac South).

Detailed recommendations regarding drilling programs and other
aspects of both properties are as follows:

- Drilling by the Company in 2010 at the Titac South intrusion has defined a
  large zone of titanium-iron mineralization, and identified an area to the
  northeast of the intrusion that merits additional drilling. A drilling program
  consisting of two drill holes is recommended to better define this
  northeastern area.
- A drilling program consisting of four drill holes at the Longnose property
  is recommended in order to both confirm historical drilling results, and to
  test continuity of mineralization within the intrusion.
- Upon completion of drilling these six holes, and obtaining assay data for
  these six holes, it is recommended that a resource calculation should be
  completed for Longnose and TiTac South. SRK Consulting have been retained to
  complete this work as independent consultants. Drilling by the Company in 2010
  at the Titac North intrusion helped to confirm the presence of strong
  titanium-iron oxide mineralization, however definition drilling is not planned
  for the 2011 drill program. A future drill program, consisting of
  approximately 50 drill holes, will be sufficient to delineate additional
  resources at TiTac North.
- A re-interpretation of a historical (1967) ground magnetic data by Quantec
  Geoscience identified numerous outlying intrusions at Titac. An introductory
  exploration drilling program consisting of four drill holes is recommended to
  explore these areas.
- A petrographic study of the oxide and sulfide mineralization found at both
  properties should be conducted to identify the specific oxide and sulfide
  minerals present at both properties.
- Initial metallurgical and recovery testing should be conducted. Initial
  bulk samples should consist of 100 kilogram composites, collected from drill
  core sample coarse rejects, and represent average mineralization grades.
- Selective sample pulps should be assayed for platinum group elements
  contents.

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- 32 -

A budget is presented to complete the recommended work program:

|Recommended Item                                                                                                              |   | US$     | 
|----------------------------------------------------------------------------------------------------------------------------- | - | ------- | 
|Longnose in-fill and step-out
      drilling (4 holes/1100 m @ $163/m*)                                                       |   | 180,000 | 
|Titac South in-fill drilling (2 holes/500 m @
      $163/m*)                                                                  |   | 82,000  | 
|Resource calculation & 43-101
      Reporting                                                                                 |   | 60,000  | 
|Titac outlying intrusions exploration drilling (4
      holes/1200 m @ $163/m*)                                               |   | 200,000 | 
|Acquisition of additional mineral
      leases/property boundary survey                                                       |   | 40,000  | 
|Mineralization study                                                                                                          |   | 15,000  | 
|Metallurgical testing                                                                                                         |   | 100,000 | 
|Platinum group element assays                                                                                                 |   | 12,000  | 
|TOTAL                                                                                                                         | $ | 689,000 | 
|*Drilling cost per metre includes: Site and Trail
      preparation, drilling, sampling, facility/vehicle lease, and staffing |   |         | 



Figure 1: Titac and Longnose Project Location and
Infrastructure

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- 33 -



Figure 2: Longnose Property Boundary with Drill Collar
Locations of 2010 Drill Program



Figure 3: Titac Property Boundary with Drill Collar
Locations of 2010 Drill Program

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- 34 -

Planned Activities

The Company intends to proceed
with the recommended program in the Minnesota Report, and anticipates that the
program will commence in February, 2011. All necessary permits are in place, and
the Company has the funds to complete the proposed program.

Pampa el Toro Iron Sands Project, Peru

Information in this AIF regarding
the Iron Sands Project is based on information provided by the Iron Sands
Report. The following summary is from the Iron Sands Report and the detailed
disclosure in the Iron Sands Report is incorporated into this AIF by reference.
Readers are encouraged to review the entire Iron Sands Report, which is filed on
SEDAR at www.sedar.com. There has been no
material work done on the Iron Sands Project since the completion of the Iron
Sands Report.

Summary

The Pampa el Toro Project is an
Iron Sands project situated in the desert coastal region of Southern Peru.
During late 2005 the Company initiated a feasibility study on this project by
starting a sand sampling program headed by Cooke Geochemical Consulting, and a
trenching and percussion drilling programme managed by their own geologists.
This has been followed up by various outsourced metallurgical test programs,
initially done by Midrex (2005) and most recently by Bateman Engineering (2007).

Location

The property is located near the
city of Nazca in the desert coastal region of southern Peru approximately 45 km
northeast of the port of San Juan, close to the large Marcona iron mine
(approximate resource of 1.4Bt @ 54% iron), the Mina Justa copper deposit
(inferred resource of 218Mt @ 0.8% copper), and the Pampa de Pongo iron deposit
(Figure 4).

Ownership

There are 14 mining concessions
within the Pampa El Toro Project area totalling 10,300 hectares (Figure 5). The
Company has direct ownership of 9 of the concessions and has signed an option
agreement with Minas Ataspacas S.A. to acquire an initial 70% interest in the
other 5 concessions.

Geology and Mineralization

The Lower Paleozoic iron rich
Marcona Formation is unconformably overlain by Triassic, Jurassic and Cretaceous
volcanic and sedimentary sequences which, in turn, were intruded by stocks and
dykes belonging to the Peruvian Coastal Batholith complex. These strata were, in
turn, deformed, uplifted and eroded, and formed a base on which Quaternary
sediments were deposited.

It is speculated that the
iron-bearing minerals contained in the iron sands either partially or wholly
originated from the volcanic units overlying the Marcona formation, however
additional as yet unidentified sources are possible. However, it is possible
that erosion of these Quaternary sediments contributed significant quantities of
magnetite material contained in the dune fields.

Mineralogically, the principal
iron-bearing minerals in the dunes consist of magnetite, titanomagnetite and
ilmenite, with minor to trace amounts of hematite, rutile, titanite, ulvospinel
and goethite. Silicate minerals, which make up the bulk of the sands, are
primarily quartz, plagioclase, amphibole, chlorite, mica and pyroxene. The
majority of the ilmenite (80-85% by volume) is associated with magnetite,
titanomagnetite and hematite, with the remaining 15-20% by volume present as
free ilmenite grains.

The dune sands are considered to
be the product of aeolian re-distribution of contemporary and ancient beach
sands and Quaternary basin sediments derived from erosion of the bedrock,
winnowed, and re-distributed, by prevailing winds to produce potentially
economic concentrations of magnetite in extensive, and partially active, dune
fields.

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- 35 -

Exploration Concept

The primary focus of the
exploration work has been on the sampling, trenching and percussion drilling of
the deposit, combined with significant amounts of metallurgical testwork. This
has lead to the development of a robust geological and structural model on which
the mineral resource estimation and calculation is based. Exploration is thus at
an advanced stage. Detailed metallurgical testwork has also been completed.

The Company has conducted the
exploration program with a set of standard procedures which aim to monitor the
quality of the sampling and assay results. The standard procedures include
submitting both Certified Reference Materials to monitor the accuracy of the
analyses, as well as the analysis of field and laboratory pulp duplicate samples
to benchmark the sampling and sample splitting errors as well as the precision
and repeatability of the analyses. The quality control samples are checked
before accepting the batch analytical results from the laboratory in order to
control the quality of the data accepted in the exploration database. The
quality control samples indicate that there was no bias introduced in the
samples splitting process, as field duplicates and pulp duplicates from the
laboratory show very similar characteristics. Analysis of the quality control
sample results indicates that the analyses have been conducted to a high level
of accuracy and precision, and are acceptable for use in Mineral Resource
Estimation.

Status of Exploration

A pilot mineral processing plant
has been erected on site in early 2008 and approximately 56.8 tons of magnetic
concentrate was produced. In terms of metallurgical testwork, the Phase I
briquetting work and the Phase II bench-scale pig iron production program has
been completed. The Phase III pilot-scale pig iron production program has been
completed and the analytical results are currently being determined.

Mineral Resource Estimation

SRK Consulting (South Africa)
(Pty) Ltd. (SRK) have generated a Mineral Resource estimate based on the data
supplied by the Company from their exploration programs. The assay results of a
selected set of elements from the 5m composite samples were analysed and found
to represent a relatively well represented single population of all elements.
There are strong correlations between the major economic elements (Fe2O3,
TiO2, and V) that indicate a common genetic and depositional history. This

indicates that these elements are most likely contained within
the same, or strongly associated minerals. SRK generated and modeled
experimental semi-variograms that indicate long range continuity in the major
elements, but that also indicate a long range trend element within the deposit
in a north-south direction. Cross validation tests conducted by SRK on the
semi-variograms indicate that the modelled semi-variograms and the selected
search neighbourhood parameters should provide robust estimates.

The surface topography contours
were used to generate a wireframe representation of the topography. This surface
was copied vertically downwards by 30m, and used to constrain the depth extent
of the Mineral Resource estimate. Drillhole collars were also projected
vertically onto the surface as the various generations of GPS surveys of the
collars did not accurately match the surveyed contours.

---

- 36 -

SRK created a block model with a
block size equivalent to the nominal drillhole spacing of 250m X and Y
directions, and 5m vertically. The block model was rotated to approximately
match the dip of the topographic surface, which coincided with the plane of best
continuity. In order to better model the volume, and the topographic variations,
the parent blocks were sub-divided into smaller blocks, with a minimum size in
the XY plane of 6.25m by 6.25m. The blocks were created to exactly match the intersection of the wireframe with the block center. Only
parent blocks were estimated (i.e. each 250m by 250m by 5m collection of
sub-blocks will have the same grade estimate) The vertical continuity of
mineralization is significantly shorter than the lateral continuity, as would be
expected from a deposit emplaced and reworked in thin sheets over time. The
search ellipsoid employed by SRK takes this into account using anisotropic
search scaling, with the result that samples from adjacent boreholes are given a
higher weighting than samples from the same borehole that occur above or below
the block being estimated. A minimum of four samples was required to estimate a
block, and a maximum of 12 was used, to preserve some local variability in the
grades. The maximum number of samples used in the estimation was selected after
an optimisation exercise indicated that this was the best balance between
generating high quality estimates, and over-smoothing of the estimation.

The Mineral Resources were
classified on the basis of the confidence in the geological variation, the
quality of the sampling and analytical results, drillhole spacing, and
indicators of the quality of the estimation. The central portion of the deposit,
which is drilled on approximately 250m centers, which has high quality estimates
was classified as an Indicated Mineral Resource. The portion of the deposit
surrounding this, drilled on approximately 500m centers, and extending
approximately 500m beyond the area drilled on 500 centers is classified as an
Inferred Mineral Resource. Portions of the deposit that were estimated further
than 500m from the 500m spaced drilling were also excluded from the Mineral
Resources until further confirmatory work is completed to confirm the grades of
the material. The Mineral Resources are reported in Table 1.

Table 1: Pampa el Toro Mineral Resources as at 21 July
2009.1

|          |  | Volume   |  |  |               |  |  | Grade    |  |  | Grade   |  |  | Grade   | 
|--------- |  | -------- |  |  | ------------- |  |  | -------- |  |  | ------- |  |  | ------- | 
|Category  |  | (m3'000) |  |  | **Tons (kT)** |  |  | (Fe2O3%) |  |  | (TiO2%) |  |  | (V ppm) | 
|Indicated |  | 133,608  |  |  | 241,831       |  |  | 6.67     |  |  | 0.72    |  |  | 172     | 
|Inferred  |  | 348,190  |  |  | 630,224       |  |  | 6.47     |  |  | 0.70    |  |  | 166     | 

1No grade cut-off has been applied to the material
in the Mineral Resource, as the grades are relatively homogenous, would likely
be able to be blended, and are projected to be economically viable, based on the
assumptions made by the Company. A Mineral Resource is not a Mineral Reserve and
does not have demonstrated economical viability.

Qualified Persons Conclusions and Recommendations

In the exploration conducted to
date at the Iron Sands Project, the surface sampling and subsequent percussion
drillhole testing indicates that the overall magnetite content is relatively
homogeneous, particularly in the uppermost 30 metres. Sample density achieved in
the investigations is considered to be more than adequate to support these
assertions.

The underestimation of magnetic
mineral content and Fe grades caused by milling and grinding of sand is not
expected to affect the in-situ Fe grade on which the current Mineral Resource
estimate is based.

As an additional upgrading step
to dry magnetic separation, screening of the concentrate is both simple and
economic. Further testing in this regard is strongly recommended.

A robust Mineral Resource
estimate has been generated based on a sound geological model and exploration
database. The Mineral Resource is classified in terms of the CIM definitions on
Standards on Mineral Resources and Reserves  Definitions and Guidelines. An
Indicated Mineral Resource of 133,608 kT with a Fe2O3
grade of 6.67% has been defined, along with an Inferred Resource of
348,190 kT with a Fe2O3 grade of 6.47% .

SRK recommend that the
metallurgical test work continue to improve the confidence in the ability to
upgrade the raw sand material into a saleable product, and that the Company
proceed with the preliminary economic assessment of the project.

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- 37 -



Figure 4: Pampa el Toro Iron Sands Project Location and
Infrastructure

---

- 38 -



Figure 5: Pampa el Toro Iron Sands Project Tenure and Dune
Field Location Map

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- 39 -

Planned Activities

The Company intends to complete
the metallurgical test program presently underway for the recovery of vanadium
and titanium from the smelter slag, and believes that the results of this
testing will add significant value in terms of potential high-quality pig-iron
and titanium-vanadium co-products. However, the ability of the Company to
proceed with further work beyond the metallurgical testing program at the Iron
Sands Project is dependent upon the Company being able to either raise the
significant additional financing required to do so or to secure a partner to
move the project forward. The Company is also assessing the desirability of
undertaking pre-feasibility studies to address the mining of the Iron Sands
Project resource as well as a pre-feasibility study for the value-added smelting
operation. At the present time, the Company is looking to secure a partner who
can help move the project to a commercial stage, however, there can be no
assurance that it will be able to locate such a partner, or successfully
negotiate and conclude an acceptable agreement to do so.

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 59,260,602 were issued at
January 20, 2010. 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:

---

- 40 -

Toronto Stock Exchange

|Month                 | High | Low  | Volume   
|--------------------- | ---- | ---- | ---------
|                      | ($)  | ($)  |          
|January 1 to 20, 2011 | 2.22 | 1.68 | 1,637,136
|December, 2010        | 2.35 | 1.37 | 3,775,184
|November, 2010        | 1.60 | 1.20 | 2,879,008
|October, 2010         | 1.30 | 1.16 | 1,187,948
|September, 2010       | 1.35 | 1.16 | 1,452,235
|August, 2010          | 1.33 | 1.06 | 1,919,684
|July, 2010            | 1.22 | 1.07 | 527,367  
|June, 2010            | 1.33 | 1.07 | 1,969,486
|May, 2010             | 1.33 | 1.13 | 1,686,341
|April, 2010           | 1.45 | 1.27 | 963,686  
|March, 2010           | 1.43 | 1.31 | 1,867,147
|February, 2010        | 1,48 | 1.28 | 1,120,792
|January, 2010         | 1.64 | 1.38 | 1,586,269
|December, 2009        | 1.66 | 1.30 | 2,663,596
|November, 2009        | 1.36 | 1.22 | 860,740  

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:

---

- 41 -

|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)              
|                                        |                                                           |                          
|Hendrik Van Alphen                      | Businessman; President of Cardero, 2000
      to          | Director since April 19, 
|President, Chief Executive Officer      | present.                                                  | 1999                     
|and Director                            |                                                           |                          
|British Columbia, Canada                |                                                           | President since April 10,
|                                        |                                                           | 2000                     
|                                        |                                                           |                          
|                                        |                                                           | Chief Executive Officer  
|                                        |                                                           | since May 14, 2001       
|                                        |                                                           |                          
|Leonard Harris(3)(4)(5)(6)              | Independent consultant to the mining
      industry,      | Since February 25, 2000  
|Director                                | 1992 to present.                                          |                          
|Colorado, USA                           |                                                           |                          
|                                        |                                                           |                          
|Lawrence W. Talbot                      | Barrister and Solicitor; Owner, Lawrence
      W. Talbot  | Director since April 17, 
|Director, Vice-President and            | Law Corporation (law firm) since May,
      2006;         | 2003                     
|General Counsel                         | previously Partner, Gowling Lafleur
      Henderson       | Vice-President &         
|British Columbia, Canada                | LLP (law firm) since April 2000.                          | General Counsel since    
|                                        |                                                           | July 1, 2006             
|                                        |                                                           |                          
|Murray W. Hitzman,
      Ph.D.(3)(4)(5) |                                                           |                          
|Director                                | Geologist; Professor of Economic Geology
      at the     | Since January 4, 2006    
|Colorado, United States                 | 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.                               |                          
|                                        |                                                           |                          
|Stephan A. Fitch(3)(4)(6)               |                                                           |                          
|Director                                | Businessman; Managing Director, IAG
      Holdings        | Since May 31, 2006       
|London, England                         | Limited (private investment company)
      2003 to        |                          
|                                        | present; previously Partner,
      International Asset    |                          
|                                        | Group Ltd. (private merchant and
      investment         |                          
|                                        | banking firm) 1995 to 2003.                               |                          
|                                        |                                                           |                          
|Michael W. Kinley, C.A.                 |                                                           |                          
|Chief Financial Officer                 | Chartered Accountant; President, Winslow                  | Since January 4, 2006    
|British Columbia, Canada                | Associates Management &
      Communications Inc.         |                          
|                                        | 1973 to present (private consulting
      firm); CFO of   |                          
|                                        | International Tower Hill Mines Ltd.,
      Dorato         |                          
|                                        | Resources Inc., and Trevali Resources
      Corp.;        |                          
|                                        | Director, Indico Resources Ltd.;
      Director,          |                          
|                                        | StonePoint Global Brands Inc.;
      President,           |                          
|                                        | WorldStar Energy Corp.; Director, Strike                  |                          
|                                        | Resources Ltd.; President, CFO and
      Director, GFK    |                          
|                                        | Resources Ltd., CEO and Director,
      Can-Asia          |                          
|                                        | Minerals Inc.                                             |                          
|                                        |                                                           |                          
|Mark D. Cruise, Ph.D., EurGeol.         | Geologist, President of Trevali
      Resources Corp.,    | Since November 16,       
|Vice-President-Business                 | May 18, 2008 to present; Vice-President,
      Business   | 2004                     
|Development                             | Development of Cardero, April 2007 to
      present,      |                          
|British Columbia, Canada                | Vice-President, Exploration of Cardero
      November     |                          
|                                        | 2004 to March 2007; Senior Geologist                      |                          
|                                        | Copper/Zinc, Anglo American plc, 1996 to                  |                          
|                                        | November 2004.                                            |                          
|                                        |                                                           |                          
|                                        |                                                           |                          
|Keith Henderson, EurGeol                | Geologist; Vice President, Exploration
      of Cardero,  | Since April 1, 2007      
|Vice-President, Exploration             | April 1, 2007 to present; President,
      Dorato         |                          
|British Columbia, Canada                | Resources Inc., December 1, 2008 to
      present;        |                          
|                                        | Senior Project Geologist, Anglo American                  |                          
|                                        | (Exploration) Canada Ltd., 2002 to March
      31, 2007   |                          
|                                        |                                                           |                          
|Glenn Hoffman                           | Metallurgist; CEO and President of
      Cardero Iron     | Since August 23, 2007    
|CEO and President of Cardero Iron       | Ore Company Ltd. (subsidiary) since
      August, 2007;   |                          
|Ore Company Ltd.                        | previously, several positions, including
      Manager of |                          
|South Carolina, USA                     | Research and Development, with Midrex                     |                          
|                                        | Technologies, Inc. (private process
      engineering and |                          
|                                        | technology company)                                       |                          

---

- 42 -

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
      September 2011). 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                                                                                                                                                      

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 20, 2010, Carderos
Directors and executive officers, as a group, beneficially hold a total of
1,948,102 Common Shares, directly or indirectly, representing 3.287% of the
59,260,602 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:

| | (a) | 875,000 Common Shares exercisable at $1.30 per Common Share until
      September 11, 2011;
| | --- | -------------------------------------------------------------------------------------------
| |     |                                                                                            
| | (b) | 160,000 Common Shares exercisable at $1.31 per Common Share until
      December 1, 2011;  
| |     |                                                                                            
| | (c) | 500,000 Common Shares exercisable at $1.16 per Common Share until July
      27, 2012; and 
| |     |                                                                                            
| | (d) | 875,000 Common Shares exercisable at $1.16 per Common Share until
      August 11, 2012.   

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) | was subject to an order that was issued while the Director or
      executive officer was acting in the capacity as director, chief executive
      officer or chief financial officer, except as follows:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i)  | Michael W. Kinley, the Chief Financial Officer of Cardero, was the
      President and Director of Abstract Enterprises Corp. (he resigned in
      2005), which was the subject of a British Columbia Securities Commission
      (BCSC) cease trade order on July 10, 2002 for failure to file financial
      statements (a similar order was issued by the Alberta Securities
      Commission (ASC)) and was delisted on June 20, 2003, and                                                                                                                        
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (ii) | Michael W. Kinley, the Chief Financial Officer of Cardero is the
      President, Chief Executive Officer and a Director of GFK Resources Inc.
      (formerly Noise Media Inc.), which was the subject of a BCSC cease trade
      order on January 28, 2003 for failure to file financial statements (a
      similar ASC order was also issued). The company was subsequently
      transferred to the NEX Board. The cease trade order was revoked on December 8, 2006, the company having filed a
reactivation application in accordance with applicable policies; or

---

- 43 -

| | (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; or
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (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 Resources Corp., Indico
Resources Ltd., GFK Resources Ltd., Balmoral Resources Ltd., Ethos Capital Corp., Pedro Resources Ltd. and Remstar Resources
Ltd.). 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-A Company Manual, transactions involving a
conflict of interest or related party transactions are required to be approved
by Carderos Audit Committee.

---

- 44 -

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, 2009 (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, 2009 (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, 2010;                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                  
|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, 2010.                                                          

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, 2008,
2009 or 2010, 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:

---

- 45 -

| | (a) | Stephan Fitch, 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 a 15% interest in IMMG from 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).                                                                                 
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (b) | On February 29, 2008, the Company closed a brokered private placement
      of 5,150,000 units. The units were sold at $1.10 per unit, and each unit
      consisted of one Common Share and one-half of a warrant, and with one
      whole warrant being exercisable to purchase an additional Common Share at
      a price of $1.50 until March 1, 2010. Hendrik Van Alphen, the President,
      CEO and a Director, purchased an aggregate of 100,000 units. Such purchase
      was upon the identical terms and conditions as the other subscribers in
      the placement.

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,
3rd Floor, 510 Burrard Street, Vancouver, British Columbia, V6C 3B9;
and

2. in Ontario, 100 University Avenue, 11th Floor,
Toronto, Ontario M5J 2Y12.

ITEM 14:MATERIAL CONTRACTS

Other than 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, 2009 (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, 2010, 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) | Smythe Ratcliffe LLP, Chartered Accountants:
| | --- | --------------------------------------------

| | (i)  | provided an auditors report dated January 27, 2010 in respect of the
      Companys consolidated financial statements for the years ended October
      31, 2009 and 2008 and incorporated by reference into Carderos AIF dated
      January 20, 2010, and
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                               
| | (ii) | provided an auditors report dated January 26, 2011 in respect of the
      Companys consolidated financial statements for the years ended October
      31, 2010 and 2009 and incorporated by reference into this AIF.                                      

---

- 46 -

Smythe Ratcliffe LLP is independent in
accordance with the auditors rules of professional conduct in British Columbia;

| | (b) | Each of Mark Wanless of SRK Consulting (South Africa) (Pty) Ltd.,
      Professional Earth Scientist, and Leonard Holland, Chartered Engineer, of
      Holland & Holland Consultants (UK), is responsible for the preparation
      of one or more sections of the technical report dated September 10, 2009
      entitled Pampa el Toro Mineral Resource Technical Report incorporated by
      reference in this AIF. Each of them is independent of the Company and
      neither of Messrs. Wanless or Holland holds more than 1% of the Common
      Shares; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (c) | Each of EurGeol Keith J. Henderson, of Cardero, and Stephen (Jayson)
      Ripke QP MMSA, of Cardero Management USA, is responsible for the
      preparation of one or more sections of the Minnesota Report incorporated
      by reference into this AIF. Mr. Henderson is not independent of the
      Company, as he is the Vice-President, Exploration, and holds incentive
      stock options. Mr. Ripke is not independent of the Company, as he is the
      Vice- President, Technical of Cardero Management USA, and holds incentive
      stock options.    

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.com or 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)   | the selection of a firm of external auditors to be proposed for
      election as the external auditors of the Company,                                
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                        
| | (ii)  | the oversight of the work of the Companys external auditors, and                                                                                      
| |       |                                                                                                                                                        
| | (iii) | subject to the grant by the shareholders of the authority to do so, if
      required, fixing the compensation of the external auditors of the Company.

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 independent1 and
      unrelated directors2 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).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

___________________1 Whether a director is independent will be
determined in accordance with all applicable laws and regulations, including the
applicable securities laws of Canada and the United States and the regulations
and policies of any stock exchange or quotation system on which the Companys
securities are listed or quoted.

2 unrelated director means a director who is: (a)
not a member of management and is free from any interest and any business,
family or other relationship which could reasonably be perceived to materially
interfere with the directors ability to act with a view to the best interests
of the issuer, other than interests and relationships arising solely from
holdings in the issuer, (b) not currently, or has not been within the last three
years, an officer, employee of or material service provider to the issuer or any
of its subsidiaries or affiliates; and (c) not a director (or similarly situated
individual) officer, employee or significant shareholder of an entity that has a
material business relationship with the issuer. A chair or vice chair of the
board of directors who is not a member of management is not, for that reason
alone, a related director.

---

- 2 -

|2.2 | All of the members of the Committee will be financially
      literate3, 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.                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|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) | the Committee will meet:
| | --- | ------------------------

| | (i)  | at least four times annually, and 
| | ---- | ----------------------------------
| |      |                                   
| | (ii) | may meet as many additional times:

| | A. | as deemed necessary or appropriate by the Committee,                                                                                 
| | -- | -------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                      
| | B. | upon request by any member of the Committee, the Chief Executive
      Officer, the Chief Financial Officer or the external auditors,

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

___________________3 An individual is financially literate if he or she
has the ability to read and understand a set of financial statements that
present a breadth and level of complexity of accounting issues that are
generally compatible to the breadth and complexity of the issues that can
reasonably be expected to be raised by the Companys financial statements.

---

- 3 -

| | (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.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|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) | be directly responsible for:
| | --- | ----------------------------

| | (i)   | the selection of a firm of external auditors to be proposed for
      election as the external auditors of the Company,                                
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                        
| | (ii)  | the oversight of the work of the Companys external auditors, and                                                                                      
| |       |                                                                                                                                                        
| | (iii) | subject to the grant by the shareholders of the authority to do so, if
      required, fixing the compensation of the external auditors of the Company;

| | (b) | to review with the management of the Company (and, in the case of the
      annual audited statements, with the external auditors) the annual audited
      consolidated and unaudited consolidated quarterly financial statements,
      including the notes thereto, to ensure that such statements present fairly
      the financial position of the Company and the results of its operations
      and, if appropriate, to recommend to the Board as to the approval of any
      such financial statements;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | to assist the Board in the discharge of its responsibilities relating
      to the Companys accounting principles, reporting practices and internal
      controls and its approval of the Company's annual and quarterly
      consolidated financial statements;                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (d) | to establish and maintain a direct line of communication with the
      Company's internal accounting staff and any external accounting
      consultant(s) and assess their performance;                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (e) | to ensure that the management of the Company has designed, implemented
      and is maintaining an effective and appropriate system of internal
      financial controls; and                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (f) | to report regularly to the Board on the fulfilment of its duties and
      responsibilities.                                                                                                                                                                                                                                                                                                                                                                                                                      

---

- 4 -

|3.2 | The duties and responsibilities of the Committee as they relate to the
      external auditors will be as follows:
|--- | ------------------------------------------------------------------------------------------------------------------

| | (a) | to select a firm of external auditors to be proposed by management of
      the Company to the shareholders for election by the shareholders as the
      external auditors for the Company, and to verify the independence of such
      proposed external auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | to review and approve the fee, scope and timing of the annual and any
      other audit performed by the external auditors;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | to review and evaluate the qualifications, performance and
      independence of the lead partner of the external auditors of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (d) | to discuss with management of the Company the timing and process for
      implementing the rotation of the lead audit partner and the reviewing
      partners of the external auditors of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (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;                                                                                                                                                                                                                                                                                                                                                                                                                    

---

- 5 -

| | (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)    | the contents of their report,                                                                                                                                    
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |        |                                                                                                                                                                  
| | (ii)   | the scope and quality of the audit work performed,                                                                                                               
| |        |                                                                                                                                                                  
| | (iii)  | the adequacy of the Company's financial and accounting personnel,                                                                                                
| |        |                                                                                                                                                                  
| | (iv)   | the co-operation received from the Company's personnel and any
      external consultants during the audit,                                                      
| |        |                                                                                                                                                                  
| | (v)    | the scope and nature of the internal resources used,                                                                                                             
| |        |                                                                                                                                                                  
| | (vi)   | any significant transactions outside of the normal business of the
      Company,                                                                                
| |        |                                                                                                                                                                  
| | (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
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 6 -

| | (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;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (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)   | the annual report to shareholders;                         
| | ----- | -----------------------------------------------------------
| |       |                                                            
| | (ii)  | the annual information form (if any);                      
| |       |                                                            
| | (iii) | any quarterly or annual management discussion and analysis;
| |       |                                                            
| | (iv)  | prospectuses; and                                          
| |       |                                                            
| | (v)   | other public reports requiring approval by the Board,      

---

- 7 -

| |     | 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;                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

- 8 -

| | (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.                                                                                                                                                                                  

ARTICLE 4  GENERAL

|4.1 | The Committee will:
|--- | -------------------

| | (a) | prepare any report or other disclosure, including any recommendation
      of the Committee, required by any applicable legal or regulatory
      requirement to be included in the annual proxy or information circular of
      the Company;                                                                                                                                                                                                                                                                                                                    
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (b) | review this Charter at least annually and recommend any changes herein
      to the Board;                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (c) | report the activities of the Committee to the Board on a regular basis
      and make such recommendations thereto as the Committee may deem necessary
      or appropriate; and                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (d) | prepare and review with the Board an annual performance evaluation of
      the Committee, which performance evaluation must compare the performance
      of the Committee with the requirements of this Charter and be conducted in
      such manner as the Committee deems appropriate. Such report to the Board
      may be in such form as the Committee determines, which may include being
      in the form of an oral report by the chair of the Committee or by another
      member of the Committee designated by the Committee to make such report.

|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.

---

- 9 -

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.

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.

---

- 10 -

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,
2009, being the commencement of Carderos most recently completed financial
year, has the Company relied on the exemptions of the following sections of MI
52-110:

|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,
2009, 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.

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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   | Audit Fees(1) | Audit Related | Tax Fees(3) | All Other
      Fees(4)
|---------------- | ------------- | ------------- | ----------- | -----------------------
|Ending           |               | Fees(2)       |             |                        
|October 31, 2010 | $165,000      | $22,000(5)    | $10,000     | $2,500(6)              
|October 31, 2009 | $156,000      | $28,000(6)    | $7,000      | $5,000(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
and in connection with the tax planning regarding the sale of the Pampa de Pongo
property.

(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 40-F 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 accounting issues in connection with special transactions,
including the sale of the Pampa de Pongo property in Peru.

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