**EXHIBIT        99.3**

 

 

 

 

 

 

 

 

 

 

 

 

 

**Management Discussion and Analysis**

**For the        Year Ended**

**December 31, 2007**

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**Map        of Southern South America focusing on Exeter’s projects in both Argentina and        Chile:**

 

         

 

 

 

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**A        summary of the Company’s mineral properties follows:**

 

| **Summary of Projects**                                  |
|----------------------------------------------------------|
| Rights

Acquired                                         |  

Properties | Land Area

(sq. km) |  

Paid to Date | Future

Commitments |
| 100%

Owned                                              | Cerro Moro******

-15 tenements | 160 | ***** | - 2% NSR to CVSA |
| 100% Owned                                               | Santa Cruz Regional

-15 tenements | 1,450 | Nil | Nil |
| Option for 100%                                          | CVSA Properties

Santa Cruz, Chubut, Rio Negro

- 23 tenements | 722 | US$100,000

                         

*****includes acquisition                        of

Cerro Moro | - exploration expenditures

totaling US$3,000,000

to Dec. 30, 2009

                         

- 2% NSR |
| Option for

100%                                         | Northern Chile

Maricunga Property (Caspiche) | 30 | Nil | - expenditure totaling

US$2,550,000 to January 31, 2011

                         

- 3.0 % NSR |
| Data                                                     | Southern Chile

- 48 Targets | N/A | Nil | Nil |
| Option for 100%                                          | Don Sixto (La Cabeza)

- 7 tenements | 82 | 4,100,000 shares

plus US$175,000 | - cash payments totaling

US$400,000 to Dec. 15, 2014

                         

- 3.5% NSR |
|  

Option for

100%                                 |  

Don Sixto Regional

- 7 tenements | 81 | US$50,000 | - annual payments of US$25,000

for six years

                         

- 3 annual payments of

US$200,000 for 100% |
| 100% Owned                                               | Don Sixto Regional

- 4 tenements | 235 | Nil | Nil |
| Option for 100%                                          | MRP Properties

Agua Nueva (Don Sixto), Rosarita South, La Ramada

- 13 tenements | 300 | $70,050 | - cash payments totaling

$370,000 to October 1, 2015

                         

- 2% NSR |
|  

Option for

100%

                          |  

Estelar Properties

Rosarita, Quispe and El Salado

- 6 tenements | 68 |  

1,000,000 shares

                         

                          |  

- 2% NSR

                         

                          |

 

******Subsequent to December 31, 2007, the Company        announced that it had entered into a letter of intent (“LOI”) with Fomento        Minera de Santa Cruz Sociedad del Estado (“Fomicruz”). The LOI sets out the key        terms of a strategic agreement between the Company and Fomicruz for the future development        of Cerro Moro and is more fully described in Subsequent events.

 

 

 

 

 

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| Conversion Table |
|------------------|
| g/t              | grams per tonne |
| Au               | Gold |
| Ag               | Silver |
| oz               | ounce |
| 1 tonne          | 1.102 tons |
| 1 troy ounce     | 31.1035 grams |
| 1 ounce/ton      | 34.2857 grams per tonne |
| 1 gram/tonne     | 0.029 oz/short ton |
| km               | kilometre |
| m                | metre |
| square kilometre | 247.1 acres |
| 1 kilometre      | 0.62 miles |

| 1 metre | 3.28 feet |
|---------|-----------|

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**Management’s Discussion and Analysis**

**March        28, 2008**

 

**Report        on Operations**

 

In early        2007, the Company curtailed drilling on its Don Sixto Project to focus primarily on the        construction of geological, mineralization and structural models in preparation for updated        resources estimates for Don Sixto which were released in August 2007. With the curtailment        of drilling at Don Sixto, the Company’s geological teams focused on advancing both        its Cerro Moro and Caspiche projects in Argentine Patagonia and Chile respectively.        Following the introduction of legislation which banned the use of certain chemicals,        traditionally used in mining, by the Mendoza Provincial Government in June 2007,        exploration and independent engineering studies at Don Sixto were suspended.

 

By        August 2007, the Company had completed 10,000 metres of drilling at Cerro Moro, triggering        Cerro Vanguardia’s (“CVSA”) back-in right to gain a majority interest in        the project. The Company collated all geological data generated on Cerro Moro up to the        completion of the 10,000 meters of drilling and forwarded it to CVSA in September. Upon        receipt of that data, CVSA had 45 days in which to exercise its back-in-right. On October        30, 2007, CVSA advised the Company that it would not exercise its back in right and,        consequently, its interest reverted to a 2% net smelter royalty with the Company owning        100% of the project. Exploration at Cerro Morro including the use of at least three        drilling rigs, is expected to continue through 2008.

 

At        Caspiche, located in the Maricunga region of the Chilean Andes in an area known to be rich        in porphyry gold deposits, two drilling campaigns were conducted in early 2007 with the        final drill hole being drilled into a very promising porphyry gold target. Drilling resumed        at Caspiche in December 2007.

 

In        September, Paul Cholakas, who is domiciled in Argentina, took up his position as Chief        Operating Officer of the Company. Paul is an experienced mining engineer having managed the        Tick Hill Goldmine in North Queensland, and also has significant experience in commercial        and technical risk management. In his previous position, he was Commercial Manager of the        multi-billion dollar oil and gas producer/explorer Oilsearch Pty Ltd.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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**ARGENTINA**

 

**Cerro        Moro and CVSA Properties – Patagonia**

 

*Acquisition terms*

In        January 2004, the Company announced that it had secured an option from CVSA to acquire all        of CVSA’s exploration projects (the “CVSA Properties”), except those        surrounding the Cerro Vanguardia gold mine, in Patagonia, Argentina. CVSA is owned 92.5% by        AngloGold Ashanti Ltd. and 7.5% by Fomicruz.

 

Under        the option agreement, Exeter paid CVSA US$100,000 for the right to earn a 100% interest in        the CVSA Properties by spending US$3 million within five years, including completing 8,000        metres of drilling on any of the four major projects which comprise the CVSA Properties.        CVSA also has the right to back into a 60% interest in a project following the completion        of 10,000 meters of drilling on that project, by paying Exeter 2.5 times its expenditures        on that project and by paying for all the project costs to the completion of a bankable        feasibility study. CVSA can increase its interest to 70%, by financing Exeter’s share        of mine development costs, at industry standard terms. Should CVSA elect not to back into a        project, its interest will revert to a 2% net smelter royalty (“NSR”) in that        project.

 

At the        end of 2006, Exeter had met the obligation to incur total aggregate expenditures of        US$3,000,000, and had completed 12,000 metres of drilling, and in early 2007 notified CVSA        that it was exercising the option to acquire the CVSA Properties subject to their back in        right. On August 2, 2007, Exeter notified CVSA that it had completed 10,000 metres of        drilling at Cerro Moro and provided them with a report containing exploration results in        early September. In October, CVSA advised the Company that it had elected not to exercise        the back-in right and its interest reverted to a 2% NSR on the Cerro Moro        project.

 

To date,        Exeter has completed 7,641 meters of drilling on two other Santa Cruz properties (drilled        at Cerro Puntudo and Verde). Further drilling scheduled for 2008 is dependent on the        Company contracting additional qualified geologists to conduct the field work necessary to        better define drill targets. Exeter has not conducted any drilling on either of the Rio        Negro or Chubut projects, which comprise the remainder of the projects held.

 

On        December 20, 2007, the Company filed a technical report, complying with the requirements of        the Canadian Securities Administration’s National Policy Instrument 43-101 (“NI        43-101”), for the Cerro Moro drafted by Jerry Perkins, Exeter’s Vice President        Exploration and Development, and a Qualified Person (“QP”) and Matthew        Williams, Exeter’s Exploration Manager and a QP. The report can be viewed on SEDAR        atwww.sedar.com.

 

*Property Description*

The CVSA        properties are grouped into the four main project areas listed below, of which Cerro Moro        was the most advanced at the time of acquisition:

 

| Cerro Moro*                 | 15 tenements | 160 sq km |
|-----------------------------|--------------|-----------|
| Other Santa Cruz properties | 8 tenements  | 341 sq km |
| Chubut properties           | 11 tenements | 241 sq km |
| Rio Negro properties        | 4 tenements  | 140 sq km |

 

*Now 100% owned by the Company subject to a 2%        NSR.

         

Most of        the CVSA properties were acquired by CVSA over 10 years ago, prior to the recent interest        in Patagonia. All of the projects have favourable geological settings, significant        hydrothermal alteration features and/or anomalous gold or silver geochemistry.

 

Many of        the properties held under the agreement were identified by CVSA using satellite imagery        following structural studies, suggesting large alteration systems. The amount of subsequent        exploration varied, but in many cases anomalous gold and/or silver mineralization was        identified. No geophysical surveys were conducted and drilling did not extend into covered        areas.

 

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A number        of the properties considered to be low priority targets were returned to CVSA in 2005 and        in May 2006. Additional properties have been acquired around projects considered to have        good potential for discoveries. Following the acquisition of Cerro Moro by the Company in        October 2007, a total of 23 tenements covering 722 square kilometres in three provinces        remain subject to the agreement. Prospecting and geochemical surveys have been conducted on        many of the Santa Cruz, Chubut and Rio Negro properties and, following that work and the        favourable mining regime in Santa Cruz, the Company has decided to focus its attention on        the Cerro Moro, Puntudo and Verde projects, all situated in Santa Cruz Province. Other        properties in Santa Cruz Province covered by the agreement include the Calandria and Azul        properties.

 

**Cerro        Puntudo Project – Santa Cruz Province**

 

The 200        square kilometre Cerro Puntudo project is approximately 100 kilometres west of the Cerro        Vanguardia mine in Santa Cruz Province. The known mineralization is considered to be        epithermal in character, hosted within Jurassic age, felsic volcanic rocks.

 

**Verde        Silver Project – Santa Cruz Province**

 

Silver        mineralization on the Verde property, in western Santa Cruz Province, relates to at least        30 geological structures.

 

**Calandria Project - Santa Cruz Province**

 

The        Calandria Project is thought to have potential for high-level low sulphidation style        epithermal gold deposits. Geologic mapping and a ground magnetic survey have been conducted        with some 600 line kilometres completed.

 

**CHILE**

 

**Northern Chile - Maricunga**

 

**Caspiche Project**

 

In 2005,        the Company entered into an agreement with Minera Anglo American Chile Limitada and Empresa        Minera Mantos Blancos S.A. (“Anglo American”) over seven properties in the        Maricunga region of Chile. The terms of the agreement provide for increasing annual        drilling and exploration commitments over five years, and the phased reversion of five        properties to Anglo American after the second and third years. Once Exeter has spent a        total of US$2.55 million, including completing 15,500 metres of drilling, it will have        earned a 100% interest in the remaining properties. Anglo American will be entitled to a 3%        net smelter return from production.

 

All hard        copy data received from Anglo American were digitized, and the satellite (Aster) imagery        for the area secured, prior to the commencement of field work in November 2005. Magnetic        data acquired for Caspiche has been reprocessed to delineate targets for epithermal gold        mineralization. Exploration, including geochemical sampling and prospecting was conducted        through the field season in early 2006. This work resulted in early reversion of five of        the seven properties to Anglo American and allowed Exeter to focus on the two most        favourable properties, jointly referred to as the Caspiche project. Previously, exploration        by Anglo American led to the discovery and subsequent drilling of a copper-gold porphyry        system at Caspiche.

 

The        Caspiche project is located in a prolific region of gold porphyry deposits, 11 km (7 miles)        southeast of Kinross Gold’s Refugio Mine and 15 km (10 miles) north of Barrick Gold        – Kinross Gold’s Cerro Casale project.

 

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On        January 25, 2008, the Company filed a NI 43-101 technical report for the Caspiche Project        drafted by Jason Beckton, formerly Exeter’s Exploration Manager in Chile, a Qualified        Person (“QP”) and Jerry Perkins, Exeter’s Vice President Exploration and        Development and a QP. The report can be viewed on SEDAR atwww.sedar.com.

 

**ARGENTINA**

 

**OTHER        PROJECTS**

 

**Don        Sixto (La Cabeza) – Mendoza**

 

Exeter        ceased exploration at Don Sixto following the Mendoza Provincial Government’s        anti-mining legislation enacted in June 2007. The new legislation banning the use of        certain chemicals traditionally used in the mining process effectively precludes the        development of mining projects in Mendoza Province. The Company deferred all exploration        and independent engineering studies in Mendoza and filed an action in the Mendoza Supreme        Court to have this anti-mining legislation declared unconstitutional. Should the Company        not be successful in its constitutional challenge or the anti-mining legislation not be        amended, the carrying value of the Don Sixto project may not be recoverable requiring the        Company to write-off its entire investment of $3.2 million. The Company continues to work        with all levels of government, industry and unions to demonstrate that the Don Sixto        project, if viable, could be developed responsibly and that it would provide important        economic and social benefits to the community and to the Province.

 

*Acquisition terms*

In 2005,        the Company completed the acquisition of Cognito Limited (“Cognito”), a company        that has the option to acquire a 100% interest in the Don Sixto gold project. The Company        issued a total of 4,100,000 common shares and paid $25,000 to Rowen Company Limited        (“Rowen”) and its principals as consideration for the option to acquire Cognito        and in settlement of the purchase consideration. Bryce Roxburgh, the President and CEO and        a director of the Company, is a principal of Rowen.

 

To earn        its interest in the Don Sixto property (subject to a 3.5% NSR in favour of the owners of        the property), Cognito must pay to the owners of the property a total of US$525,000, in        staged payments, by December 2014. On behalf of Cognito, the Company has made all required        payments totaling US$175,000 to date. Cognito may terminate the staged payments upon making        a development decision in respect of the project; provided that production commences within        two years. Cognito has the option to purchase the NSR outright for US$1,000,000.

 

Early in 2007, the Company expanded its holding around Don Sixto by signing        an option agreement over an additional 81 square kilometres (20,160 acres) of exploration        rights, situated to the immediate north of Don Sixto. The option was acquired to secure        areas considered favourable for the discovery of epithermal gold-silver systems. The terms        for the option provide for annual payments of US$25,000 over six years followed by a        purchase price comprising three annual payments of US$200,000. There are no expenditure        requirements.

 

Subsequent to December 31, 2007, the Company entered an agreement with the        property owners deferring the annual payments until such time as the legislation is amended        such that mining can be conducted in Mendoza Province.

 

A regional program evaluating potential repetitions within the tenure        surrounding Don Sixto commenced late in 2006 and was curtailed in early 2007. The        significant increase in knowledge of the mineralization in the area generated from the        comprehensive exploration and drilling programs carried out over the past three years at        Don Sixto and provided the basis for the regional evaluation program. Work initially        involved targeting areas with similar structural and alteration features as Don Sixto.        Ikonos satellite imagery and reprocessed airborne magnetic/radiometric survey data was also        used to assist in targeting for mineralized zones. This work, considered to be at an early        stage, has also been terminated following the introduction of anti-mining        legislation.

 

*Property        Description*

Don        Sixto is located 370 km south of the city of Mendoza, in Mendoza Province, and consists of        seven gold concessions, covering approximately 82 square kilometres. Approximately 615        square kilometres of additional concessions, comprising the Agua Nueva property and other        properties in the area, are held under option pursuant to

 

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agreements with Minera Rio de la Plata, described below, the option entered        into in early 2007, and the areas acquired by the Company. Geologically, it is readily        accessed by gravel roads and lies at an elevation of 1,100 metres above sea level. The area        has no grid electricity or water pipeline.

 

The        property was discovered in 1997 by Argentina Mineral Development (“AMD”), which        spent approximately US$3.3 million on exploration to outline ore-grade gold mineralization        within epithermal quartz veins and breccias, in hydrothermally altered, Permo-Triassic        felsic volcanic rocks. The Don Sixto mineralization is described as low-sulphidation        epithermal. Preliminary metallurgical test work indicated +90% gold recovery for oxidized        and sulphide bearing material utilizing conventional leaching methods. Drilling by AMD        included 16,000 metres of diamond and reverse circulation testing. This exploration program        partially delineated multiple zones of gold mineralization within a 4 square kilometre area        and led to resource calculations followed by an in-house scoping study.

 

Exeter        commissioned Ruben S. Verzosa, P. Eng. of Langley, British Columbia, a QP, to review the        results of the AMD exploration program and in-house scoping study. Mr. Verzosa reviewed the        methodology of all exploration procedures and confirmed that the resources established to        that date were “inferred resources” as defined by the Canadian Institute of        Mining, Metallurgy and Petroleum code. This report can be viewed atwww.sedar.com.

 

Robert        Harley, formerly Exeter’s Vice President, Exploration completed a NI 43-101 technical        report, updating all exploration to September, 2004. This report can be viewed atwww.sedar.com.

 

Subsequently, Matthew Williams, Exeter’s Exploration Manager and QP,        together with independent QP Peter Allen of Australian Mine Design and Development        (“AMDAD”) of Brisbane, Australia, drafted a new NI 43-101 technical report to        accompany the revised statement of Indicated and Inferred Resources. This report was filed        on July 27, 2005 and can be viewed on SEDAR atwww.sedar.com. A further update of resources        was issued in September 2007 with a NI 43-101 technical report to accompany those resource        estimates filed on February 20, 2008. The report can be viewed on SEDAR atwww.sedar.com.

 

*Purchase        of Surface Rights*

The        Company purchased the 8,000 hectare property overlying the proposed Don Sixto development        site in late 2005 for US $78,000. The purchase agreement requires that the Company build        two new houses for the prior landowners and grants them the right to reacquire the property        upon completion of mining activities.

 

**Estelar Properties**

 

*Acquisition terms*

In July        2003, the Company completed the acquisition of Estelar Resources Limited        (“Estelar”), a company that owns the rights to four mineral projects in        Argentina. The consideration paid for the acquisition of Estelar was the issuance of        1,000,000 common shares of the Company to Estelar’s shareholders. The Estelar        properties carry a 2% NSR, payable to the previous owner, AMD.

 

*Property Description*

The        Estelar projects currently cover approximately 68 square kilometres of exploration rights        in central and western Argentina. Individually, the properties are referred to as the        Quispe, Rosarita and El Salado gold projects - all of which have the potential for the        discovery of epithermal gold deposits and/or porphyry gold-copper systems. There are no        exploration commitments on the projects.

 

**Quispe Project – Catamarca Province**

 

The        Quispe Project is located in southwestern Catamarca province in northwest Argentina and        covers 30 square kilometres of exploration rights. The project was identified through        ground follow-up of satellite-imagery color anomalies. The target is a porphyry copper-gold        deposit and/or high-sulphidation epithermal gold system.

 

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**Rosarita Project – San Juan        Province**

 

The        Rosarita Project, located in San Juan Province, covers 30 square kilometres of exploration        rights and has potential for a low-sulphidation epithermal gold system. The project lies        immediately south of Intrepid’s Casposo gold-silver development stage deposit, which        is the subject of a pre-feasibility study for the development of an open pit/underground        gold mine.

 

**El        Salado Project – San Juan Province**

 

The El        Salado property covers an area of 8 square kilometres over a large, low grade, copper-gold        porphyry system. The property is located 200 kilometres north of San Juan City, the capital        of San Juan Province.

 

**MRP        Properties**

 

*Acquisition terms*

In        November 2003, the Company entered into an option agreement to acquire a 100% interest in        three gold properties, Agua Nueva, La Ramada and Rosarita South, from Minera Rio de la        Plata (“MRP”), a private, arm’s length Argentine company. Tenements        peripheral to the Don Sixto and Rosarita projects were relinquished from the agreement        during 2006 resulting in retention of 13 tenements covering 300 square        kilometres.

 

The        option agreement requires payments totaling $440,000 by October 2015 of which $70,050 has        been paid to date and provides for a 2% NSR, which Exeter can purchase outright for        $750,000 payable to MRP from future production. There are no minimum annual exploration        expenditure commitments on these properties.

 

**Agua        Nueva (Don Sixto North) – Mendoza Province**

 

The Agua        Nueva property covers an area of approximately 299 square kilometres that adjoins the        Company’s Don Sixto property to the east, west and north.

 

**La        Ramada – La Rioja Province**

 

The        property comprises exploration titles over a 1 square kilometre area. The Company plans to        undertake mapping and geochemical sampling to define targets for drilling and will likely        acquire additional lands in the area.

 

**CHILE**

 

**OTHER        PROJECTS**

**Magallanes**

 

In 2006,        Exeter entered into an agreement with Rio Tinto Mining & Exploration Limited        (“Rio Tinto”) covering 48 exploration targets in Magallanes, Chile. Rio Tinto        has the right to acquire a 60% interest in any of these targets once Exeter has drilled        5,000 metres on any target by notifying the Company of its intention to acquire an        interest. Should Rio Tinto not exercise this option, it will be entitled to a 1% royalty        from production on that property.

 

Following a detailed review of the Rio Tinto data, the Company applied for        concessions over some of the targets including Punta Southerland, Pico Batchelor and Monte        del Sol covering a total area of 5,400 hectares.

 

**Cochrane**

 

Mineral        rights to the Confluencia project, located outside of the area covered by the Rio Tinto        agreement, were secured in 2006.

 

**Results from Operations**

 

The        Company began 2007 with 37,836,013 shares outstanding and ended the year with 41,226,487        shares outstanding. During the year, the Company received net proceeds of $8,036,284 and        issued 1,338,475 shares upon the exercise of options and 2,051,999 shares upon the exercise        of warrants. Shares issued and proceeds received are summarized below:

 

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|   | **Options Exercised** | **Warrants Exercised** |  

**Totals** |
|--------|-----------------------|------------------------|--------------------|

| Shares issued | 1,338,475  | 2,051,999  | 3,390,474  |
|---------------|------------|------------|------------|
| Net proceeds  | $2,006,287 | $6,029,997 | $8,036,284 |

 

**Subsequent Events**

 

Subsequent to December 31, 2007, the Company issued shares pursuant to the        exercise of options as

follows:

|          | **Options Exercised** |
|---------------|-----------------------|
| Shares issued | 42,275                |
| Net proceeds  | $55,030               |

 

As of        March 28, 2008, the Company had 41,268,762 shares outstanding.

 

**Summary of Financial Results**

 

**Selected Information**

 

The        Company’s consolidated financial statements for the years ended December 31, 2007,        2006 and 2005 (the “Consolidated Financial Statements”) have been prepared in        accordance with Canadian generally accepted accounting principles and practices. Currency        amounts are in Canadian dollars, except where stated otherwise. The following selected        financial information is taken from the Consolidated Financial Statements and should be        read in conjunction with those statements.

 

**Year Ended December 31, 2007**

During        the year ended December 31, 2007, the Company retroactively changed its accounting policy        for mineral property exploration expenditures to align itself with United States and        international standards and policies applied by large companies in the mining and        exploration industry. Prior to the year ended December 31, 2007, the Company capitalized        all such costs to mineral properties and only wrote down capitalized costs when either the        property was abandoned or if the capitalized costs were not considered to be economically        recoverable. Exploration expenditures are now charged to earnings as they are        incurred.

 

The        impact of this change in 2007 was to increase the loss for the year by $11,969,446 (2006:        $11,094,175; 2005: $5,016,154) and reduce mineral properties and deferred costs by the same        amount and increase loss per share from ($0.14) to ($0.43) (2006: ($0.17) to ($0.52); 2005:        ($0.20) to ($0.43)).

 

Throughout the year, the Company focused its drilling and exploration        programs on its three key projects: the Don Sixto and the Cerro Moro projects in Argentina        and the Caspiche project in Chile. Following the introduction of anti-mining legislation in        June 2007, the Company put the Don Sixto project on hold and ceased work except for        completing certain studies including environmental work and resource calculations which        were completed in the year. Exploration programs on its Cerro Moro project, now 100% owned        by the Company, continued throughout the year actively increasing in the second quarter and        being maintained through the remainder of the year. With limited drill rig availability and        the length of the southern winter, activity on its Caspiche project in Chile was limited to        a few months in the first quarter of 2007 and in December 2007. Exploration expenditures        during the year at the CVSA properties, including Cerro Moro, the Chilean properties,        including Caspiche, and the Don Sixto Project, were $5,419,940, $2,548,547 and $3,583,716,        respectively.

Including exploration expenditures of $11,969,446, the Company posted a loss        of $16,868,644 in 2007. Other significant expenditures during the year include $1,279,968        for administrative salaries and consulting, $990,957 for director’s fees, $948,370        for management fees, $664,841 for shareholder communications and $616,824 for travel and        promotion. Stock based compensation expense in 2007 was $3,777,702 (2006: $2,384,845, 2005:        $1,886,463) and has been allocated to the following expense categories: administrative        salaries and consulting $657,477 (2006: $661,998, 2005: $338,933); director’s fees        $960,957 (2006: $585,369, 2005: $700,953); management fees $720,870 (2006: $ nil, 2005:        $165,080); mineral property exploration expenditures $1,258,446 (2006: $506,444, 2005:        $473,025); and shareholder communications $179,952 (2006: $631,035, 2005:        $208,472).

 

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**Year ended December 31, 2007 compared to the year ended        December 31, 2006**

 

The loss        for the year of $16,868,644 represents an increase of about $990,000 when compared to the        loss incurred in 2006. Stock-based compensation in 2007 was $3,777,702 an increase of        $1,392,857 over 2006 resulting from additional options granted to existing and newly        engaged employees, directors and consultants throughout the year. After accounting for the        increase in stock based compensation, the loss in 2007 compared to 2006 was affected by the        following significant items: accounting and audit fees increased by approximately $170,000,        primarily due to the Company incurring additional costs due to the engagement of external        consultants to assist with the internal control documentation and testing and the        requirements of Sarbanes Oxley legislation; increased travel and promotion costs of        approximately $150,000 due to the Company attending various shows and conducting investor        visits to its various properties; offset by a decrease in mineral property write offs of        approximately $238,000 and increased interest income of approximately $160,000 earned on        cash holdings through the year. Other costs generally increased by smaller amounts        reflecting the Company’s increasing levels of activity.

 

Cash        received from the issuance of shares in 2007 was $8,036,284 which is $10,938,914 less than        proceeds received in 2006. This difference of about $10.9 million is primarily the result        of the Company receiving net proceeds of $9,718,762 from private placement offerings in        2006. No financings were completed in 2007 and cash received upon the issuance of shares        was derived from the exercise of options and warrants throughout the year.

 

The        issuance of shares upon the exercise of options and warrants throughout the year resulted        in contributed surplus in the amount of $982,736 being allocated to share        capital.

 

**Fourth Quarter 2007 to Fourth Quarter 2006**

At the        end of the fourth quarter 2007, the Company had approximately $8.7 million in cash and cash        equivalents; which was approximately $5.8 million less than in the fourth quarter 2006. The        decrease in cash holdings is due to the Company utilizing cash raised in private placements        in October 2006 being used to conduct operations through 2007. Exploration expenditures in        the fourth quarter 2006 were approximately $700,000 higher than in 2007 mainly due to the        Company completely ending its drilling program at Don Sixto in early 2007. Administration        expenditures in both the fourth quarter 2006 and 2007 are notably higher than in other        quarters, a result of bonuses paid to certain members of management, employees and        consultants at year end.

| **Year ended December 31,**                      | **2007** | 2006       | 2005 |
|--------------------------------------------------|----------|------------|------|
| Interest income                                  | $        | 391,506    | $    | 226,977 | $ | 41,335 |
| Mineral property exploration expenditures*       | $        | 11,969,446 | $    | 11,380,252 | $ | 5,016,154 |
| Total stock-based compensation                   | $        | 3,777,702  | $    | 2,384,845 | $ | 1,886,463 |
| Net loss and comprehensive loss for the year     | $        | 16,868,644 | $    | 15,876,371 | $ | 7,880,121 |
| Basic and diluted loss per common share          | $        | (0.43)     | $    | (0.52) | $ | (0.43) |
| *Includes allocation of stock based compensation | $        | 1,258,446  | $    | 506,444 | $ | 473,025 |

 

| **As at December 31,** | **2007** | 2006         | 2005 |
|------------------------|----------|--------------|------|
| Working capital        | $        | 7,057,047    | $    | 12,373,333 | $ | 7,338,582 |
| Total assets           | $        | 12,737,078   | $    | 18,088,092 | $ | 11,429,070 |
| Total liabilities      | $        | 2,114,690    | $    | 2,261,385 | $ | 554,798 |
| Share capital          | $        | 55,249,342   | $    | 46,230,295 | $ | 27,802,270 |
| Deficit                | $        | (51,861,173) | $    | (34,992,529) | $ | (19,116,158) |

 

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The        following is a summary of quarterly results taken from the Company’s unaudited        quarterly consolidated financial statements:

**Comparison to Prior Quarterly Periods***

| **                                                                       $000's** |
|------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                          | ** 2007** | **                                2006** |
|                                                                                                                                     | 4th Quarter | 3rd Quarter | 2nd

Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter |
| Interest                                                                                                                                 | 106 | 115 | 85 | 86 | 86 | 17 | 68 | 56 |
| Net loss and Comprehensive loss                                                                                                          | 4,304 | 3,963 | 5,377 | 3,224 | 6,144 | 3,277 | 3,843 | 2,612 |
| Administration expenditures                                                                                                              | 992 | 475 | 623 | 661 | 1,059 | 423 | 630 | 495 |
| Mineral property exploration expenditures                                                                                                | 3,261 | 3,363 | 2,758 | 2,587 | 3,993 | 2,754 | 2,461 | 1,582 |
| Mineral property acquisitions and (write –                        offs)                                                            | 104 | - | - | - | (187) | - | - | - |
| Basic and diluted loss/share in cents/share                                                                                              | $0.11 | $0.10 | $0.14 | $0.08 | $0.18 | $0.11 | $0.14 | $0.09 |

 

*Note:        Quarterly balances have been restated to reflect the Company’s change in accounting        policy

 

Interest        income has remained higher in the last five quarters when compared to previous quarters as        the exercise of options and warrants together with the private placement financings        completed in October 2006, has resulted in the Company maintaining higher interest earning        cash balances.

 

Administration expenditures are calculated by removing interest, stock based        compensation and exploration expenditures from the net loss from operations and with the        exception of both the fourth quarter 2006 and fourth quarter 2007, when bonuses were given        to certain members of management and staff, these expenditures have remained relatively        consistent throughout the previous eight quarters.

 

Net loss        and comprehensive loss per quarter, including mineral property exploration expenditures,        has increased in the last five quarters when compared to earlier quarterly results. These        expenditures are a reflection of the Company’s continued advancement of its key        projects and in particular the increased efforts on its Cerro Moro project in        2007.

 

**Liquidity and Capital Resources**

 

The        Company’s cash and cash equivalents at December 31, 2007 totalled $8,722,779 compared        to $14,511,062 at December 31, 2006 and $7,788,697 at December 31, 2005. The Company        continues to utilize its cash resources to fund project exploration and administrative        requirements. Aside from such cash, the Company has no material liquid assets. As the        Company has no significant income, and cash balances, unless replenished by capital        fundraising, will continue to decline as the Company utilizes these funds to conduct its        operations.

 

The        Company has no loans or bank debt and there are no restrictions on the use of its cash        resources.

 

Currently held funds will be used for planned exploration programs and for        general corporate purposes. The Company will be required to undertake additional financing        to fund the continued exploration of existing projects, if it acquires new projects or if        it exercises options to acquire projects currently under option.

 

Subsequent to December 31, 2007, the Company entered into an agreement with        a syndicate of underwriters to sell, on a private placement basis, 7.78 million special        warrants at a price of $4.50 per special warrant to raise gross proceeds of $35 million.        Each special warrant is exercisable to acquire one common share of the Company. The Company        has agreed to use its best efforts to file and obtain a receipt for a prospectus in certain        provinces of Canada qualifying the common shares for trading. If a receipt for such a        prospectus is not obtained by the date which is 41 days after the closing of the private        placement, each special warrant shall be convertible into 1.1 common shares of the Company.        The offering closed on or about March 26, 2008. As consideration to the underwriters, the        Company agreed to pay the underwriters a cash fee in an amount equal to six and one half        percent (6.5%) of the gross proceeds received by the Company from the offering. The Company        also agreed to issue to the underwriters 505,700 non-transferable warrants        (“Underwriters’ Warrants”) constituting six and one-half percent (6.5%)        of the aggregate number of special warrants sold pursuant to the offering. Each        Underwriters’ Warrant will be exercisable for a period of twelve (12) months at the        offering price of $4.50.

The        Company intends to use the net proceeds of the offering for exploration and development of        its properties in Argentina and Chile, and for general corporate purposes.

Subsequent to December 31, 2007, the Company has received $1,249,334 through        the exercise of options.

 

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**Contractual Obligations**

 

The        Company leases offices in Vancouver, Argentina and Chile and has expenditure and option        payment obligations related to its properties. Option payments and property expenditure        obligations are contingent on exploration results and can be cancelled at any time should        exploration results so warrant. Other financial commitments are summarized in the table        below:

 

|          | **Payments Due by Year** |
|---------------|--------------------------|
| Cash Payments | Total                    | 2008 | 2009 – 2010 | After 2011 |
| Office leases | $ 408,191                | $ 140,826 | $ 157,327 | $ 110,038 |
| Total         | **$ 408,191**            | **$ 140,826** | **$ 157,327** | **$ 110,038** |

 

**Related Party Transactions**

         

Amounts due to related parties are for management, consulting, exploration        and legal fees and for expenses incurred while conducting the Company’s        business.

         

A total of $1,271,274 (2006: $1,204,005; 2005: $681,280) was paid to or        accrued for related party transactions as described below.

         

|   | **a)** | Exploration and consulting fees totaling $360,000 (2006:                        $282,000; 2005: $144,000) and $43,500 (2006: $58,000 2005: $21,000) for the                        provision of other consulting services was paid or accrued to a corporation                        of which the President and Chief Executive Officer is a                        beneficiary. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **b)** | Management and consulting fees totaling $165,000 (2006:                        $238,000; 2005: $96,000) were paid or accrued to a corporation controlled                        by the Chairman of the Company. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **c)** | Management fees of $167,250 (2006: $195,000; 2005: $85,000)                        were paid or accrued to a corporation controlled by the Chief Financial                        Officer of the Company. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **d)** | Legal fees totaling $57,200 (2006: $120,101; 2005: $105,866)                        were paid or accrued to a corporation controlled by a former director of                        the Company of which the Secretary of the Company is an                        employee. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **e)** | Exploration and development costs totaling $238,663 (2006:                        $266,633; 2005:$134,000) were paid or accrued to a company controlled by                        the Company’s Vice President, Exploration and Development. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **f)** | Management and consulting fees of $239,661 (2006: $nil;                        2005: $nil) were paid or accrued to a company controlled by the Chief                        Operating Officer of the Company. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

The above transactions are in the normal course of operations and have been        valued in these consolidated financial statements at the exchange amount which is the        amount of consideration established and agreed to by the related parties.

**Subsequent Events**

         

|   | a) | Subsequent to December 31, 2007, the Company entered into a                        letter of intent with Fomento Minera de Santa Cruz Sociedad del Estado                        (“Fomicruz”), a company owned by the government of Santa Cruz                        province, Argentina. The letter of intent (“LOI”) sets out the                        key terms of a strategic agreement between the Company and Fomicruz for the                        future development of Exeter’s 100 percent owned Cerro Moro project                        in Santa Cruz, and provides access to Fomicruz’s significant                        landholding around Cerro Moro. The Company and Fomicruz will, subject to                        approval by the parties, enter into a detailed agreement which will include                        the following terms: |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Fomicruz will acquire a 5 percent interest in the                        Company’s 160 square kilometer Cerro Moro project. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | The Company will have the right to earn up to an 80 percent                        interest in 763 square kilometer of Fomicruz’s exploration properties                        adjoining the Cerro Moro project by incurring USD$10 million in exploration                        expenditures over a number of years to be determined later. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | The Company will finance all exploration and development                        costs of the Cerro Moro project and Fomicruz will repay an agreed amount of                        those costs from 50 percent of Fomicruz’s share of net revenue from                        future operations. |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | The Company will manage the exploration and potential future                        development on the properties |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

 

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|   | b) | Subsequent to December 31, 2007, the Company entered into an                        agreement with a syndicate of underwriters to sell, on a private placement                        basis, 7.78 million special warrants at a price of $4.50 per special                        warrant to raise gross proceeds of $35 million. Each special warrant is                        exercisable to acquire one common share of the Company. The Company has                        agreed to use its best efforts to file and obtain a receipt for a                        prospectus in certain provinces of Canada qualifying the common shares for                        trading. If a receipt for such a prospectus is not obtained by the date                        which is 41 days after the closing of the private placement, each special                        warrant shall be convertible into 1.1 common shares of the Company. The                        offering closed on or about March 26, 2008. As consideration to the                        underwriters, the Company agreed to pay the underwriters a cash fee in an                        amount equal to six and one half percent (6.5%) of the gross proceeds                        received by the Company from the offering. The Company also agreed to issue                        to the underwriters 505,700 non-transferable warrants                        (“Underwriters’ Warrants”) constituting six and one-half                        percent (6.5%) of the aggregate number of special warrants sold pursuant to                        the offering. Each Underwriters’ Warrant will be exercisable for a                        period of twelve (12) months at the offering price of $4.50. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The Company intends to use the net proceeds of the offering for exploration        and development of the Company’s properties in Argentina and Chile, and for general        corporate purposes.

 

**Forward Looking Statements**

This        management discussion and analysis contains “forward-looking information” and        “forward-looking statements” (together, the “forward-looking        statements”) within the meaning of applicable securities laws and the United States        Private Securities Litigation Reform Act of 1995, including the Company’s belief as        to the timing of its drilling and exploration programs and exploration results.        Forward-looking statements involve known and unknown risks, uncertainties and other factors        which may cause the actual results, performance or achievements of the Company to vary from        any future results, performance or achievements expressed or implied by the forward-looking        statements. Although the Company has attempted to identify important factors that could        cause actual actions, events or results to differ materially from those described in        forward-looking statements, there may be other factors that cause actions, events or        results not to be as anticipated, estimated or intended. There can be no assurance that        forward-looking statements will prove to be accurate, as actual results and future events        could differ materially from those anticipated in such statements. Accordingly, readers        should not place undue reliance on forward-looking statements. All statements are made as        of the date of this Management Discussion and Analysis and the Company is under no        obligation to update or alter any forward-looking statements except as required under        applicable securities laws. See Risk Factors, below.

 

**Risks**

The        Company is subject to substantial environmental requirements which could cause a        restriction or suspension of certain Company operations. The current and anticipated future        operations of the Company require permits from various governmental authorities and such        operations are and will be governed by laws and regulations governing various elements of        the mining industry. The Company’s exploration activities in Argentina and Chile are        subject to various Federal, Provincial and local laws governing land use, the protection of        the environment, prospecting, development, production, exports, taxes, labour standards,        occupational health, waste disposal, toxic substances, and other matters. Such operations        and exploration activities are also subject to substantial regulation under these laws by        governmental agencies and may require that the Company to obtain permits from various        governmental agencies.

 

During        the second quarter 2007, Exeter ceased all exploration activities at the Don Sixto Project        following the Mendoza Provincial Government’s recent anti-mining legislation. The new        legislation, introduced in June, 2007, effectively precludes the development of some mining        projects in Mendoza Province, as certain chemicals traditionally used in the mining process        were banned. The Company has filed an action in the Mendoza Supreme Court to have this        anti-mining legislation declared unconstitutional. Should the Company not be successful in        its constitutional challenge or the anti mining legislation not be amended, the carrying        value of the Don Sixto project may not be recoverable requiring the Company to write-off        its entire investment of $3.2 million.

 

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The        exploration and development of mineral deposits involve significant risks which careful        evaluation, experience and knowledge may not, in some cases, eliminate. The commercial        viability of any mineral deposit depends on many factors, not all of which are within the        control of management. Some of the factors that affect the financial viability of a given        mineral deposit include its size, grade and proximity to infrastructure. Government        regulation, taxes, royalties, land tenure, land use, environmental protection and        reclamation and closure obligations all have an impact on the economic viability of a        mineral deposit.

 

The        marketability of minerals is affected by numerous factors beyond the control of the        Company. These factors include, but are not limited to, market fluctuations, government        regulations relating to prices, taxes and royalties, allowable production, import, exports        and supply and demand. One or more of these risk elements could have an impact on costs of        an operation and if significant enough, reduce the profitability of all future production        and threaten the continuation of a particular project or operations altogether.

 

The        Company has no production of minerals and its properties are all currently at the        exploration stage. There is no assurance that a commercially viable mineral deposit exists        on any of the Company’s properties, and substantial additional work will be required        in order to determine the presence of any such deposit.

 

Although        the Company can conduct exploration on most of its properties year-round, exploration on        some of its Patagonia properties and properties at higher altitude in Chile and Argentina        is difficult during the winter months of June to October.

 

The        Company relies on equity financings to fund its activities. While it has been successful in        the past, there is no guarantee that the Company will be successful in raising funds        through those means in the future.

 

Risk        factors are more fully described in the Company’s Annual Information Form attached as        an exhibit to the Annual Report on Form 40-F for the year ended December 31, 2007, and        subsequent filings with the SEC. You can review and obtain copies of our filings from the        SEC’s website athttp://www.sec.gov/edgar.shtml

 

**Outlook**

In 2008,        the Company plans to continue its exploration and drilling programs at Cerro Moro in Santa        Cruz, Argentina and Caspiche in the Maricunga, Chile.

 

The        Company will continue working with all levels of government, industry and unions to        demonstrate that the Don Sixto project in Mendoza, if viable, could be developed        responsibly and that it would provide important economic and social benefits to the        community and the province.

 

Exploration campaigns are planned for some of the Company’s        non-primary properties which are either new to the Company or are still considered to be        under-explored. These programs are, however, dependent at least in part on the Company        being able to secure adequate qualified personnel to conduct such programs.

 

**Proposed Transactions**

 

The        Company continues to evaluate new property acquisitions. Should it enter into agreements on        new properties it may be required to make cash payments and complete work expenditure        commitments under those agreements.

 

**Critical Accounting Estimates and Policies**

 

The        Company’s accounting policies are discussed in detail in the Annual Financial        Statements; however, accounting policies require the application of management’s        judgement in respect of the following relevant matters:

 

|   | (i) | mineral property costs – the Company regularly reviews                        the carrying value of each mineral property for conditions that suggest                        impairment. This review requires significant judgement where the Company                        does not have any proven or probable reserves that would enable an estimate                        of future cash flows to be compared to the carrying values. Factors                        considered in the assessment of asset impairment include, but are not                        limited to, whether there has been a significant decrease in market price                        of the property; whether there has been a significant adverse change in the                        legal, regulatory, accessibility, title, environmental or political factors                        that could affect the property’s value; whether there has been an                        accumulation of costs significantly in excess of the amounts originally                        expected for the property’s acquisition, development or cost of                        holding; whether exploration activities produced results that are not                        promising such that no more work is being planned in the foreseeable future                        and whether the Company has significant funds to be able to maintain its                        interest in the mineral property; and |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

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|   | (ii) | stock based compensation – the Company provides                        compensation benefits to its employees, directors, officers and consultants                        through a stock based compensation plan. The fair value of each option                        award is estimated on the date of the grant using the Black-Scholes option                        pricing model. Expected volatility is based on historical volatility of the                        stock. The Company utilizes historical data to estimate option exercises                        and termination behaviour with the valuation model. The risk-free rate for                        the expected term of the option is based on the Government of Canada yield                        curve in effect at the time of the grant. Actual results may differ                        materially from those estimates based on these assumptions. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Changes        in Accounting Policies**

 

During        the year ended December 31, 2007, the Company retroactively changed its accounting policy        for mineral property exploration expenditures to align itself with United States and        international standards and policies applied by large companies in the mining and        exploration industry. Prior to the year ended December 31, 2007, the Company capitalized        all such costs to mineral properties and only wrote down capitalized costs when either the        property was abandoned or if the capitalized costs were not considered to be economically        recoverable. Exploration expenditures are now charged to earnings as they are        incurred.

 

The        impact of this change in 2007 was to increase the loss for the year by $11,969,446 (2006:        $11,094,175; 2005: $5,016,154) and reduce mineral properties and deferred costs by the same        amount and increase loss per share from ($0.14) to ($0.43) (2006: ($0.17) to ($0.52); 2005:        ($0.20) to ($0.43)).

 

Effective January 1, 2007, the Company has adopted the guidelines provided        by the Canadian Institute of Chartered Accountants (“CICA”) relating to the        accounting treatment of financial instruments.

Financial Instruments – Recognition and Measurement, Section        3855

This        standard prescribes when a financial asset, financial liability or non-financial derivative        is to be recognized on the balance sheet and whether fair value or cost-based measures are        used. It also specifies how financial instrument gains and losses are to be presented.        Section 3855 requires that all financial assets, except those qualified as held to        maturity, and derivative financial instruments, must be measured at fair value. Financial        liabilities qualified as held for trading must also be measured at fair value, while all        other financial liabilities may be measured at cost.

 

Effective January 1, 2007, the Company’s cash equivalents have been        classified as held-for-trading, and related recognized gains and losses are recorded        directly in net income. Receivables and payables are carried at cost, which equates to fair        value. Transaction costs related to the acquisition of financial instruments are charged to        earnings as incurred.

Hedges, Section 3865

This        standard is applicable when a company chooses to designate a hedging relationship for        accounting purposes. It builds on the existing Accounting Guideline AcG-13 “Hedging        Relationships”, and Section 1650 “Foreign Currency Translation”, by        specifying how hedge accounting is applied and what disclosures are necessary when it is        applied. The Company does not apply hedge accounting and accordingly is not impacted by        this standard.

Comprehensive Income, Section 1530

This        standard introduces new rules for the reporting and display of comprehensive income.        Comprehensive income is the change in shareholders’ equity (net assets) of an        enterprise during a reporting period from transactions and other events and circumstances        from non-owner sources. It includes all changes in equity during a period except those        resulting from investments by owners and distributions to owners. These items include        holding gains and losses on certain investments and gains and losses on certain derivative        instruments. The Company holds no marketable securities, does not have any self sustaining        foreign subsidiaries and does not apply hedge accounting. Accordingly, the consolidated        statement of comprehensive income and the balance sheet do not contain any other        comprehensive income items.

 

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Accounting Changes (Section 1506)

        In July 2006, the CICA reissued Handbook Section 1506 “Accounting Changes”        which is effective for fiscal years beginning on or after January 1, 2007. Under this        standard, voluntary changes in accounting policy are only made when they result in the        financial statements providing more reliable and more relevant information. Changes in        accounting policy are applied retrospectively unless doing so is impracticable or the        change in accounting policy is made on initial application of a primary source of GAAP. A        change in accounting estimate is generally recognized prospectively and material prior        period errors are amended through restatements. New disclosures are required in respect of        such accounting changes. The impact that the adoption of Section 1506 has had on the        Company’s results of operations and financial condition has been noted above in the        description of the change in accounting policy for mineral property exploration        expenditures.

 

**International Financial Reporting Standards ("IFRS")**

 

In 2006,        the Canadian Accounting Standards Board ("AcSB") published a new strategic plan that will        significantly affect financial reporting requirements for Canadian companies.  The        AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected        five year transitional period.  In February 2008, the AcSB announced that 2011 is the        changeover date for publicly-listed companies to use IFRS, replacing Canada's own GAAP.         The date is for interim and annual financial statements relating to fiscal years        beginning on or after January 1, 2011.  The transition date of January 1, 2011 will        require the restatement, for comparative purposes, of amounts reported by the Company for        the year ended December 31, 2010.  While the Company has begun assessing the adoption        of IFRS for 2011, the financial reporting impact of the transition to IFRS cannot be        reasonably estimated at this time.

 

**Disclosure Controls**

 

At the        end of the fiscal year ended December 31, 2007, the Company carried out an evaluation,        under the supervision of and with the participation of the Company’s management,        including the Chief Executive Officer (“CEO”) and the Chief Financial Officer        (“CFO”), of the effectiveness of the design and operations of the        Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e)        and Rule 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the        “Exchange Act”)). Based on that evaluation, the CEO and the CFO have concluded        that as of December 31, 2007, the Company’s disclosure controls and procedures were        adequately designed and effective in ensuring that: (i) information required to be        disclosed by the Company in reports that it files or submits to the Securities and Exchange        Commission under the Exchange Act is recorded, processed, summarized and reported within        the time periods specified in applicable rules and forms and (ii) material information        required to be disclosed in its reports filed under the Exchange Act is accumulated and        communicated to management, including the CEO and CFO, as appropriate, to allow for        accurate and timely decisions regarding required disclosure.

 

**Management’s responsibility for the Financial        Statements**

 

The        preparation and presentation of the accompanying consolidated financial statements,        Management’s Discussion and Analysis (“MD&A”) and all financial        information in the Financial Statements are the responsibility of management and have been        approved by the Board of Directors. The Financial Statements have been prepared in        accordance with Canadian generally accepted accounting principles. Financial statements, by        this nature are not precise since they include amounts based upon estimates and judgments.        When alternative treatments exist, management has chosen those it deems to be the most        appropriate in the circumstances. The financial information presented elsewhere in the        Financial Statements is consistent with that in the consolidated financial        statements.

 

Management, under the supervision of and with the participation of the CEO        and the CFO, have a process in place to evaluate disclosure controls and procedures and        internal control over financial reporting as required by Canadian and U.S. securities        regulations. We, as CEO and CFO, will certify our annual filings with the CSA and SEC as        required in Canada by Multilateral Instrument 52-109 and in the United States as required        by the Exchange Act. The Board of Directors is responsible for ensuring that management        fulfills its responsibilities for financial reporting and is ultimately responsible for        reviewing and approving the consolidated financial statements. The Board carries out this        responsibility principally through its Audit Committee which is independent from        management. The Audit Committee is appointed by the Board of Directors and reviews the        consolidated financial statements and MD&A; considers the report of the external        auditors; assesses the adequacy of our internal controls, including management’s        assessment described below; examines and approves the fees and expenses for the audit        services; and recommends the independent auditors to the Board for the appointment by the        shareholders. The independent auditors have full and free access to the Audit Committee and        meet with it to discuss their audit work, our internal control over

 

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financial reporting and financial reporting matters. The Audit Committee        reports its findings to the Board for consideration when approving the consolidated        financial statements for issuance to the shareholders and also Management’s Report on        Internal Control over Financial Reporting. Management is responsible for establishing and        maintaining adequate internal control over financial reporting.

 

**Internal Control over Financial Reporting**

 

The        Company maintains a system of internal controls over financial reporting designed under the        supervision of the Company’s CEO and CFO to provide reasonable assurance regarding        the reliability of financial reporting and the preparation of financial statements for        external purposes in accordance with Canadian GAAP. However, the Company’s        management, including the CEO and CFO, does not expect that its disclosure controls and        procedures or internal controls and procedures will prevent all error and fraud. A control        system, no matter how well conceived and operated, can provide only reasonable, not        absolute, assurances that the objectives of the control system are met. Further, the design        of a control system must reflect the fact that there are resource constraints, and the        benefits of controls must be considered relative to their costs. Because of the inherent        limitations in all control systems, no evaluation of controls can provide absolute        assurance that all control issues and instances of fraud, if any, within the Company have        been detected. These inherent limitations include the realities that judgements in        decision-making can be faulty, and that breakdowns can occur because of simple error or        mistake. Additionally, controls can be circumvented by the individual acts of some persons,        by collusion of two or more people, or by management override of the control. The design of        any system of controls also is based in part upon certain assumptions about the likelihood        of future events, and there can be no assurances that any design will succeed in achieving        its stated goals under all potential future conditions; over time, control may become        inadequate because of changes in conditions, or the degree of compliance with the policies        or procedures may deteriorate. Because of the inherent limitations in a cost effective        control system, misstatements due to error or fraud may occur and not be        detected.

 

The        Company’s Board of Directors approves the financial statements and ensures that        management discharges its financial responsibilities. The Board of Directors’ review        is accomplished principally through the Audit Committee, which is composed of independent        non-executive directors.

 

In 2007,        the Company retained an independent third party specialist to assist in the documentation        of its internal control procedures. Following the documentation of its internal control        system and testing of those systems, during the year ended December 31, 2007, the Company        effected certain changes in internal control over financial reporting that have materially        affected, or may materially affect, the Company’s internal control over financial        reporting. The Company has (i) taken steps to improve segregation of duties and the        authorization process through the addition of accounting personnel; and (ii) reviewed and        refined internal control processes; and (iii) reviewed and improved general controls over        information technology; and (iv) enhanced financial control over period close        processes.

 

**Management’s Report on Internal Control over Financial        Reporting**

 

The        Company’s management is responsible for establishing and maintaining adequate        internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange        Act. The Company’s management has employed a framework consistent with Exchange Act        Rule 13a – 15(c), to evaluate the Company’s internal control over financial        reporting described below. The Company’s internal control over financial reporting is        a process designed to provide reasonable assurance regarding the reliability of financial        reporting and the preparation and fair presentation of financial statements for external        purposes in accordance with generally accepted accounting principles.

 

Because        of its inherent limitations, internal control over financial reporting may not prevent or        detect misstatements. Projections of any evaluation of effectiveness to future periods are        subject to the risk that controls may become inadequate because of changes in conditions,        or that the degree of compliance with the policies or procedures may        deteriorate.

 

Management conducted an evaluation of the design and operation of the        Company’s internal control over financial reporting as of December 31, 2007 based on        the criteria set forth in Internal Control – Integrated Framework” issued by        the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This        evaluation included review of the documentation controls, evaluation of the design        effectiveness of controls, testing of the operating effectiveness of controls and a        conclusion on this evaluation. Based on this evaluation, management has concluded that the        Company’s internal control over financial reporting was effective as of December 31,        2007.

 

 

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The        effectiveness of the Company’s internal controls over financial reporting has been        audited by PricewaterhouseCoopers LLP, an independent public accounting firm, who have        expressed their opinion in their report included with the annual consolidated financial        statements.

 

**Amex        Corporate Governance**

 

The        Company’s common shares are listed on the AMEX. Section 110 of the AMEX Company Guide        permits AMEX to consider the laws, customs and practices of foreign issuers in relaxing        certain AMEX listing criteria, and to grant exemptions from AMEX listing criteria based on        these considerations. A company seeking relief under these provisions is required to        provide written certification from independent local counsel that the non-complying        practice is not prohibited by home country law. A description of the significant ways in        which the Company’s governance practices differ from those followed by domestic        companies pursuant to AMEX standards is as follows:

 

*Shareholder Meeting Quorum Requirement:*The        AMEX minimum requirement for a shareholder meeting is one-third of the outstanding shares        of common stock. In addition, a company listed on AMEX is required to state its quorum        requirement in its bylaws. The Company’s quorum requirement is set forth in its        Articles and bylaws. A quorum for a meeting of members of the Company is two persons who        are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the        shares entitled to be voted at the meeting

         

*Proxy Delivery Requirement:*AMEX requires the        solicitation of proxies and delivery of proxy statements for all shareholder meetings, and        requires that these proxies shall be solicited pursuant to a proxy statement that conforms        to SEC proxy rules. The Company is a “foreign private issuer” as defined in        Rule 3b-4 under the Exchange Act, and the equity securities of the Company are accordingly        exempt from the proxy rules set forth is Sections 14(a), 14(b), 14(c) and 14(f) of the        Exchange Act. The Company solicits proxies in accordance with applicable rules and        regulations in Canada.

         

*Shareholder Approval for Issuance of Shares:*Section 713 of the AMEX Company Guide requires shareholder approval as a        prerequisite to approval of applications to list additional shares when the additional        shares will be issued in connection with a transaction involving the sale or issuance by a        company of common stock (or securities convertible into or exercisable for common stock)        equal to 20% or more of presently outstanding stock for less than the greater of book or        market value of the stock. However, the issuance of common stock in an amount in excess of        20% of the presently outstanding stock for less than book or market value, without        shareholder approval, is not prohibited under the rules of the TSX Venture Exchange        (“TSX-V”) and does not constitute a default under the TSX-V rules or any        applicable laws in Canada.

 

The        foregoing are consistent with the laws, customs and practices in Canada.

 

In        addition, the Company may from time-to-time seek relief from AMEX corporate governance        requirements on specific transactions under Section 110 of the AMEX Company Guide by        providing written certification from independent local counsel that the non-complying        practice is not prohibited by our home country law, in which case, the Company shall make        the disclosure of such transaction available on the Company’s website atwww.exeterresource.com.

 

 

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