ANNUAL INFORMATION FORMFOR THE FISCAL YEAR ENDED
OCTOBER 31, 2006













Suite 1901  1177 West Hastings Street
Vancouver, British Columbia
V6E 2K3

January 26, 2007



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ITEM 2 - TABLE OF CONTENTS





PRELIMINARY NOTES

Documents Incorporated by Reference



Date of Information



Currency and Exchange Rates



Metric Equivalents



Forward-Looking Statements



Caution Regarding Adjacent or Similar Mineral Properties



Caution Regarding Reference to Resources and Reserves



Glossary of Terms



ITEM 3:

CORPORATE STRUCTURE



Name, Address and Incorporation



Intercorporate Relationships



ITEM 4:

GENERAL DEVELOPMENT OF THE BUSINESS



Three Year History



Significant Acquisitions



ITEM 5:

NARRATIVE DESCRIPTION OF THE BUSINESS



General



Risk Factors



Material Mineral Projects



ITEM 6:

DIVIDENDS



ITEM 7:

DESCRIPTION OF CAPITAL STRUCTURE



General Description of Capital Structure



Constraints



ITEM 8:

MARKET FOR SECURITIES



Trading Price and Volume



ITEM 9:

escrowed securities



ITEM 10:

DIRECTORS AND OFFICERS



Name, Occupation and Security Holding



Cease Trade Orders, Bankruptcies, Penalties or Sanctions



Conflicts of Interest



ITEM 11:

promoters



ITEM 12:

Legal Proceedings and Regulatory Actions



Legal Proceedings



Regulatory Actions



ITEM 13:

interest of management and others in material transactions



ITEM 14:

transfer agent and registrar



ITEM 15:

material contracts



ITEM 16:

NAMES AND INTERESTS OF EXPERTS



Names and Interests of Experts



ITEM 17:

ADDITIONAL INFORMATION



Audit Committee Information



Additional Information







SCHEDULE A  AUDIT COMMITTEE INFORMATION

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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 Financial Statements and Management Discussion and Analysis of the Company for the year ended October 31, 2006;

(b)

Management Discussion and Analysis of the Company for the year ended October 31, 2006 dated January 26, 2007;

(c)

Management Information Circular dated March 15, 2006 in respect of the 2006 Annual General Meeting (Information Circular);

(d)

Technical report dated January 5, 2007 entitled Diamond Drill Report on the Picale Property, Baja California Norte IOCG Project (Alisitos Project)  Baja California Norte, Mexico prepared by Gary D. Belik, P.Geo. (the Belik Report); and

(e)

Technical Report dated January 10, 2007 entitled Summary Report on the Incahuasi Gold project, Northwest Argentina prepared by Paul Klipfel, Ph.D of Mineral Resource Services Inc. (the Klipfel 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, 2006 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 | 2006                 
|Rate at end of period            | USD 0.8907           
|Average rate for period          | USD 0.8753           
|High for period                  | USD 0.9099           
|Low for period                   | USD 0.8361           

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
        1 acre = 0.405 hectares
        2,204.62 pounds = 1 metric ton = 1 tonne | 2000 pounds (1 short ton) = 0.907 tonnes
        1 ounce (troy) = 31.103 grams
        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

Certain of the statements made and information contained or incorporated by reference in this AIF and in the documents incorporated by reference herein may contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, including statements concerning the existence and size of potential deposits on mineral properties under option agreements, the potential acquisition of properties, plans regarding share ownership in other companies, the Companys plans for evaluation, exploration and work programs at its various mineral properties, and expenses and delays relating to these.  Forward-looking statements are typically identified by words such as: believe, expect, anticipate, assume, intend, plan, project, estimate, postulate, strategy, goals, objective, potential, may, could, would, might, will and similar expressions, or which by their nature refer to future events.  Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including without limitation, risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of any mineral deposits that may be located, the possibility that future exploration, development or mining results will not be consistent with the Companys expectations, variations in mining dilution and metal recoveries, accidents, equipment breakdowns, title matters, labour disputes or other unanticipated difficulties with or interruptions in production, the potential for delays in exploration or development activities or the completion of a feasibility study, political risks involving operations in Mexico, Argentina and Peru and other countries and the policies of other nations towards companies doing business in these jurisdictions, the inherent uncertainty of exploration program, production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, failure to obtain required financing on a timely basis and other risks and uncertainties, including those described under Risk Factors in this AIF as well as in the Managements Discussion and Analysis incorporated by reference into this AIF.  Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements.  Although the Company believes that such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.  The Company does not expect to update forward-looking statements continually as conditions change and you are referred to the full discussion of the Companys business contained in the Companys disclosure filed with the Canadian securities regulatory authorities.  Readers are advised not to 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) strictly prohibit information of this type in documents filed with the SEC.  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.  These definitions under NI 43-101 and the CIM Standards, including that for mineral reserve, differ from the definitions adopted by the SEC in Industry Guide 7 and may not be comparable to similar information disclosed by U.S. companies.  In the United States, 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.  This is different from the definition under NI 43-101, which is defined in the Glossary of Terms.

The term mineral resource used in the Companys disclosure is a Canadian mining term as defined in accordance with NI 43-101 under the guidelines set out in the CIM Standards and is not used by U.S. companies reporting in accordance with Industry Guide 7.  Mineral resources which are not mineral reserves do not have demonstrated economic viability.  See Glossary of Terms.

Glossary of Terms

The following is a glossary of certain mining terms used in this Annual Information Form.

|adit                                    | A passage driven horizontally into a mountainside providing access to a mineral deposit from the surface of the working of a mine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|bedding                                 | The arrangement of sedimentary rock in layers; stratification; also, the general character or pattern of the beds and their contacts within a rock mass                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|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 the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Cardero Iron                            | Cardero Iron Ore Company Ltd., a wholly owned British Columbia subsidiary of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Peru                            | Cardero Peru, S.A.C., a wholly owned Peruvian subsidiary of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|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 the Company as the same are constituted on the date hereof                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|conglomerate                            | A coarse grained clastic sedimentary rock, composed of rounded to sub-angular fragments larger than 2mm in diameter set in a fine-grained matrix of sand or silt, and commonly cemented by calcium carbonate, iron oxide, silica or hardened clay                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Cu                                      | Copper                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|dacite                                  | Igneous rock which is fine grained or volcanic equivalent of granodiorite and quartz dirorite.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|dip                                     | The angle that a stratum or any planar feature makes with the horizontal, measured perpendicular to the strike and in the vertical plane                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Director                                | A member of the Board of Directors of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|drift                                   | A horizontal tunnel driven along or parallel to the strike of the orebody, for the extraction or exploration of minerals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|g/t                                     | Grams per metric tonne                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|gneiss                                  | A foliated rock formed by regional metamorphism, in which bands or lenticles of granular materials alternate with bands or lenticles of minerals with flaky or elongate prismatic habit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|greywacke                               | A dark grey firmly indurated coarse grained sandstone believed to have been deposited by submarine turbidity currents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|halo                                    | In geochemical prospecting, diffusion into surrounding ground or rocks of a sufficiently high concentration of the sought mineral to aid in its location.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|hanging wall                            | The overlying side of an orebody, fault or mine working,; especially the wall rock above an inclined vein or fault                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|hydrothermal                            | A term pertaining to hot aqueous solutions of magmatic origin which may transport metals and minerals in solution.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|ignimbrite                              | The rock formed by widespread deposition and consolidation of ash flows and swift-flowing, turbulent gaseous clouds erupted from a volcano and containing ash and other pyroclastics                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|km                                      | Kilometres                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|m                                       | Metres                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|mm                                      | Millimetres                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|mafic                                   | Said of an igneous rock composed chiefly of dark, ferromagnesian minerals                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|magmatic                                | Of, or pertaining to, or derived from, magma                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|manto                                   | A flat-lying, bedded deposit; either a sedimentary bed or a replacement, strata-bound orebody                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|martite                                 | Hermatite occurring in iron-black octahedral crystals pseudomorphous after magnetite                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|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 the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Pb                                      | Lead                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|shear zone                              | A tabular zone of rock that has been crushed and brecciated by many parallel fractures due to shear strain (often mineralized by ore-forming solutions)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|silicified                              | Any rock to which silica has been added                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|stockwork                               | A mineral deposit consisting of a three-dimensional network of irregular veinlets closely enough spaced that the whole mass can be mined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|tailings                                | The material that remains after all metals considered economic have been removed from ore during milling.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|TSE                                     | Toronto Stock Exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|TSXV                                    | TSX Venture Exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|tuff                                    | A general term for all pyroclastic rocks, may be consolidated or non-consolidated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|volcaniclastic                          | Pertaining to a clastic rock containing volcanic material in whatever proportion, and without regard to its origin or environment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Zn                                      | Zinc                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



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) on January 13, 2005, and is now governed by that statute.  On April 22, 2005, the Company 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 new Business Corporations Act(B.C.).  A copy of the new Articles is available on SEDAR at www.sedar.com.

The office and principal business address of Cardero is located at Suite 1901  1177 West Hastings Street, Vancouver, British Columbia V6E 2K3, and its registered and records office is located at Suite 2300, Four Bentall Centre, 1055 Dunsmuir Street, P.O. Box 49122, Vancouver, B.C. V7X 1J1.

Intercorporate Relationships

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

Throughout this document references made to the Company refer to Cardero and its consolidated subsidiaries, Cardero Argentina, Cardero Peru, Cardero Iron and MMC.

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, and Peru.  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. Other than on the Pampa de Pongo property, there are currently no identified mineral resources or mineral reserves on any of the Companys mineral properties.

Over the past three financial years, the Company has focussed primarily on the acquisition and exploration of mineral properties in Argentina, Mexico and Peru.  During the 2004, 2005 and 2006 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 deposits.  Some of these, such as the Condor Yacu, Olaroz and Cerro Atajo properties in Argentina, the La Zorra and Ludivina properties in Mexico and the Lircay property in Peru, have since been returned to the respective vendors, and the associated costs written off in light of disappointing exploration results.  Others, such as Chingolo, Mina Angela and Organullo properties in Argentina and the Marcona, Corongo and Bocana properties in Peru are currently being reviewed, and further work is not planned at this time.

During this period, the Company has specialized in identifying and acquiring potential IOCG deposits (referred to as Olympic Dam type deposits) and entered into option agreements to acquire a number of properties in Mexico and Peru that it believes are prospective for IOCG deposits.  The Baja IOCG project in Mexico is an example of this.  In May, 2006, Anglo American Mexico, S.A. de C.V., which was earning a 51% interest in this project, determined to terminate its option, and the Company now controls 100% of this project.

The Company has also identified iron ore as a commodity for which there is currently a significant demand, and has evaluated a number of prospective iron ore properties, some of which have been acquired.  The Pampa de Pongo Iron property, the Iron Sands project and the Katanga property, all in Peru, are examples of this.  The Company continues to evaluate a number of potential iron deposits, not only in Peru and Argentina, but also in other countries, as well as the iron ore potential of its IOCG properties.

Most recently, the Company formulated a strategy to explore for, identify and acquire mineral properties based upon a specific geological model, being that for sediment hosted vein deposits (SHV).  Company personnel determined that the Puna region of Argentina displayed all of the characteristics making it prospective for the formation of such deposits and, based on this determination, undertook an aggressive year long multidisciplinary regional exploration program targeting a SHV model in the 61,000 square kilometre Ordovician Santa Victoria Basin in north-western Argentina.  SHV type deposits are capable of forming a wide range of deposit sizes from sub-million ounce up to and including world-class to giant deposits.  Premier global examples include the SHV gold deposits of Asia (Muruntau, Sukoy Log), Australia (Bendigo-Ballarat) and New Zealand (Otago Schist) and, as such, they form attractive bulk tonnage gold exploration targets.  All SHV deposits occur with a common set of characteristics that unite them as a class.  These characteristics are consistent with those observed to date in the Puna region of NW Argentina, namely, age, tectonic setting, metallongeny, alteration and style of mineralization.  The 2005/2006 regional exploration program carried out by Cardero consisted of regional scale target generation based on the structural interpretation of Landsat, regional magnetic, geologic, and geochemical datasets of the entire 61,000 square kilometre prospective belt.  A total of fifty-one targets areas were delineated for follow-up field work.  To date, the Company has acquired 11 properties under its SHV Project, and may acquire additional properties, as reconnaissance and evaluation work is ongoing.

While the Company intends to carry out much of the exploration work on its properties directly, the Company will also consider optioning or joint venturing its properties to other companies, and is currently entertaining proposals in this regard.

In pursuance of these objectives, during the year ended October 31, 2006 the Company has entered into a number of agreements to acquire an interest, or the right to acquire an interest, in a number of properties, as follows:

***A***rgentina

- Sediment Hosted Vein (SHV) Project.  Details of the existing properties acquired to date are as follows:

a.

Incahuasi Property, Catamarca Province, Argentina.  The Incahuasi property presently consists of seven minas, two cateos and one tailing concession (approximately 2,292 hectares) located in Catamarca Province, Argentina, and acquired by the Company as follows:

Pursuant to an agreement with an Argentinean individual dated April 29, 2006, the Company has the option to acquire a 100% interest in four minas (two of which form part of the Incahuasi property and two of which do not) and one tailings concession by making aggregate payments of USD 1,410,000 over five years, as follows:

-

USD 20,000 on or before May 29, 2006 (paid);

-

USD 30,000 on or before November 29, 2006 (paid);

-

USD 60,000 on or before May 29, 2007;

-

USD 100,000 on or before May 29, 2008;

-

USD 200,000 on or before May 29, 2009;

-

USD 400,000 on or before May 29, 2010;

-

USD 600,000 on or before May 29, 2011.

The property is subject to a 2% NSR to the vendor which the Company can purchase at any time for USD 500,000.

Pursuant to an agreement dated April 29, 2006 between the Company and the vendor of the foregoing properties, the Company and the vendor have also applied for three abandoned minas originally held by a third party in which each of the Company and the vendor will have an initial 50% interest (subject to the grant thereof by the applicable mining tribunal).  The Company will acquire the 50% interest of the vendor in such minas upon the exercise of the option with respect to the vendors properties as set out above.

The Company has also staked and applied for two additional cateos surrounding the foregoing minas and tailings concession and has applied for one new mina and one additional abandoned mina adjacent to the property.

b.

Salar de Oro Property, Jujuy Province, Argentina.  The Salar de Oro property consists of five continuous cateos and six minas (approximately 25,409 hectares) located in Jujuy Province, Argentina, and acquired by the Company as follows:

Pursuant to an agreement dated July 11, 2006 between the Company and a private Argentinean company, the Company has the option to acquire a 100% interest (excluding surficial placer rights) in three of the cateos and the six minas by making aggregate payments of USD 2,470,000 over four years to May 3, 2010, as follows:

-

USD 35,000 on or before April 4, 2006 (paid);

-

USD 135,000 on or before May 3, 2007;

-

USD 300,000 on or before May 3, 2008;

-

USD 300,000 on or before May 3, 2009;

-

USD 1,700,000 on or before May 3, 2010.

In addition to the foregoing, the Company has staked and applied for two cateos surrounding the foregoing property.

c.

Il Torno Property, Jujuy Province, Argentina.  The Il Torno property consists of four minas (approximately 5,046 hectares) located in Jujuy Province, Argentina, and acquired by the Company as follows:

Pursuant to an agreement dated October 3, 3006 between the Company and an Argentinean individual, the Company has the option to acquire a 100% interest (excluding surficial placer rights to a portion of the property) in the four minas for USD 3,000,000.  In order to maintain the option in good standing and to be able to explore the property prior to the exercise of the option (which must be exercised, if at all, on or before December 3, 2010) the Company is required to make the following payments:

-

USD 30,000 on signing (paid);

-

USD 30,000 on or before April 3, 2007;

-

USD 50,000 on or before October 3, 2007;

-

USD 50,000 on or before April 3, 2008;

-

USD 100,000 on or before October 3, 2008;

-

USD 100,000 on or before April 3, 2009;

-

USD 100,000 on or before October 3, 2009;

-

USD 100,000 on or before April 3, 2010;

-

USD 150,000 on or before October 3, 2010;

-

USD 200,000 on or before December 3, 2010.

The property is subject to a 2% NSR to the vendor which the Company can purchase at any time for USD 2,000,000.  The Company is required (subject to receipt of approval of the required environmental impact statement) to commence prospecting work on or before January 3, 3007, and to formulate and implement a work program on the property on or before October 3, 2007.

d.

5A3/5A4 Property, Jujuy Province, Argentina.  The 5A3/5A4 property presently consists of two minas and two cateos (approximately 1,602 hectares) located in Jujuy Province, Argentina, and acquired by the Company as follows:

Pursuant to an agreement with a private Argentinean company dated May 2, 2006, the Company has the option to acquire a 100% interest in one cateo (excluding surficial placer rights for a period of 5 years) by making aggregate payments of USD 350,000 over five years, as follows:

-

USD 7,000 on or before June 2, 2006 (paid);

-

USD 14,000 on or before November 2, 2006 (paid);

-

USD 14,000 on or before June 2, 2007;

-

USD 28,000 on or before June 2, 2008;

-

USD 56,000 on or before June 2, 2009;

-

USD 91,000 on or before June 2, 2010;

-

USD 140,000 on or before June 2, 2011.

Pursuant to an agreement dated May 2, 2006 among the Company and four Argentinean individuals (as amended by an agreement dated May 17, 2006), the Company has the option to acquire a 100% interest in two minas and one cateo (excluding surficial placer rights for a period of 5 years) by making aggregate payments of USD 500,000 over five years, as follows:

-

USD 10,000 on or before June 2, 2006 (paid);

-

USD 20,000 on or before November 2, 2006 (paid);

-

USD 20,000 on or before May 2, 2007;

-

USD 40,000 on or before May 2, 2008;

-

USD 80,000 on or before May 2, 2009;

-

USD 130,000 on or before May 2, 2010;

-

USD 200,000 on or before May 2, 2011.

e.

Rinconada Property, Jujuy Province, Argentina.  The Rinconada property presently consists of three minas and one cateo (approximately 11,495 hectares) located in Jujuy Province, Argentina, and acquired by the Company as follows:

Pursuant to an agreement with a private Argentinean company dated September 19, 2006, the Company has the option to acquire a 100% interest in one mina by making aggregate payments of USD 380,000 over five years, as follows:

-

USD 18,000 on or before September 19, 2006 (paid);

-

USD 12,000 on or before February 19, 2007;

-

USD 20,000 on or before September 19, 2007;

-

USD 40,000 on or before September 19, 2008;

-

USD 70,000 on or before September 19, 2009;

-

USD 90,000 on or before September 19, 2010;

-

USD 130,000 on or before September 19, 2011.

Pursuant to an agreement dated May 2, 2006 among the Company and an Argentinean individual, the Company has the option to acquire a 100% interest in two minas for USD 940,000.  In order to maintain the option in good standing and to be able to explore the property prior to the exercise of the option (which must be exercised, if at all, on or before September 2, 2010) the Company is required to make the following payments:

-

USD 15,000 on or before June 2, 2006 (paid);

-

USD 15,000 on or before July 2, 2006 (paid);

-

USD 15,000 on or before August 2, 2006 (paid);

-

USD 15,000 on or before November 2, 2006 (paid);

-

USD 60,000 on or before August 2, 2007;

-

USD 60,000 on or before April 2, 2008;

-

USD 60,000 on or before November 2, 2008;

-

USD 80,000 on or before November 2, 2009;

-

USD 80,000 on or before February 2, 2010;

-

USD 600,000 on or before September 2, 2010.

In addition to the foregoing, the Company has staked and applied for one cateo adjoining the foregoing property.

f.

El Carmen Property, Jujuy Province, Argentina.  The El Carmen property presently consists of four cateos (approximately 8,088 hectares) located in Jujuy Province, Argentina, and acquired by the Company through the staking and application therefor.

g.

Oros Mayo Property, Jujuy Province, Argentina.  The Oros Mayo property presently consists of one cateo (approximately 4,010 hectares) located in Jujuy Province, Argentina, and acquired by the Company through the staking and application therefor.

h.

5C2/5C3 Property, Jujuy Province, Argentina.  The 5C2/5C3 property presently consists of one cateo (approximately 4,391 hectares) located in Jujuy Province, Argentina, and acquired by the Company through the staking and application therefor.

i.

5C1 South Property, Jujuy Province, Argentina.  The 5C1 South property presently consists of two cateos (approximately 8,778 hectares) located in Jujuy Province, Argentina, and acquired by the Company through the staking and application therefor.

j.

El Toro East/5C5 Property, Jujuy Province, Argentina.  The El Toro East/5C5 property presently consists of two cateos (approximately 2,612 hectares) located in Jujuy Province, Argentina, and acquired by the Company through the staking and application therefor.

k.

El Toro Property, Jujuy Province, Argentina.  The El Toro property presently consists of one cateo (approximately 8,820 hectares) located in Jujuy Province, Argentina, and acquired by the Company through the staking and application therefor.

Peru

- Bocana Property

This property was acquired for its gold and magnetite (iron sand) potential.  Pursuant to an option agreement dated August, 2006, among the Company, a Peruvian individual and a private Panamanian corporation, the Company has the right to acquire a 75% interest in two mining concessions (approximately 1,795 hectares).  In order to maintain the option in good standing and to be permitted to carry out exploration activities prior to such exercise, the Company is required to make payments and incur exploration expenditures as follows:

Payments of USD 500,000, as follows:

-

USD 50,000 on signing (paid);

-

USD 100,000 on or beforeAugust 1, 2007;

-

USD 150,000 on or before August 1, 2008; and

-

USD 200,000 on or before August 1, 2009.

In addition to the foregoing, the agreement requires aggregate payments of USD 120,000 (USD 5,000 per month) to a third party (a private Florida corporation) for a period of 24 months following the execution of the agreement (all of which have been paid for the fiscal year ending October 31, 2006 and for the subsequent period up to January, 2007).

Aggregate exploration expenditures of USD 1,850,000, as follows:

-

USD 350,000 on or before August 1, 2007;

-

USD 850,000 on or before August 1, 2008; and

-

USD 1,850,000 on or before August 1, 2009.

Upon the Company having exercised the option, the property will be transferred to a new private Peruvian company, in which the Company will have a 75% interest and the vendor will have a 25% interest.  The Company is responsible for funding 100% of the expenditures incurred by the new company (the interest of the vendor therein being carried).  The Company will have the option to acquire the 25% interest of the vendor in the new company for the sum of USD 2,500,000 at any time after the Company exercises the option to acquire the initial 75% interest.

Significant Acquisitions

Since November 1, 2005, 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.

Although not required to be the subject of a Business Acquisition Report, on August 4, 2006, the Company acquired, through a private placement, an aggregate of 4,000,000 common shares of International Tower Hill Mines Ltd. (ITH), plus common share purchase warrants to purchase up to an additional 2,000,000 common shares at a price of $1.00 until August 4, 2008.  As a result of this acquisition, Cardero then held an aggregate of 4,000,000 common shares of ITH, representing approximately 13.32% of the then issued and outstanding common shares of ITH.  Assuming the exercise of the 2,000,000 warrants, Cardero would then hold approximately 18.74% of the then issued common shares (assuming no other warrant or option exercises).  The Company subsequently sold 1,000,000 of the ITH shares in order to recoup its initial investment.  However, it does not have any present plan to dispose of any additional ITH shares.

ITH is a public British Columbia company listed on the TSX Venture Exchange.  On August 4, 2006, ITH completed the acquisition of all of the Alaskan mineral exploration properties and associated database from AngloGold Ashanti (U.S.A.) Exploration Inc. (AngloGold).  In addition, in conjunction with the closing of this acquisition, ITH entered into option agreements with AngloGold to earn a 60% interest in each of two additional properties in Alaska.  ITH issued 5,997,295 common shares to AngloGold in connection with the acquisition (representing approximately 19.96% of the then issued shares of ITH).

ITH is a resource exploration company, focused in Alaska, which controls a number of exploration projects representing a spectrum of early stage to advanced gold discoveries.  ITH is committed to building share holder value through new discoveries while maintaining a majority interest in its holdings, thereby giving its shareholders the maximum value for their investment.  For further information with respect to ITH, readers are directed to ITHs public disclosure filings, which may be accessed via www.sedar.com and ITHs website, www.internationaltowerhill.com.

The Company determined to invest in ITH due to its extensive Alaskan property package and accompanying database and the quality of the exploration team, several of whom joined from AngloGold and have a good track record for discovering mines.  The Company believed that this investment had a significant possibility of appreciation, and the subsequent performance of ITH has borne that out.  Having recovered its initial investment through the sale of 1,000,000 of the shares, the Company views the balance of its holdings as a long-term investment, and has no present plans to dispose of any further ITH shares

ITEM 5:NARRATIVE DESCRIPTION OF THE BUSINESS

General

Summary

The Company currently holds, or has rights to acquire, interests (ranging from 50% to 100%) in several mineral properties (subject, in certain cases, to net smelter return royalties payable to the original property vendors) in Argentina, Mexico and Peru.  The Company is in the process of evaluating such properties through exploration programs or, in some cases, mineralogical 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).  At the present time, the Company is primarily interest in properties that are prospective for gold, silver, copper and iron ore.

The Company considers that the properties forming part of the Baja California Norte IOCG Project in Mexico, the Pampa de Pongo property and the Iron Sands Project in Peru and the Incahuasi property in Argentina 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.  The progress on, and results of, work programs on 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 Pampa de Pongo property in Peru) or mineral reserves.  The Company does not propose any method of production at this time.

All aspects of the Companys business require specialized skills and knowledge.  Such skills and knowledge include the areas of geology, drilling, logistical planning and 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 and Peru.  The Company has secured personnel to conduct its contemplated programs.  Over the past 15 months the increased mineral exploration activity on a global scale has made some services difficult to procure, particularly skilled and experienced contract drilling personnel.  It is possible that delays or increased costs may be experienced in order to proceed with drilling activities during the current period.  The Company is also experiencing significant delays is having some tests carried out by outside consultants, and this is slowing down the development of certain of its properties, notably the Iron Sands project.  Such delays could significantly affect the Company if, for example, commodity prices fall significantly thereby reducing the opportunity the Company may have had to develop a particular project had such tests been completed in a timely manner before the fall of such prices.  In addition, assay labs are significantly backlogged, thus significantly increasing the time that the Company waits for assay results.  Such delays can slow down work programs, thus increasing field expenses or other costs (such as property payments which may have to be made before all information to assess the desirability of making such payment is known, or causing the Company do not make such a payment and terminate its interest in a property rather than make a significant property payment before all information is available).

The mining business is subject to mineral price cycles.  The marketability of minerals and mineral concentrates is also affected by worldwide economic cycles.  At the present time, the significant demand for minerals in some countries (notably China and India) are driving increased commodity prices, but it is difficult to assess how long such demand may continue.

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

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

As of October 31, 2006, the Company had five full-time employees and one part-time employee.  Subsequent to October 31, 2006, the Company hired an additional full-time employee.  The Company primarily relies upon consultants to carry on many of its activities and, in particular, to supervise work programs on its mineral properties.  However, as the Company expands 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 the Company, nor is the Company aware of any such pending or threaten proceedings.  There have not been any voluntary bankruptcy, receivership or similar proceedings by the Company 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 the Company within the three most recently completed financial years or completed or currently proposed for the current financial year.

Social or Environmental Policies

The Company has not adopted any specific social or environmental policies that are fundamental to its operations (such as policies regarding its relationship with the environment, with the communities in the vicinity of its mineral exploration projects or human rights policies).  However, the Company has 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.  In addition, 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 to improve the existing living conditions, but also through hiring, when appropriate, local workers to assist in ongoing exploration programs.  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.

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.

Other than the Pampa de Pongo project in Peru, there is no known resource, and there are no known reserves, 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 will ever qualify as a commercial mineable ore body which can be legally and economically exploited.

Fluctuation of Metal 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 metals produced.  The Companys long-term viability and profitability depend, in large part, upon the market price of metals 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 supply of and demand for metals 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.

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 Concessions 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.  The Company does not presently have the financial resources required to make all payments and complete all expenditure obligations under its various property acquisition agreements.  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 and Access Matters:  The acquisition of title to mineral concessions 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 concessions in which it has an interest and, to the best of its knowledge, title to all such concessions is in good standing, this should not be construed as a guarantee of title.  Title to the concessions 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.  In many areas, the rights of surface access to the ground subject to mineral concessions, either for exploration or development, must be negotiated with various governmental authorities, surface owners, landholders, co-operative associations or aboriginal or indigenous peoples.  There can be no guarantee that the Company will be successful in obtaining any required surface access, on acceptable terms or at all, and the inability to do so could result in the Company being unable to explore and/or develop a particular concession or property.

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 shares, short-term, high-cost borrowing 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, short-term borrowing 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.

Insufficient Financial Resources:  The Company does not presently have sufficient financial resources to undertake by itself the acquisition, exploration and development of all of its planned acquisition, exploration and development programs.  Future property acquisitions and the development of the Companys properties will therefore depend upon the Companys ability to obtain financing through the joint venturing of projects, private placement financing, public financing, short or long term borrowings or other means.  There is no assurance that the Company will be successful in obtaining the required financing.  Failure to raise the required funds could result in the Company losing, or being required to dispose of, its interest in its properties.

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

Dependence Upon Others and Key Personnel:  The success of the Companys operations will depend upon numerous factors, many of which are beyond the Companys control, including (i) the ability of the Company to enter into strategic alliances through a combination of one or more joint ventures, mergers or acquisition transactions; and (ii) the ability to attract and retain additional key personnel in 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.

Currency Fluctuations:  The Company maintains its accounts in Canadian and U.S. dollars and Argentinean and Mexican pesos, making it subject to foreign currency fluctuations.  Such fluctuations may materially affect the Companys financial position and results.

Share Price Volatility:  In recent years, the securities markets 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 wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies.  There can be no assurance that significant fluctuations in price will not occur.

Exploration and Mining Risks:  Fires, power outages, labour disruptions, flooding, explosions, cave-ins, land slides 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.

Financing Risks:  The Company has limited financial resources, has no source of operating cash flow and has no assurance that additional funding will be available to it for further exploration and development of its projects or to fulfil its obligations under any applicable agreements.  Although the Company has been successful in the past in obtaining financing through the sale of equity securities, there can be no assurance that it will be able to obtain adequate financing in the future or that the terms of such financing will be favourable.  Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of its projects with the possible loss of such properties.

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

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

Limited Experience with Development-Stage Mining Operations:  The Company has limited experience in placing resource properties into production, and their 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 included in this AIF are estimates only 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. In addition, the grade of mineralization ultimately mined may differ from that indicated by drilling results and such differences could be material.  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 this AIF should not be interpreted as assurances of mine life or of the profitability of future operations.

Enforcement of Civil Liabilities:  As substantially all of the assets of the Company and its subsidiaries are located outside of Canada, and certain of the directors and officers of the Company are resident outside of Canada, it may be difficult or impossible to enforce judgements granted by a court in Canada against the assets of the Company and its subsidiaries or the directors and officers of the Company residing outside of Canada.

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 the Company may be a passive foreign investment company under Section 1297(a) of the U.S. Internal Revenue Code (a PFIC).  If the Company 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.

Alternatively, a U.S. taxpayer that makes a qualified electing fund  (a QEF) election with respect to the Company generally will be subject to U.S. federal income tax on such U.S. taxpayers pro rata share of the Company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 the Company.  U.S. taxpayers should be aware, however, that there can be no assurance that the Company will satisfy record keeping requirements under the QEF rules or that the Company will supply U.S. taxpayers with required information under the QEF rules, in event that the Company 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 the Company 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 the Company 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.

Material Mineral Projects

Baja California Norte IOCG Project, Mexico

Effective May 30, 2006, Anglo American Mexico S.A. de C.V. (Anglo) elected to terminate its option to earn a 51% interest in the Companys Baja California Norte (IOCG) Project (also referred to as the Alisitos Project) (Baja IOCG Project), and thereby surrendered all interest in this property.  Accordingly, on May 30th 2006, the Company assumed 100% control of the Baja IOCG project.

Following the Company resuming control of the Baja IOCG Project, the Company carried out a program of drilling on the Picale prospect, based upon the encouraging results of earlier drilling by Anglo.  Information in this AIF regarding the results of the overall drilling program on the Picale property (by both Anglo and the Company) is based on information provided by the Belik Report.  The following Summary is from the Belik Report and the detailed disclosure in the Belik Report is incorporated into this AIF by reference.  Readers are encouraged to review the entire Belik Report which is filed on SEDAR at www.sedar.com.

Summary

The Picale property is comprised of the Picale, Yecencia and Yecencia 2 mineral concessions which were acquired by Anglo on behalf of the joint venture in 2003 through an option agreement with a third party (Anglo-Flores Agreement).  The rights and obligations under the Anglo-Flores agreement were assigned to the Company when Anglo terminated the joint venture with Cardero in June.  Upon completion of the 2006 drill program, Cardero terminated the Anglo-Flores Agreement.  The Company does not currently hold any rights or interest in the Picale property.

The center of the Alisitos project area is situated near the center of Baja California Norte, Mexico, approximately 330 kilometres south of the US border and the city of Tijuana.  The project area is predominantly underlain by bimodal Arc-type volcanic rocks of the Cretaceous Alisitos Formation, intruded by large granitic masses of the Late Cretaceous Peninsular Batholith.  A large number of iron oxide +/- copper-gold occurrences are hosted within the Alisitos volcanics and associated sediments that exhibit geological characteristics and a metallogenic setting similar to the IOCG districts in northern Chile and southern Peru.  Mineralization in the Alisitos belt occurs as replacement mantos and complex, structurally controlled veins, stockwork zones and breccia bodies.  The style of mineralization, apparent alteration assemblages (commonly multiple phases including strong potassic alteration zones) and lithogeochemistry (Cu-Au-Ag-Mo-Co-Ni-P-U-LREE) are similar to productive IOCG deposits elsewhere.

The Company initiated exploration work in the Baja region in early 2002.  Work consisted of regional reconnaissance mapping of the Alisitos belt from the US border to Grero Negro, a distance of about 400 km, and detailed mapping and sampling on a number of prospective properties examined or acquired by the Company within the belt (San Fernando, Picale, La Encantada, Santa Josefina, Santa Marta).  In late 2002, Anglo entered into a Joint Venture Agreement with the Company to further explore the district.  During  2003 and 2004 Anglo, on behalf of the JV, carried out an airborne magnetic-radiometric regional geochemical surveys and regional mapping followed by ground acquisition, detailed property mapping and ground geophysical surveys.

In 2005, the JV drilled three high priority targets (including Picale) defined by the earlier work.  In total 5201.15 meters of diamond drilling (19 holes) were completed in 2005.  Three holes, with a combined total of 423.98 metres, were drilled at Picale.

At Picale, iron-copper-gold mineralization occurs in a simple, thin, flat-lying bedding-conformable manto that has been traced intermittently over a strike length of more than 5.0 kilometres. Mineralization replaces a distinctive, coarse volcaniclastic-limestone unit that is capped by fine-grained felsic tuffs and underlain by a distinctive, coarse, quartz (commonly blue)-feldspar crystal tuff.  Numerous historical workings (prospect pits, small adits and declines) occur along the trace of the manto horizon but all are shallow and extend only a few meters below the surface.  Surface sampling by Anglo and Cardero geologists along the trace of the zone returned values ranging from 1% to 4% copper and up to 2 g/T gold over widths of up to 4.0 metres.

The three holes drilled in 2005 provided a preliminary test of the down-dip extension of the manto horizon.  The first two holes were collared near the leading edge of the manto and intersected mainly magnetite with low copper values.  The third hole (PC-3), which was collared 400 metres down dip from the leading edge of the manto, intersected semimassive to massive magnetite-sulphide grading 4.03% copper and 0.4g/t gold over a true width of 6.52 meters.

Based on the encouraging results in drill hole PC-3, follow-up drilling was carried out at Picale in 2006.  In total, 3,474.73 meters of NQ diamond drilling (22 holes) were completed during the 2006 campaign.  All holes hit the manto horizon over widths varying from 2.6 metres to 11.7 metres.  Most contain significant magnetite mineralization, typically in semimassive to massive bands with leaner more weakly mineralized (iron) intervals.  Alteration is fairly consistent from hole to hole with biotite typically well developed in the hanging wall and immediate footwall.  Alteration associated with the manto consists primarily of actinolite-tremolite-epidote-biotite-albite-scapolite with lesser tourmaline, quartz, serpentine, chlorite, garnet, diopside and calcite.

The amount of sulphide (pyrite-potassium-chalcopyrite) and chalchopyrite:pyrite ratios are highly variable.  Although a significant amount of chalcopyrite locally occurs in veins, veinlets and disseminations in the footwall (e.g. hole 24), copper mineralization is essentially confined to the manto horizon.  Copper appears to be a relatively late magmatic phase (probably a copper-enriched residual fluid).  Distribution of copper within the manto is probably of function of local host rock-fluid chemistry and available residual porosity.

Although the manto horizon is very continuous and predictable, copper grades are highly variable (trace to +10%) with poor hole-to-hole continuity.  There appears to be a possible continuity of significant copper mineralization between holes 3, 4, 7, 10, 11, 16 and 24 within a northwest-trending zone that may be up to 200 metres wide and 700 metres long (remains open to the northwest).  Additional drilling would be required in order to establish the average grade, thickness and continuity within this zone.

The results of the 2006 drill program are largely inconclusive.  The manto horizon appears to extend well beyond the area tested by drilling, however, evaluation of these areas will be more difficult and costly due to rougher terrain, inaccessibility and thicker cap rock.  Although a number of the holes intersected significant copper mineralization over potentially mineable widths, most of the manto intercepts are either too low grade or narrow to be economically viable.  The apparent erratic nature of copper mineralization within the manto, which results in poor correlation of copper grades from hole to hole, is also problematic.

Based on, for the most part, the disappointing results of the 2006 drill program, the Company elected to terminate the Anglo-Flores Agreement and has relinquished all interest in the Picale property.

Ongoing Work Programs

Anglo is in the process of transferring to Carderos subsidiary, MMC, all of the concessions acquired by Anglo on behalf of the joint venture.  Following this transfer, the Company proposes, based upon an analysis of the results to date, to reduce the size of the overall property to concentrate the land holdings over the most promising areas of the overall Baja IOCG Project.

The Company plans to continue to explore the district during the second and third quarters of 2007, with an estimated total budget of USD 500,000.  Additional drill testing is scheduled to occur at the San Jose, San Fernando West, El Gato and El Cuervito targets by the end of 2007.

Incahuasi SHV Property, Argentina

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

For details of the acquisition of the Incahuasi Property, see Three Year History  Argentina  Incahuasi Property.

Summary

The Incahuasi property is located in the high Andean plateau region known as the Puna in northwest Argentina.  The area of interest consists of an historic gold mine with intermittent production since pre-Hispanic time.  Production from 1936 to 1954 reportedly recovered average grades between 12 and 18 g/t gold with local bonanza grades up to 300 g/t gold.  Production ceased due to flooding as opposed to lack of ore.

Historic mine workings cover more than 600 metres of strike length of a gold-bearing vein system, extend down-dip to 130 metres depth, and are developed within several vein zones in an area approximately 300 metres wide.  The principal zone of veining fills a shear zone with inferred reverse offset.  This shear zone extends to the north and south beyond the limits of the workings and suggests that there is ample opportunity for the discovery of more mineralization.  In addition, minor stockwork veinlets occur in wall rock near vein zones presenting the possibility that wider zones of mineralization may be present.  Incahuasi is interpreted to be a Sediment Hosted Vein (SHV) type of deposit, a subset of the broader orogenic class of gold deposits.

Work to date by the Company includes reconnaissance and trench sampling.  Highlights of this work include a sample containing 231 g/t gold from a 20 centimetre quartz vein within a zone of quartz veins.  Samples from the other veins contain up to 10.15 g/t gold.  Grab samples from the dump and mill site contain up to 25.3 g/t gold.

Gold occurs in quartz ± carbonate ± sulfide veins which fill a shear zone and related structures.  Host rocks are shale, siltstone, and conglomerate of the Ordovician Santa Victoria Group, a package of rocks which were deposited in a passive margin setting and now form a belt along the eastern margin of the Andes from north central Argentina to northern Peru.  These rocks have undergone fold-thrust deformation during the late Ordovician Ocloyic Orogeny.  It is interpreted that the shear zone formed and mineralization deposited during this event.  Early stages of quartz veining have been milled and brecciated within the shear zone and then overprinted with subsequent veins.  Historic mining has been on the late-stage quartz veins.

Alteration is dominated by sericitization which weathers at the surface to clay rendering the mine area white as if after argillic alteration.  In addition, disseminated pyrite along with diffuse and webwork veinlets of iron-oxide is interpreted to be after oxidation of iron-carbonate.  The style of mineralization, the host rocks, the structure, and the style of alteration are typical of SHV systems.

Ongoing Work Programs

The author of the Klipfel Report recommends that the Company implement its planned phased exploration program.  This consists of review of historic data for reconstruction of deposit architecture using past data and mine plans and drilling of approximately 2,500 metres of diamond core holes along strike and down dip from existing workings.  The Company plans to implement the recommended program, commencing in the first quarter of 2007, at an estimated cost of USD 450,000.

Iron Sands Project, Peru

Summary

In 2005, the Company acquired, by staking, a 32,000-hectare (320 km2) iron (magnetite) sand property near the city of Nazca in the desert coastal region of southern Peru.  Geographically the property forms part of, and is adjacent to the Companys properties in the Marcona IOCG district (Carbonera, Daniella).  The Company has since staked some new claims and dropped some of the original claims, and the Iron sands project now consists of three separate areas  the Carbonara Dune Field, the Pampa El Torro Dune Field and the Tanaka Dune Field, as well as some additional claims covering an area to the south of the Carbonera Dune Field.  The total claim area held by the Company is now approximately 40,000 hectares.

In December, 2005, the Company assumed, from a private Peruvian company, all rights and obligations under an agreement dated December 16, 2005 between a private Peruvian company and Minera Ataspacas S.A., an arms length private Peruvian company, whereby the private Peruvian company has the option to acquire, from Minera Ataspacas, an initial 70% interest in 5 mineral sand concessions (3,500 hectares total) surrounded on three sides by the Companys Pampa El Torro Dune field claims.  In order to exercise the option, the Company is required to pay a total of USD 2,500,000 over 5 years to December 15, 2010 and incur exploration expenditures of not less than USD 250,000 over the same period.  Upon the Company having acquired the 70% interest, a joint venture company will be formed with Minera Ataspacas, and each party will thereafter be required to contribute its share of ongoing expenditures or be diluted.  If either party is diluted to less than 10%, such interest will be converted to a 2% net smelter return royalty.  If Minera Ataspacas is reduced to the 2% NSR, the Company may purchase half the NSR (1%)for USD 2,000,000 within 24 months of the exercise of the option, and the remaining half (1%) for USD 8,000,000 within 36 months of the exercise of the option.

The Companys strategy for the project is to highlight a logistically easily accessible area containing sufficient magnetite (iron oxide) bearing sands to support a 20 to 30 year integrated mining operation.  Following advice from SRK Consulting (Johannesburg), a 5,820 metre, ninety-seven borehole program systematically percussion drill-tested an approximately 6.5km2 area using a combination of 500 and 250 meter drill centres.

Mineral process testing has been conducted at three independent laboratories.  The results indicate that magnetite recoveries vary from 93 to 60% for surface sand sized mineralization and between 35 and 50% for composite drill material.  The Company believes that excessive grinding of the magnetite occurred during the drilling process and that this finer material adversely affects the recovery process.  Such grinding of material is considered highly unlikely to occur in any proposed mining operation.  The Company is presently designing a suitable process to address this issue, possibly utilizing composite material from surface pits where there is limited or no possibility of mechanical grinding of the magnetite.

Contingent on favourable results from the testing and the delineation of a suitable resource, Cardero is proposing a two stage production strategy.  This strategy would consist, firstly, of the production of a direct shipping iron concentrate, and, secondly, the processing of the concentrate to produce pig iron, with titanium and vanadium as potential by-products.

The second stage would be a Midrex FASTMELT® pilot plant test on the concentrate to assess the feasibility of producing pig iron and recovering titanium and vanadium from the resultant slag.  Assuming a successful test result and a positive feasibility study, the next step would be to install a full scale Midrex FASTMELT ® plant at the Iron Sands Project.

Ongoing Work Programs

SRK Consulting has been retained to provide ongoing advice and, contingent on additional process testing, to complete a N.I. 43-101 resource estimate.  Due to the significant work backlogs and delays in global iron testing facilities, the Company is presently unable to provide an accurate date on when this work will be completed but it is anticipated to occur sometime in the third or fourth quarter of 2007.  Assuming that the test work is favourable, and that the Company proceeds with a Midrex FASTMELT® pilot plant test, the Company estimates that it will incur approximately USD 1,200,000 in expenditures on the Iron Sands Project in fiscal 2007.

EurGeol Dr. Mark D. Cruise, Carderos Vice President-Exploration and a qualified person as defined by National Instrument 43-101, has supervised the preparation of the scientific and technical information that forms the basis for the above disclosure with respect to the Companys Iron Sands Project.

Pampa de Pongo Property, Peru

The Company has not carried out any further work on the Pampa de Pongo property since the drill program completed in the spring of 2005 and the resource calculation completed in August 2005.  The Company continues to make the payments required to maintain its option in good standing (the next payment is USD 100,000 due in January, 2007) and is presently designing a suitable strategy to advance the project.  No additional field work is scheduled in the near-future, but the Company estimates that it will incur approximately USD 150,000 in exploration expenditures on the Pampa de Pongo Iron Project in fiscal 2007.

The inferred resource estimates at the Pampa de Pongo Property are as follows:

Inferred Resources of the Central Zone and South Zones of the Pampa de Pongo Property(1).

|Mineralized Zone  | Inferred Resources(2)
(tonnes) | Grade:    
|----------------- | ------------------------------ | ----------
|Iron (%)          | Copper (%)                     | Gold (g/T)
|Central Zone      | 848,000,000                    | 44.9      
|South Zone  East | 100,000,000                    | 43.0      
|South Zone  West | 5,000,000                      | 43.8      
|Total             | 953,000,000                    | 44.7      

Note:

1.

Readers are cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability.
2.

Readers are strongly urged to review the applicable technical report with respect to the inferred resource estimate dated August 6, 2005 and filed on SEDAR on September 12, 2005.

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 fiscal 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 the Company 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 47,231,439 were issued at January 26, 2007.  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.

Constraints

There are no constraints imposed on the ownership of Common Shares to ensure that Cardero has any required level of Canadian ownership.

ITEM 8:MARKET FOR SECURITIES

The Common Shares are listed and posted for trading on the TSE (symbol CDU), on the American Stock Exchange (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 TSX (since July 5, 2006) and TSX Venture Exchange (November 2005  July 4, 2006) 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:

Toronto Stock Exchange

|Month                  | High
($) | Low
($) | Volume   
|---------------------- | -------- | ------- | ---------
|January 1 to 26, 2007  | 2.08     | 1.64    | 1,633,778
|December, 2006         | 2.04     | 1.62    | 1,075,858
|November, 2006         | 2.02     | 1.79    | 1,285,147
|October, 2006          | 2.04     | 1.51    | 1,497,503
|September, 2006        | 2.25     | 1.26    | 1,441,170
|August, 2006           | 2.04     | 1.67    | 683,652  
|July, 2006 (July 5 on) | 2.45     | 1.65    | 589,514  



TSX Venture Exchange

|Month            | High
($) | Low
($) | Volume   
|---------------- | -------- | ------- | ---------
|July 1 - 4, 2006 | 2.49     | 2.19    | 17,600   
|June, 2006       | 2.64     | 1.89    | 669,420  
|May, 2006        | 3.83     | 2.10    | 1,939,786
|April, 2006      | 3.64     | 2.75    | 1,262,107
|March, 2006      | 3.87     | 3.15    | 1,235,577
|February, 2006   | 4.30     | 3.45    | 1,149,159
|January, 2006    | 5.79     | 3.87    | 3,414,806
|December, 2005   | 5.45     | 4.29    | 2,413,695
|November, 2005   | 4.86     | 3.15    | 2,366,763

ITEM 9:ESCROWED SECURITIES

There are no securities of the Company subject to escrow.

ITEM 10:DIRECTORS AND OFFICERS

Name, Occupation and Security Holding

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

|Name, Position and
Province/State and Country of Residence(1)                               | Principal Occupation
During the Past 5 Years(1)                                                                                                                                                                                                                                                                                                               | Period of Service as an Officer or Director(2)                                     
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------
|Hendrik van AlphenPresident, Chief Executive Officer and Director
British Columbia, Canada  | Businessman; President of Cardero, 1999 to present.                                                                                                                                                                                                                                                                                                           | Director since April 19, 1999
President since April 10, 2000
CEO since May 14, 2001
|Leonard Harris(3)(4)Director
Colorado, USA                                                  | Independent consultant to the mining industry, 1992 to present.                                                                                                                                                                                                                                                                                               | Since February 25, 2000                                                            
|Lawrence W. Talbot (4)Director, Vice-President and General Counsel
British Columbia, Canada | Barrister and Solicitor; Owner, Lawrence W. Talbot Law Corporation (law firm), previously Partner, Gowling Lafleur Henderson LLP (law firm) since April 2000.                                                                                                                                                                                                 | Director since April 17, 2003
Vice-President & General Counsel since July 1, 2006  
|Murray W. Hitzman, Ph.D.(3)
Director
Colorado, United States                                | Geologist; Professor of Economic Geology at the Colorado School of Mines since June 1996 and Head of the Department of Geology and Geological Engineering at the Colorado School of Mines since August 2000.                                                                                                                                                  | Since January 4, 2006                                                              
|Stephan A. Fitch(3)
Director
London, England                                                | Businessman; Managing Director, IAG Holdings Limited (private investment company) 2003 to present; previously Partner, International Asset Group Ltd. (private merchant and investment banking firm) 1995 to 2003.                                                                                                                                            | Since May 31, 2006                                                                 
|Michael W. Kinley, C.A.
Chief Financial Officer
British Columbia, Canada                    | Chartered Accountant; President, Winslow Associates Management & Communications Inc. 1973 to present (private consulting firm); CFO, Wealth Minerals Ltd.; Director, Indico Technologies Ltd.; Director, StonePoint Global Brands Inc.; President, WorldStar Energy Corp.; Director, Strike Resources Ltd.; President, Noise Media Inc. (GFK Resources Ltd.). | Since January 4, 2006                                                              
|Mark D. Cruise, Ph.D.Vice-President, Exploration
British Columbia, Canada                   | Geologist; Vice-President, Exploration of Cardero, 2004 to present; Senior Geologist Copper/Zinc, Anglo American plc, 1996 to 2004.                                                                                                                                                                                                                           | Since November 16, 2004                                                            
|Marla K. RitchieCorporate Secretary
British Columbia, Canada                                | Corporate Administrator; Corporate Secretary, Cardero, May 2001 to present; from February 1992 to November 2003, Secretary/Administrator to several public natural resource companies, including Ascot Resources Ltd., Brett Resources Ltd., Golden Band Resources Inc., Hyder Gold Inc., Leicester Diamond Mines Ltd. and Solomon Resources Limited          | Since May 14, 2001                                                                 

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 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 July 19, 2007).  All officers hold office at the pleasure of the Board.
3.

Denotes member of the Audit Committee.
4.

Denotes member of the Compensation Committee.

Cardero does not currently have any committees other than the Audit Committee and the Compensation Committee.

As at January 26, 2007, Carderos Directors and senior officers, as a group, beneficially hold a total of 1,275,550 Common Shares, directly or indirectly, representing 2.7% of the 47,231,439 issued Common Shares.  Carderos Directors and senior 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)

200,000 Common shares exercisable at $3.00 per Common share until July 29, 2007;

(b)

200,000 Common shares exercisable at $3.00 per Common share until July 29, 2007;

(c)

175,000 Common Shares exercisable at $3.00 per Common Share until September 1, 2007;

(d)

725,000 Common Shares exercisable at $2.80 per Common Share until May 2, 2008;

(e)

875,000 Common Shares exercisable at $1.95 per Common Share until August 4, 2006; and

(f)

375,000 Common Shares exercisable at $2.00 per Common Share until November 30, 2006

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

No Director, executive officer or person holding a sufficient number of securities of Cardero to affect materially the control of Cardero:

1.

is, as at the date of this AIF or has been, or 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 that capacity:

(a)

was the subject of a cease trade or similar order, or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days, except as follows:

(i)

Michael W. Kinley, the Chief Financial Officer of the Company, was the President and Director of Abstract Enterprises Corp. (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,

(ii)

Michael W. Kinley, the Chief Financial Officer of the Company is the President, Chief Executive Officer and a Director of 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;

(b)

was subject to an event that resulted, after the Director or executive officer ceased to be a Director or executive officer, in the company being the subject of a cease trade order or similar order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or

(c)

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;

2.

has, within ten years before the date of the 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; or

3.

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 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.  To the extent that such other companies may participate in or be affected by ventures involving Cardero, these Directors and officers of Cardero may have conflicting interests in negotiating, settling and approving the terms of such ventures.  Conflicts of interest affecting the Directors and officers of Cardero will be governed by Carderos Code of Business Conduct and Ethics, the Articles of Cardero and the provisions of the Business Corporations Act (British Columbia) 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.

ITEM 11:PROMOTERS

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

ITEM 12:LEGAL PROCEEDINGS AND REGULATORY ACTIONS

Legal Proceedings

The Company is not currently, and has not since November 1, 2005 (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, 2005 (being the commencement of the Companys last competed financial year), any of the Companys properties been, the subject to any legal proceedings, except as follows:

On May 20, 2004, Western Telluric Resources Inc. and Minera Olympic, S. de R.L. de C.V. (Minera) (collectively, the Plaintiffs) in the British Columbia Supreme Court (Vancouver Registry, No. S042795) against Cardero and James Dawson, Murray McClaren and their respective companies, Dawson Geological Consultants Ltd. and 529197 B.C. Ltd. (carrying on business as Crockite Resources).

The relief claimed against Cardero is the setting aside of an agreement dated December 12, 2001 between Cardero and Minera regarding the acquisition of mineral concessions in Baja Norte State, Mexico.  The Plaintiffs are suing for damages for breach of contract, breach of duty of confidence and knowing participation in breach of fiduciary duty.

Cardero has filed a Statement of Defence in which it denies any liability as well as a Counterclaim against the Plaintiffs for malicious prosecution, abuse of process, injurious falsehood and conspiracy to injure.  Cardero filed an application to have the Plaintiffs post security for costs in the amount of $115,000 which was granted by the Court on March 10, 2005.  The Plaintiffs have posted the required security.

The pleadings are closed and documents have been exchanged.  Discoveries have been partially completed, and trial is currently set for March 2007.

Cardero is not currently in a position to quantify the potential exposure to Cardero or the potential recovery that may be had pursuant to the Counterclaim.  No specific amounts are claimed in either the Statement of Claim or the Counterclaim.  The Plaintiffs have not delivered any evidence with respect to quantum.  In addition, the size of any damage award against Cardero may be affected by results of work on the subject mineral properties after the date hereof and trial.

Regulatory Actions

There have not been any:

1.

penalties or sanctions imposed against the Company by a court relating to securities legislation or by a securities regulatory authority during the financial year ended October 31, 2006;

2.

any other penalties or sanctions imposed against the Company 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 the Company with a court relating to securities legislation or with a securities regulatory authority during the financial year ended October 31, 2006.

ITEM 13: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, since November 1, 2005 (being the commencement of the Companys last completed financial year), had any material interest, direct or indirect, in any transaction that has materially affected, or will materially affect, the Company.

ITEM 14:TRANSFER AGENT AND REGISTRAR

The Companys transfer agent and registrar is Pacific Corporate Trust Company.  Transfers may be effected at, and registration facilities are maintained at:

1.

in British Columbia, 2nd Floor, 510 Burrard Street, Vancouver, British Columbia, V6C 3B9; and

2.

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

ITEM 15: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, 2005 (being the commencement of the Companys most recently completed financial year) and that are still in effect

ITEM 16: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, 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, Chartered Accountants:

(i)

provided an auditors report dated January 17, 2006 in respect of the Companys financial statements for the years ended October 31, 2005 and 2004 and incorporated by reference into Carderos AIF dated January 25, 2006, and

(ii)

provided an auditors report dated January 23, 2007 in respect of the Companys financial statements for the years ended October 31, 2006 and 2005 and incorporated by reference into this AIF.

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

(b)

Jan N. Helsen, Ph.D., P.Geo., a qualified person for the purposes of NI 43-101, is the author responsible for the preparation of the technical report dated August 6, 2005 entitled Geological Valuation Report of the Pampa de Pongo Property, Arequipa Department, Caraveli Province, Peru and incorporated by reference into Carderos AIF dated January 25, 2006.  Mr. Helsen holds less than 1% of the outstanding Common Shares;

(c)

Stephen Enns, P.Geo. and Alistair Findlay, P.Geo., each a qualified person for the purposes of NI 43-101, are the authors responsible for the technical report dated January 12, 2006 entitled Technical Report on the Geology of the Huachi Porphyry Copper Prospect, San Juan Province, Argentina and incorporated by reference into Carderos AIF dated January 25, 2006.  Each of Mr. Enns and Mr. Findlay holds less than 1% of the outstanding Common Shares;

(d)

Paul D. Kipfel, Ph.D, AEPG, a qualified person for the purposes of NI 43-101, is the author responsible for the preparation of the Klipfel Report incorporated by reference into this AIF.  Mr. Klipfel holds less than 1% of the outstanding Common Shares and incentive stock options to acquire up to an additional 30,000 Common Shares; and

(e)

Gary D. Belik, P.Geo. a qualified person for the purposes of NI 43-101, is the author responsible for the preparation of:

(i)

the technical report dated January 22, 2006 entitled Diamond Drill Report on the Baja California Norte IOCG Project (San Fernando, Picale and Amargosa Properties)  Baja California Norte, Mexico and incorporated by reference into Carderos AIF dated January 25, 2006, and

(ii)

the Belik Report incorporated by reference into this AIF.

Mr. Belik holds less than 1% of the outstanding Common Shares and incentive stock options to acquire up to an additional 75,000 Common Shares.

ITEM 17:ADDITIONAL INFORMATION

Audit Committee Information

Under Multilateral Instrument 52-110  Audit Committees (MI 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 Carderos comparative audited consolidated financial statements, together with the auditors report thereon, and the related Management Discussion and Analysis for its most recently completed fiscal year ended October 31, 2006.

A copy of this AIF, the Information Circular and the financial statements (including any interim statements from the past fiscal 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).

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)

a member of the Committee other than the chair, or

(b)

another individual who is not a member of the management of the Company.

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

(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.



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.
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.

---

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.

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;

(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

(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,

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

(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.

Composition of the Audit Committee

The Company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 world wide, 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 the Company.  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 the Company.

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 though 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 2002 was named Head of the Department of Geology and Geological Engineering at the Colorado School of Mines.  Mr. Hitzman has been a director of a number of public companies similar to the Company, and in such roles, he has had experience with the review and understanding of the accounting principles relevant to the financial statements of public natural resource companies.

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

Reliance on Certain Exemptions

At no time since the commencement of the Companys most recently completed financial year has the Company relied on the exemptions 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, 2005, being the commencement of the Company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 the Company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 the Company.  The Chairman of the Audit Committee is authorized to approve any non-audit services or additional work which the Chairman deems as necessary and is required to notify the other members of the Audit Committee of such non-audit or additional work.



External Auditor Service Fees (By Category)

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

|Financial Year Ending | Audit Fees(1) | Audit Related Fees(2) | Tax Fees(3) | All Other Fees(4)
|--------------------- | ------------- | --------------------- | ----------- | -----------------
|October 31, 2005      | $25,800       | Nil                   | $2,500      | Nil              
|October 31, 2006      | $67,375       | $1,000                | $3,500      | Nil              

(1) The aggregate audit fees billed.

(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.

(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.

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