**EXHIBIT        99.2**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**Consolidated Financial Statements**

**(Expressed in Canadian Dollars)**

**Years        Ended December 31, 2007, 2006 and 2005**

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| **Exeter Resource Corporation**                                                                      |
|------------------------------------------------------------------------------------------------------|
|  

**Consolidated Financial Statements (Expressed in Canadian                        Dollars)** |

 

 

 

| **Years Ended December 31, 2007, 2006 and                        2005**      |   | **Page**           |
|------------------------------------------------------------------------------|--------|--------------------|
| Auditors’ Report                                                       |   | 3-5                |
|                                                                         |   |               |
| Consolidated Balance Sheets                                                  |   | 6                  |
|                                                                         |   |               |
| Consolidated Statements of Operations                                        |   | 7                  |
|                                                                         |   |               |
| Consolidated Statements of Cash Flows                                        |   | 8                  |
|                                                                         |   |               |
| Consolidated Statements of Shareholders’                        Equity |   | 9                  |
|                                                                         |   |               |
| Notes to the Consolidated Financial Statements                               |   | 10 – 29 |

 

 

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**Independent Auditors’        Report**

**To the Shareholders of Exeter Resource        Corporation         **

We have completed an        integrated audit of Exeter Resource Corporation’s 2007 consolidated financial        statements and of its internal control over financial reporting as at December 31, 2007.        Our opinions, based on our audits, are presented below.

**Consolidated****financial statements**

We have audited the accompanying consolidated balance sheet        of Exeter Resource Corporation as at December 31, 2007, and the related consolidated        statements of operations, comprehensive loss, shareholders’ equity and cash flows for        the year then ended. These financial statements are the responsibility of the        Company’s management. Our responsibility is to express an opinion on these financial        statements based on our audit.

We conducted our audit of the Company’s financial        statements in accordance with Canadian generally accepted auditing standards and the        standards of the Public Company Accounting Oversight Board (United States). Those standards        require that we plan and perform an audit to obtain reasonable assurance about whether the        financial statements are free of material misstatement. An audit of financial statements        includes examining, on a test basis, evidence supporting the amounts and disclosures in the        financial statements. A financial statement audit also includes assessing the accounting        principles used and significant estimates made by management, and evaluating the overall        financial statement presentation. We believe that our audit provides a reasonable basis for        our opinion.

In our opinion, the        consolidated financial statements referred to above present fairly, in all material        respects, the financial position of the Company as at December 31, 2007 and the results of        its operations and its cash flows for the year then ended in accordance with Canadian        generally accepted accounting principles.

The consolidated financial        statements as at December 31, 2006 and for the two years then ended, prior to the        adjustments for the change in accounting policy for exploration expenditures as described        in note 3 to the financial statements, were audited by other auditors who expressed an        opinion without reservation on those financial statements in their report dated March 19,        2007. We have audited the adjustments to the 2006 and 2005 financial statements and in our        opinion, such adjustments, in all material respects, are appropriate and have been properly        applied.

**Internal control over financial reporting**

We have also audited Exeter Resource Corporation’s        internal control over financial reporting as at December 31, 2007, based on criteria        established in Internal Control - Integrated Framework issued by the Committee of        Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management        is responsible for maintaining effective internal control over financial reporting and for        its assessment of the effectiveness of internal control over financial reporting, which is        set out in Management’s Report on Internal Control Over Financial Reporting included        in Management’s Discussion and Analysis. Our responsibility is to express an opinion        on the effectiveness of the Company’s internal control over financial reporting based        on our audit.

We conducted our audit of internal control over financial        reporting in accordance with the standards of the Public Company Accounting Oversight Board        (United States). Those standards require that we plan and perform the audit to obtain        reasonable assurance about whether effective internal control over financial reporting was        maintained in all material respects. An audit of internal control over financial reporting        includes obtaining an understanding of internal control over financial reporting, assessing        the risk that a material weakness exists, testing and evaluating the design and operating        effectiveness of internal control based on the assessed risk, and performing such other        procedures as we consider necessary in the circumstances. We believe that our audit        provides a reasonable basis for our opinion.

A company’s internal control over financial reporting        is a process designed to provide reasonable assurance regarding the reliability of        financial reporting and the preparation of financial statements for external purposes in        accordance with generally accepted accounting principles. A company’s internal        control over financial reporting includes those policies and procedures that        (i) pertain to the maintenance of records that, in reasonable detail, accurately and        fairly reflect the

 

| 3 |
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transactions and dispositions of the assets of the company;        (ii) provide reasonable assurance that transactions are recorded as necessary to        permit preparation of financial statements in accordance with generally accepted accounting        principles, and that receipts and expenditures of the company are being made only in        accordance with authorizations of management and directors of the company; and        (iii) provide reasonable assurance regarding prevention or timely detection of        unauthorized acquisition, use, or disposition of the company’s assets that could have        a material effect on the financial statements.

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

In our opinion, the Company maintained, in all material        respects, effective internal control over financial reporting as at December 31, 2007 based        on criteria established in Internal Control — Integrated Framework issued by the        COSO.

 

*(signed) PricewaterhouseCoopers        LLP*

**Chartered Accountants**

Vancouver, British Columbia        March 28, 2008

**Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Differences**         

In the United States, reporting standards for auditors        require the addition of an explanatory paragraph (following the opinion paragraph) when        there are changes in accounting principles that have a material effect on the comparability        of the Company’s financial statements, such as the change described in note 3(a) to        the financial statements. Our report to the shareholders dated March 28, 2008 is expressed        in accordance with Canadian reporting standards which do not require a reference to such a        change in accounting principles in the auditors’ report when the change is properly        accounted for and adequately disclosed in the financial statements.

*(signed) PricewaterhouseCoopers        LLP*

**Chartered Accountants**

        Vancouver, British Columbia        March 28, 2008

 

 

 

 

 

 

 

 

 

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**Auditors' Report**

**To the        Shareholders of**

**Exeter        Resource Corporation**

We have        audited the consolidated balance sheets of Exeter Resource Corporation as at December 31,        2006 and December 31, 2005 and the consolidated statements of operations, cash flows,        shareholders’ equity and deferred exploration costs for each of the years in the        three year period ended December 31, 2006. These financial statements are the        responsibility of the Company's management. Our responsibility is to express an opinion on        these financial statements based on our audits.

We        conducted our audits in accordance with generally accepted auditing standards in Canada and        the standards of the Public Company Accounting Oversight Board (United States). Those        standards require that we plan and perform an audit to obtain reasonable assurance whether        the financial statements are free of material misstatement. An audit includes examining, on        a test basis, evidence supporting the amounts and disclosures in the financial statements.        An audit also includes assessing the accounting principles used and significant estimates        made by management, as well as evaluating the overall financial statement presentation. We        believe our audits provide a reasonable basis for our opinions.

In our        opinion, these consolidated financial statements present fairly, in all material respects,        the financial position of the Company as at December 31, 2006 and December 31, 2005 and the        results of its operations and its cash flows for each of the years in the three year period        ended December 31, 2006, in accordance with Canadian generally accepted accounting        principles.

 

|   | “MacKay                        LLP” |
|--------|-------------------------------------------------|

| **Vancouver, Canada.** | **Chartered Accountants** |
|------------------------|---------------------------|

**March        19, 2007**

 

 

 

         

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| **Exeter Resource Corporation**                                                        |
|----------------------------------------------------------------------------------------|
| **Consolidated Balance Sheets (Expressed in Canadian                        Dollars)** |

 

| **December 31,**                                                                                                                                                                                                                                                                                                                                                                                                                |   | **2007**       |   | 2006           |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|----------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |           |   | Restated       |
| **Assets**                                                                                                                                                                                                                                                                                                                                                                                                                      |   |           |   | (See note 3)   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |           |   |           |
| **Current**                                                                                                                                                                                                                                                                                                                                                                                                                     |   |           |   |           |
| Cash and cash                        equivalents                                                                 (notes 7)                                                                                         | $      | 8,722,779      | $      | 14,511,062     |
| Other receivables and prepaid expenses                                                                                                                                                                                                                                                                                                                                                                                          |   | 448,958        |   | 123,656        |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 9,171,737      |   | 14,634,718     |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |           |   |           |
| **Property and                        equipment**                                                                  (notes 8)                                                                                  |   | 210,962        |   | 203,358        |
| **Mineral                        properties**                                                                        (notes 9)                                                  |   | 3,354,379      |   | 3,250,016      |
|                                                                                                                                                                                                                                                                                                                                                                                                                            | **$**  | **12,737,078** | **$**  | **18,088,092** |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |           |   |           |
| **Liabilities**                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           |   |           |
|  

**Current**                                                                                                                                                                                                                                                                                                                                                                                                             |   |           |   |           |
| Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                        | $      | 1,773,532      | $      | 1,884,769      |
| Due to related                        parties                                                                           (note 14)                                |   | 341,158        |   | 376,616        |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2,114,690      |   | 2,261,385      |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |           |   |           |
| **Shareholders’ Equity**                                                                                                                                                                                                                                                                                                                                                                                                  |   |           |   |           |
| **Share                        capital**                                                                                 (note 10) |   | 55,249,342     |   | 46,230,295     |
| **Contributed                        surplus**                                                                       (note 13)                                                       |   | 7,234,219      |   | 4,588,941      |
| **Deficit**                                                                                                                                                                                                                                                                                                                                                                                                                     |   | (51,861,173)   |   | (34,992,529)   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 10,622,388     |   | 15,826,707     |
|                                                                                                                                                                                                                                                                                                                                                                                                                            | **$**  | **12,737,078** | **$**  | **18,088,092** |

 

 

**Nature        of Business and Continuing Operations**(Note 1)

 

**Subsequent Events**(Note 19)

 

**Approved by the Directors:**

 

|  

"Yale Simpson"   |  

                         

                         

**Director** |
|--------------------------|--------------------------------------------------------------------------------------|
|  

"Bryce Roxburgh" |  

                         

                         

**Director** |

 

 

See accompanying notes to the consolidated financial        statements.

 

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| **Exeter Resource Corporation**                                                                  |
|--------------------------------------------------------------------------------------------------|
| **Consolidated Statements of Operations (Expressed in                        Canadian Dollars)** |

 

| **For the years ended December 31,**                                                                                                                                                                                                                                                                                                                                                                             |   | **2007**         |   | 2006         |   | 2005         |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|--------|--------------|--------|--------------|
|                                                                                                                                                                                                                                                                                                                                                                                                             |   |             |   | Restated     |   | Restated     |
|                                                                                                                                                                                                                                                                                                                                                                                                             |   |             |   | (See note 3) |   | (See note 3) |
| **Income**                                                                                                                                                                                                                                                                                                                                                                                                       |   |             |   |         |   |         |
| Interest income                                                                                                                                                                                                                                                                                                                                                                                                  | $      | 391,506          | $      | 226,977      | $      | 41,335       |
|                                                                                                                                                                                                                                                                                                                                                                                                             |   |             |   |         |   |         |
| **Expenses**                                                                                                                                                                                                                                                                                                                                                                                                     |   |             |   |         |   |         |
| Accounting and audit                                                                                                                                                                                                                                                                                                                                                                                             |   | 269,309          |   | 99,019       |   | 72,394       |
| Administration salaries and                        consulting            (note                        11)                                                                                                                                                                                                                                            |   | 1,279,968        |   | 1,191,900    |   | 491,869      |
| Amortization                                                                                                                                                                                                                                                                                                                                                                                                     |   | 41,336           |   | 40,699       |   | 21,179       |
| Bank charges                                                                                                                                                                                                                                                                                                                                                                                                     |   | 21,209           |   | 21,623       |   | 6,250        |
| Directors’                        fees                                                      (note                        11) |   | 990,957          |   | 615,369      |   | 730,910      |
| Legal fees                                                                                                                                                                                                                                                                                                                                                                                                       |   | 105,224          |   | 179,551      |   | 139,273      |
| Management                        fees                                                (note                        11)                                           |   | 948,370          |   | 365,113      |   | 225,080      |
| Mineral property exploration                        expenditures      (note 11)                                                                                                                                                                                                                                                                                                         |   | 11,969,446       |   | 11,380,252   |   | 5,016,154    |
| Mineral property acquisition cost write-off                                                                                                                                                                                                                                                                                                                                                                      |   | -                |   | 237,820      |   | -            |
| Office and miscellaneous                                                                                                                                                                                                                                                                                                                                                                                         |   | 91,827           |   | 78,531       |   | 41,373       |
| Rent                                                                                                                                                                                                                                                                                                                                                                                                             |   | 83,154           |   | 51,892       |   | 41,287       |
| Shareholder                        communications                                                    (note 11)                                                                                                                                                       |   | 664,841          |   | 1,185,722    |   | 765,804      |
| Stock exchange listing and filing fees                                                                                                                                                                                                                                                                                                                                                                           |   | 109,430          |   | 116,565      |   | 69,228       |
| Telecommunications                                                                                                                                                                                                                                                                                                                                                                                               |   | 31,864           |   | 20,519       |   | 9,830        |
| Transfer agent                                                                                                                                                                                                                                                                                                                                                                                                   |   | 15,581           |   | 20,030       |   | 7,723        |
| Travel and promotion                                                                                                                                                                                                                                                                                                                                                                                             |   | 616,824          |   | 463,921      |   | 291,055      |
|                                                                                                                                                                                                                                                                                                                                                                                                             |   | **17,239,340**   |   | 16,068,526   |   | 7,929,409    |
|                                                                                                                                                                                                                                                                                                                                                                                                             |   |             |   |         |   |         |
| **Loss before other items**                                                                                                                                                                                                                                                                                                                                                                                      |   | (16,847,834)     |   | (15,841,549) |   | (7,888,074)  |
| Gain/(loss) on conversion of foreign currencies                                                                                                                                                                                                                                                                                                                                                                  |   | (20,810)         |   | (34,822)     |   | 7,953        |
| **Net loss and comprehensive loss for the                        year**                                                                                                                                                                                                                                                                                                                                          | **$**  | **(16,868,644)** | $      | (15,876,371) | $      | (7,880,121)  |
| **Basic and diluted loss per share**                                                                                                                                                                                                                                                                                                                                                                             | **$**  | **(0.43)**       | $      | (0.52)       | $      | (0.43)       |
| **Weighted average number of common shares                        outstanding**                                                                                                                                                                                                                                                                                                                                  |   | **39,322,850**   |   | 30,688,058   |   | 18,128,363   |

 

 

 

 

 

 

See        accompanying notes to the consolidated financial statements.

 

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| **Exeter Resource Corporation**                                                                  |
|--------------------------------------------------------------------------------------------------|
| **Consolidated Statements of Cash Flows (Expressed in                        Canadian Dollars)** |

         

| **For the year ended December 31,**                                                                                                                                                                                                                                                                                                                                                                                             |   | **2007**         |   | 2006         |   | 2005         |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|--------|--------------|--------|--------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |             |   | Restated     |   | Restated     |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |             |   | (See note 3) |   | (See note 3) |
| **Operating activities**                                                                                                                                                                                                                                                                                                                                                                                                        |   |             |   |         |   |         |
| Loss for the year                                                                                                                                                                                                                                                                                                                                                                                                               | $      | (16,868,644)     | $      | (15,876,371) | $      | (7,880,121)  |
|  

Non cash items:                                                                                                                                                                                                                                                                                                                                                                                                         |   |             |   |         |   |         |
| Amortization                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 73,707           |   | 104,929      |   | 71,780       |
| Total stock based compensation                                                                                                                                                                                                                                                                                                                                                                                                  |   | 3,777,702        |   | 2,384,845    |   | 1,886,463    |
| Write off of mineral properties                                                                                                                                                                                                                                                                                                                                                                                                 |   | -                |   | 237,820      |   | -            |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **(13,017,235)** |   | (13,148,777) |   | (5,921,878)  |
| Changes in non-cash working capital items:                                                                                                                                                                                                                                                                                                                                                                                      |   |             |   |         |   |         |
| Other receivables and prepaid expenses                                                                                                                                                                                                                                                                                                                                                                                          |   | (325,302)        |   | (18,973)     |   | (45,624)     |
| Accounts payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                        |   | (111,237)        |   | 1,494,084    |   | 301,517      |
| Due to related parties                                                                                                                                                                                                                                                                                                                                                                                                          |   | (185,119)        |   | 212,503      |   | 30,926       |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **(13,638,893)** |   | (11,461,163) |   | (5,635,059)  |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |             |   |         |   |         |
| **Financing activities**                                                                                                                                                                                                                                                                                                                                                                                                        |   |             |   |         |   |         |
| Issue of share capital for cash                                                                                                                                                                                                                                                                                                                                                                                                 |   | 8,036,284        |   | 18,975,198   |   | 11,455,450   |
| Share issue costs                                                                                                                                                                                                                                                                                                                                                                                                               |   | -                |   | (531,238)    |   | (307,745)    |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **8,036,284**    |   | 18,443,960   |   | 11,147,705   |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   |             |   |         |   |         |
| **Investing activities**                                                                                                                                                                                                                                                                                                                                                                                                        |   |             |   |         |   |         |
| Acquisition of property and equipment                                                                                                                                                                                                                                                                                                                                                                                           |   | (81,311)         |   | (189,863)    |   | (51,199)     |
| Acquisition of mineral properties                                                                                                                                                                                                                                                                                                                                                                                               |   | (104,363)        |   | (70,569)     |   | (131,623)    |
|                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **(185,674)**    |   | (260,432)    |   | (182,822)    |
| **Net increase (decrease) in cash and cash                        equivalents**                                                                                                                                                                                                                                                                                                                                                 |   | **(5,788,283)**  |   | 6,722,365    |   | 5,329,824    |
| **Cash and cash equivalents, beginning of                        year**                                                                                                                                                                                                                                                                                                                                                         |   | **14,511,062**   |   | 7,788,697    |   | 2,458,873    |
| **Cash and cash equivalents, end of year**                                                                                                                                                                                                                                                                                                                                                                                      | **$**  | **8,722,779**    | $      | 14,511,062   | $      | 7,788,697    |
| **Cash equivalents**                                         (note                        7)

**Supplemental cash flow information**       (note 15)

                          |   |             |   |         |   |         |

         

         

         

         

         

See accompanying notes to the consolidated financial        statements.

 

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| **Exeter Resource Corporation**                                                                                  |
|------------------------------------------------------------------------------------------------------------------|
| **Consolidated Statements of Shareholders’ Equity                        (Expressed in Canadian Dollars)** |
| **For the years ended December 31, 2007, 2006, and                        2005**                                 |
|                                                                                                             |
|                                                                                                             |   | Issued Share Capital |   |   |   |
|                                                                                                             |   | Number of Shares | Amount | Contributed Surplus | Deficit | Total Shareholders' Equity |   |
| Balance at December 31, 2004 Restated (See note                        3)                                        | 15,356,387 | $ 14,078,259 | $ 378,003 | $ (11,236,037) | $ 3,220,225 |   |
|                                                                                                             |   |   |   |   |   |   |   |
| Additions During the Year:                                                                                       |   |   |   |   |   |   |
| -                                                                                                                | Exercise of warrants | 1,722,500 | 1,147,225 | - | - | 1,147,225 |   |
| -                                                                                                                | Exercise of stock options | 335,375 | 245,891 |   |   | 245,891 |   |
| -                                                                                                                | Private Placements net of share issue costs of                        $365,595 | 7,887,001 | 9,696,739 | - | - | 9,696,739 |   |
| -                                                                                                                | Finder’s Fee | 44,500 | 57,850 | - | - | 57,850 |   |
| -                                                                                                                | Acquisition of Cognito | 2,500,000 | 2,500,000 | - | - | 2,500,000 |   |
| -                                                                                                                | Contributed surplus allocated on exercise of stock                        options | - | 76,306 | (76,306) | - | - |   |
| -                                                                                                                | Stock based compensation | - | - | 1,886,463 | - | 1,886,463 |   |
| -                                                                                                                | Net loss for the year | - | - | - | (7,880,121) | (7,880,121) |   |
| Balance at December 31, 2005 Restated (See note                        3)                                        | 27,845,763 | 27,802,270 | 2,188,160 | (19,116,158) | 10,874,272 |   |
|                                                                                                             |   |   |   |   |   |   |
| Additions during the year:                                                                                       |   |   |   |   |   |   |
| -                                                                                                                | Exercise of warrants | 5,348,250 | 8,274,309 | - | - | 8,274,309 |   |
| -                                                                                                                | Exercise of stock options | 542,000 | 450,890 | - | - | 450,890 |   |
| -                                                                                                                | Private placement net of share issue costs of                        $531,238 | 3,600,000 | 8,468,762 | - | - | 8,468,762 |   |
| -                                                                                                                | Agents Warrants |   | (221,139) | 221,139 | - | - |   |
| -                                                                                                                | Private Placement | 500,000 | 1,250,000 | - | - | 1,250,000 |   |
| -                                                                                                                | Contributed surplus allocated on exercise of stock                        options | - | 205,203 | (205,203) | - | - |   |
| -                                                                                                                | Stock based compensation | - | - | 2,384,845 | - | 2,384,845 |   |
| -                                                                                                                | Net loss for the year | - | - | - | (15,876,371) | (15,876,371) |   |
| Balance at December 31, 2006 (Restated (See note                        3)                                       | 37,836,013 | 46,230,295 | 4,588,941 | (34,992,529) | 15,826,707 |   |
|                                                                                                             |   |   |   |   |   |   |   |
| Additions during the year                                                                                        |   |   |   |   |   |   |
| -                                                                                                                | Exercise of warrants | 2,051,999 | 6,029,997 | - | - | 6,029,997 |   |
| -                                                                                                                | Exercise of stock options | 1,338,475 | 2,006,287 | - | - | 2,006,287 |   |
| -                                                                                                                | Contributed surplus allocated on exercise of stock                        options | - | 951,489 | (951,489) | - | - |   |
| -                                                                                                                | Warrants | - | 31,274 | (31,274) | - | - |   |
| -                                                                                                                | Stock based compensation | - | - | 3,777,702 | - | 3,777,702 |   |
| -                                                                                                                | Bonus shares | - | - | (149,661) | - | (149,661) |   |
| -                                                                                                                | Net loss for the year | - | - | - | (16,868,644) | (16,868,644) |   |
| **Balance at December 31, 2007**                                                                                 | **41,226,487** |   | **$ 55,249,342** | **$ 7,234,219** | **$ (51,861,173)** | **$ 10,622,388** |   |
|                                                                                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

         

         

         

         

See accompanying notes to the consolidated financial        statements.

 

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| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **1.** | **Nature of Business and Continuing                        Operations** |
|--------|-------------------------------------------------------------------------|

         

Exeter Resource Corporation (the “Company”) is an exploration        stage company incorporated under the laws of British Columbia, Canada and, together with        its subsidiaries, is engaged in the acquisition and exploration of mineral properties        located in Argentina and Chile.

         

The Company is in the process of exploring its mineral properties and has        not yet determined whether these properties contain mineral reserves that are economically        recoverable. The continued operations of the Company and the recoverability of the amount        shown for mineral properties are dependent upon the existence of economically recoverable        reserves, the ability of the Company to obtain necessary financing to complete the        development of such reserves, and the profitable production or disposition of such        reserves. See note 19(b).

         

| **2.** | **Significant Accounting Policies** |
|--------|-------------------------------------|

         

|   | **a)** | **Mineral property acquisition costs** |
|--------|--------|----------------------------------------|

         

Mineral properties consist of exploration and mining concessions, options        and contracts. Acquisition costs are capitalized and deferred until such time as the        property is put into production or the property is disposed of, either through sale or        abandonment or becomes impaired. If a property is put into production the cost of        acquisition will be written off over the life of the property based on estimated economic        reserves. Proceeds received from the sale of any interest in a property will be credited        against the carrying value of the property, with any excess included in operations for the        period. If a property is abandoned, the acquisition costs will be written off to        operations.

Recorded costs of mineral properties are not intended to reflect present or        future values of the properties. The recorded costs are subject to measurement uncertainty        and it is reasonably possible, based on existing knowledge, that changes in future        conditions could require a material change in the recognized amount.

         

Although the Company has taken steps to verify title to mineral properties        in which it has an interest, these procedures do not guarantee the Company’s title.        Such properties may be subject to prior undetected agreements or transfers and title may be        affected by such defects.

         

|   | **b)** | **Mineral property exploration expenditures** |
|--------|--------|-----------------------------------------------|

         

During the year ended December 31, 2007, the Company changed its accounting        policy relating to mineral property exploration expenditures and it now expenses        exploration expenditures when incurred (See Note 3). When proven and probable reserves are        determined for a property, subsequent exploration and development costs of the property are        capitalized and amortized over the life of the property, based on estimated economic        reserves. Proceeds received from the sale of any interest in a property are credited        against the carrying value of the property, with any excess included in operations for the        period. If a property is abandoned, the deferred costs will be written off to        operations.

 

|   | **c)** | **Impairment of mineral property acquisition costs and                        deferred exploration and development expenditures** |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

Carrying values of mineral properties and the property, plant and equipment        associated with those mineral properties are reviewed for impairment when events or changes        in circumstances occur that suggest possible impairment. If the property is assessed to be        impaired, it is written down to its estimated fair value.

         

|   | **d)** | **Asset retirement obligations** |
|--------|--------|----------------------------------|

Asset retirement obligations are recognized for expected obligations related        to the retirement of long-lived tangible assets that arise from the acquisition,        construction, development or normal operation of such assets.

 

| 10 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **2.** | **Significant Accounting****Policies****(Continued)** |
|--------|-------------------------------------------------------|

A liability for an asset retirement obligation is recognized in the period        in which it is incurred and when a reasonable estimate of the fair value of the liability        can be made with the corresponding asset retirement cost recognized by increasing the        carrying amount of the related long-lived asset. The asset retirement cost is subsequently        allocated in a rational and systematic method over the underlying asset’s useful        life. The initial fair value of the liability is accreted, by charges to operations, to its        estimated future value.

         

|   | **e)** | **Cash and cash equivalents** |
|--------|--------|-------------------------------|

         

The Company considers cash and cash equivalents to include amounts held in        banks and highly liquid investments redeemable with an initial term to maturity of less        than 90 days.

         

|   | **f)** | **Translation of foreign currencies** |
|--------|--------|---------------------------------------|

         

The financial position and results of the Company’s integrated foreign        operations have been translated into Canadian funds using the temporal method as        follows:

|   | i) | Monetary items, at the rate of exchange prevailing at the                        consolidated balance sheet date. |
|--------|----|-------------------------------------------------------------------------------------------------------------------|

|   | ii) | Non-monetary items, at the historical rate of                        exchange. |
|--------|-----|--------------------------------------------------------------------------------|

|   | iii) | Exploration and administration costs, at the average rate                        during the period in which the transaction occurred. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------|

Gains and losses arising on currency translation are included in the        Statements of Operations.

         

|   | **g)** | **Property and equipment** |
|--------|--------|----------------------------|

         

Property and equipment are carried at cost less accumulated amortization.        Amortization is calculated at the following annual rates:

| Canada                       |                            |   |
|------------------------------|---------------------------------|--------|
| Computer equipment           | Declining balance - 30%         |   |
| Computer software            | Declining balance - 50%         |   |
| Equipment                    | Declining balance - 20%         |   |
| Leasehold improvements       | Straight line - 5 years         |   |
| Office equipment             | Declining balance - 20%         |   |
| Argentina and Chile          |                            |   |
| Computer equipment           | Straight-line – 3-6 years |   |
| Computer software            | Straight-line – 2 years   |   |
| Equipment including vehicles | Straight-line – 3-7 years |   |
| Office equipment             | Straight-line – 7 years   |   |

         

|   | **h)** | **Loss per share** |
|--------|--------|--------------------|

         

Basic loss per share is calculated by dividing the loss for the year by the        weighted average number of shares outstanding during the year. Diluted loss per share has        not been presented separately as the effect of common shares issuable on the exercise of        stock options and share purchase warrants would be anti-dilutive. Accordingly, basic and        diluted loss per share is the same.

         

|   | **i)** | **Share issue costs** |
|--------|--------|-----------------------|

         

Share issue costs incurred on the issue of the Company’s shares are        charged directly to share capital.

         

|   | **j)** | **Stock-based compensation** |
|--------|--------|------------------------------|

         

The Company has adopted an incentive stock option plan, which is described        in note 11. All stock-based awards are measured and recognized using the fair-value method        as determined by the Black- Scholes option

 

| 11 |
|----|

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

|   | **2.** | **Significant Accounting Policies(Continued)** |
|--------|--------|------------------------------------------------|

         

pricing model. Awards that the Company has the ability to settle with stock        are recorded as equity, whereas awards that the Company is required to settle, or has the        practice of settling, in cash are recorded as liabilities. Compensation expense is        allocated to the applicable expense category and is recognized in the Statement of        Operations over the vesting period.

         

|   | **k)** | **Income taxes** |
|--------|--------|------------------|

         

Income taxes are accounted for using the asset and liability method. Under        this method, income taxes are recognized for the estimated income taxes payable for the        current year and future income taxes are recognized for temporary differences between the        tax and accounting bases of assets and liabilities and for the benefit of losses available        to be carried forward for tax purposes that are more likely than not to be realized. Future        income tax assets and liabilities are measured using tax rates expected to apply in the        years in which the temporary differences are expected to be recovered or        settled.

         

|   | **l)** | **Use of estimates** |
|--------|--------|----------------------|

         

The preparation of financial statements in conformity with Canadian        generally accepted accounting principles requires management to make estimates and        assumptions that affect the reported amounts of assets and liabilities and disclosure of        contingent assets and liabilities at the balance sheet date and the reported amounts of        revenues and expenses during the year. Significant areas where management’s judgment        is applied are mineral property impairment assessment, valuation of future income tax        benefits and contingent liabilities. Actual results could differ from those        estimates.

         

| **3.** | **Change in Accounting Policy and Recent Accounting                        Pronouncements** |
|--------|---------------------------------------------------------------------------------------------|

         

|   | a) | 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 accounting                        standards and policies applied by large companies in the mining and                        exploration industry. The Company considers that expensing these                        expenditures until such time as an economic feasibility study has                        established proven and probable reserves constitutes a reliable and more                        relevant presentation of the Company’s exploration activities. 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 following table shows the impact of the change in accounting        policy:

         

| **Account Impacted**                         | **2007 Adjustment amount- increase                        (decrease)** | **2007 Amount after policy change** | 2006 Adjustment amount- increase (decrease) | 2006 Amount after policy change | 2005 Adjustment amount- increase (decrease) | 2005 Amount after policy change |
|----------------------------------------------|------------------------------------------------------------------------|-------------------------------------|---------------------------------------------|---------------------------------|---------------------------------------------|---------------------------------|
| Net loss and comprehensive loss for the year | **$11,969,446**                                                        | **$16,868,644**                     | $11,094,175                                 | $15,876,371                     | $4,661,005                                  | $7,880,121                      |
| Mineral properties and deferred costs        | **($11,969,446)**                                                      | **$3,354,379**                      | ($11,094,175)                               | $3,250,016                      | ($4,661,005)                                | $2,702,534                      |
| Opening Deficit                              | **$17,802,407**                                                        | **$34,992,529**                     | $7,214,676                                  | $19,116,158                     | $3,026,696                                  | $11,236,037                     |
| Loss per share                               | **($0.29)**                                                            | **($0.43)**                         | ($0.35)                                     | ($0.52)                         | ($0.23)                                     | ($0.43)                         |

 

|   | b) | 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. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

| 12 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **3.** | **Change in Accounting Policy and Recent Accounting                        Pronouncements(Continued)** |
|--------|--------------------------------------------------------------------------------------------------------|

(i)    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 for        receivables and those assets designated 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.

         

(ii)   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.

         

|   | (iii) | 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.

         

|   | (iv) | 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 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. For the year ended December 31, 2007, the Company voluntarily        changed its accounting policy for mineral property exploration expenditures and applied the        provisions of section 1506 (see note 3(a)).

         

|   | c) | **Canadian accounting pronouncements effective for                        2008** |
|--------|----|----------------------------------------------------------------------------------|

(i)   Capital Disclosures, Section 1535

         

On December 1, 2006, the CICA issued this new accounting standard which        became effective January 1, 2008. Section 1535 specifies the disclosure of information that        enables users of an entity’s financial statements to evaluate its objectives,        policies and processes for managing capital such as qualitative information about its        objectives, policies and processes for managing capital, summary quantitative data about        what the entity manages as capital, whether it has complied with any capital requirements        and, if it has not complied, the consequences of non-compliance.

 

| 13 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **3.** | **Change in Accounting Policy and Recent Accounting                        Pronouncements****(Continued)** |
|--------|------------------------------------------------------------------------------------------------------------|

         

(ii)   Inventories, Section 3031

         

In June 2007, the CICA issued section 3031 – Inventories to replace        existing section 3030. This new section, which became effective January 1, 2008,        establishes standards for the measurement and disclosure of inventories. The Company does        not expect to be impacted by the application of section 3031 as it does not currently have        any inventory.

         

(iii)  Goodwill and intangible assets, Section 3064

The CICA issued the new Handbook Section 3064, “Goodwill and        Intangible Assets”, which will replace Section 3062, “Goodwill and Intangible        Assets”. The new standard establishes revised standards for the recognition,        measurement, presentation and disclosure of goodwill and intangible assets. The new        standard also provides guidance for the treatment of preproduction and start-up costs and        requires that these costs be expensed as incurred. The new standard applies to annual and        interim financial statements relating to fiscal years beginning on or after October 1,        2008. Management is currently assessing the impact of this new accounting standard on its        consolidated financial statements.

(iv)  Financial Instruments Disclosures, Section 3862 / Financial        Instruments Presentation, Section 3863

These sections will replace Section 3861, Financial Instruments Disclosure        and Presentation, revising and enhancing disclosure requirements while carrying forward its        presentation requirements. These new sections will place increased emphasis on disclosure        about the nature and extent of risk arising from financial instruments and how the entity        manages those risks. The mandatory effective date is for annual and interim periods in        fiscal years beginning on or after October 1, 2007. The Company will begin application of        these sections effective January 1, 2008. It is not anticipated that the adoption of these        new accounting standards will impact the amounts reported in the Company’s        consolidated financial statements as they relate primarily to disclosure.

(v)   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.

         

The Company has determined that there are no other recent pronouncements        that impact its consolidated financial statements.

         

| **4.** | **Financial Instruments** |
|--------|---------------------------|

         

All significant financial assets, financial liabilities and equity        instruments of the Company are either recognized or disclosed in the financial statements        together with other information relevant for making a reasonable assessment of future cash        flows, interest rate risk and credit risk.

         

Our financial instruments are comprised of cash and cash equivalents, other        receivables, accounts payable and accrued liabilities. Unless otherwise noted, it is        management’s opinion that the Company is not exposed to significant interest,        currency or credit risks arising from the financial instruments. Cash and cash equivalents        are recorded at fair value. The fair value of other receivables, accounts payable and        accrued liabilities approximate their carrying value due to their short-term maturity or        capacity of prompt liquidation. The Company is however exposed to currency risk from        foreign currency fluctuations and manages that risk from foreign exchange fluctuations by        limiting the terms to settlement.

 

| 14 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **4.** | **Financial Instruments****(Continued)** |
|--------|------------------------------------------|

         

Certain financial instruments of the Company include amounts translated from        foreign currencies into Canadian dollars. Listed below are the relevant instruments and the        amounts of foreign currency included in their balances:

         

|                                     | **2007**        | 2006          |
|------------------------------------------|-----------------|---------------|
|                                     | Argentine Pesos | Chilean Pesos | US Dollars | Argentine Pesos | Chilean Pesos | US

Dollars |
| Cash and cash equivalents                | 1,855,883       | 90,602,505    | 236,022 | 2,636,248 | 29,024,679 | 72,675 |
| Other receivables and prepaid expenses   | 274,088         | 7,048,074     | - | 166,265 | 2,989,878 | - |
| Accounts payable and accrued liabilities | 4,363,510       | 13,170,702    | 7,500 | 3,706,391 | 26,370,114 | 7,500 |
| Rate to convert to $1.00 CDN             | 0.3116          | 0.001984      | 1.0123 | 0.377 | 0.002154 | 0.8588 |

         

| **5.** | **Principles of Consolidation** |
|--------|---------------------------------|

         

These consolidated financial statements include the accounts of the        following subsidiaries:

|                                                                               |  

Incorporation  | Percentage of Ownership |
|------------------------------------------------------------------------------------|------------------------|-------------------------|
| Estelar Resources Limited (“Estelar”)                                  | British Virgin Islands | 100%                    |
| Cognito Limited (“Cognito”)                                            | British Virgin Islands | 100%                    |
| Sociedad Contractual Minera Eton Chile                        (“Eton”) | Chile                  | 100%                    |
|                                                                                    |                        |                         |  |  |

         

| **6.** | **Investments in Subsidiaries** |
|--------|---------------------------------|

         

|   | **a)** | **Cognito Limited** |
|--------|--------|---------------------|

         

By a Principles of Agreement dated October 27, 2002, an Option to Purchase,        Acquisition and Joint Venture Agreement, dated January 18, 2003, and an agreement dated        April 30, 2003, the Company acquired the right, subject to the payment noted below, to earn        a 100% interest in Cognito. Cognito holds an option to acquire a 100% interest, subject to        a 3.5% net smelter royalty, in the Don Sixto Project. (See note 9c (i))

         

Effective July 22, 2003, the Company issued 1,600,000 shares and paid        $25,000 for the right to earn a 100% interest in Cognito. Direct costs of the acquisition        totaled $2,908. At that date, the fair value of the consideration paid for that right was        $347,908, which has been recorded as mineral property acquisition cost.

         

Effective July, 2005 the Company exercised its option to acquire a 100%        interest in Cognito and issued 2,500,000 shares, at a price of $1.00 per share, for a total        consideration of $2,500,000 which has been recorded as a mineral property acquisition cost,        to hold a 100% interest in Cognito.

         

|   | **b)** | **Estelar Resources Limited** |
|--------|--------|-------------------------------|

         

Effective July 22, 2003, the Company acquired a 100% interest in Estelar for        consideration of 1,000,000 shares (issued at a fair value of $0.237 per share). At that        date, the fair value of the assets acquired was $237,820, which was recorded as a mineral        property acquisition cost.

         

| **7.** | **Cash and Cash Equivalents** |
|--------|-------------------------------|

> 
                                     

**2007**

2006

Cash

$ 1,222,779

$ 14,511,062

Guaranteed Investment Certificate

7,500,000

-

Total

$ 8,722,779

$ 14,511,062

 

| 15 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **8.** | **Property and Equipment** |
|--------|----------------------------|

         

|      |                         | **2007**  | 2006                     |
|-----------|------------------------------|-----------|--------------------------|
|      |                         | Cost      | Accumulated Amortization | Net Book

Value | Cost | Accumulated Amortization | Net Book Value |
| Canada    |                         |      |                     |   |   |   |
|      | Computer equipment           | $ 61,665  | $ 31,881                 | $ 29,784 | $ 48,590 | $ 21,608 | $ 26,982 |
|      | Computer software            | 6,663     | 6,214                    | 449 | 5,767 | 5,767 | - |
|      | Equipment                    | 44,178    | 14,334                   | 29,844 | 44,178 | 6,874 | 37,304 |
|      | Leasehold improvements       | 26,882    | 15,738                   | 11,144 | 26,882 | 12,952 | 13,930 |
|      | Office equipment             | 17,979    | 5,344                    | 12,635 | 15,108 | 2,545 | 12,563 |
|      |                         | 157,367   | 73,511                   | 83,856 | 140,525 | 49,746 | 90,779 |
| Argentina |                         |      |                     |   |   |   |
|      | Computer equipment           | 25,860    | 20,419                   | 5,441 | 24,487 | 14,410 | 10,077 |
|      | Computer software            | 4,859     | 4,273                    | 586 | 3,969 | 3,492 | 477 |
|      | Equipment including vehicles | 194,703   | 162,627                  | 32,076 | 194,703 | 137,041 | 57,662 |
|      |                         | 225,422   | 187,319                  | 38,103 | 223,159 | 154,943 | 68,216 |
| Chile     |                         |      |                     |   |   |   |
|      | Computer equipment           | 4,072     | 400                      | 3,672 | 959 | 27 | 932 |
|      | Equipment including vehicles | 101,469   | 20,450                   | 81,019 | 45,570 | 3,787 | 41,783 |
|      | Office equipment             | 4,882     | 570                      | 4,312 | 1,688 | 40 | 1,648 |
|      |                         | 110,423   | 21,420                   | 89,003 | 48,217 | 3,854 | 44,363 |
|      |                         | $ 493,212 | $ 282,250                | $ 210,962 | $ 411,901 | $ 208,543 | $ 203,358 |

         

         

| **9.** | **(a) Mineral Property– Acquisition Cost –                        Restated (See note 3)** |
|--------|-------------------------------------------------------------------------------------------------------|

|            | **2007**                  |
|-----------------|---------------------------|
|            | Balance beginning of year | Additions (Write-off) | Balance end of the year |
| Don Sixto       | $ 3,076,444               | $ 79,313 | $ 3,155,757 |
| CVSA Properties | 128,572                   | - | 128,572 |
| Other           | 45,000                    | 25,050 | 70,050 |
|            | $ 3,250,016               | $ 104,363 | $ 3,354,379 |

 

 

| 16 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **9.** | **(a) Mineral Property– Acquisition Cost –                        Restated (See note 3) (continued)** |
|--------|-------------------------------------------------------------------------------------------------------------------|

|            |  

                         

2006 |
|-----------------|----------------------------------------------|
| Don Sixto       | $ 3,025,875                                  | $ 50,569 | $ 3,076,444 |
| CVSA Properties | 128,572                                      | - | 128,572 |
| Other           | 282,820                                      | (237,820) | 45,000 |
|            | $ 3,437,267                                  | $ (187,251) | $ 3,250,016 |

         

         

| **9.** | **(b) Mineral Property**-**Exploration Expenditures – Restated (See note                        3)** |
|--------|------------------------------------------------------------------------------------------------------------|

 

The        following tables show the Company’s exploration expenditures by project for 2007,        2006 and 2005.

         

**Schedule of Mineral Exploration Expenditures - 2007**

|                                          | CVSA        | Chilean     | Don Sixto   |      |         |
|-----------------------------------------------|-------------|-------------|-------------|-----------|--------------|
|                                          | Properties  | Properties  | Project     | Other     | Total        |
| Assays                                        | $ 256,284   | $ 54,632    | $ 647,231   | $ -       | $ 958,147    |
| Consultants and contractors                   | 68,141      | 15,098      | 119,719     | 1,755     | 204,713      |
| Drilling                                      | 1,826,807   | 349,551     | 51,810      | -         | 2,228,168    |
| Engineering                                   | -           | -           | 136,734     | -         | 136,734      |
| Environmental                                 | 5,863       | -           | 223,645     | 332       | 229,840      |
| Field Camp                                    | 221,438     | 410,514     | 308,767     | 1,903     | 942,622      |
| Geological                                    | 583,904     | 785,240     | 174,315     | 111,575   | 1,655,034    |
| Geophysical                                   | 121,355     | -           | 1,747       | -         | 123,102      |
| Hydrology                                     | -           | -           | 21,645      | -         | 21,645       |
| Infrastructure                                | -           | -           | 30,506      | -         | 30,506       |
| IVA tax                                       | 569,730     | 170,528     | 130,891     | -         | 871,149      |
| Legal and title                               | 101,863     | 78,527      | 1,266       | 254,716   | 436,372      |
| Metallurgical                                 | -           | -           | 128,002     | -         | 128,002      |
| Office operations                             | 247,768     | 167,079     | 55,523      | 1,894     | 472,264      |
| Resource Development                          | -           | -           | 174,074     | -         | 174,074      |
| Travel                                        | 382,793     | 343,338     | 258,802     | 32,987    | 1,017,920    |
| Wages and benefits                            | 1,033,994   | 174,040     | 1,119,039   | 12,081    | 2,339,154    |
| **Mineral Property Exploration Expenditures** | $ 5,419,940 | $ 2,548,547 | $ 3,583,716 | $ 417,243 | $ 11,969,446 |

 

 

| 17 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

             

| **9.** | **(b) Mineral                            Property**-**Exploration Expenditures – Restated (See note                            3) (continued)** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| Schedule of Mineral Property Exploration Expenditures -                        2006 |
|-------------------------------------------------------------------------------------|
|                                                                                | CVSA | Chilean | Don Sixto |   |   |
|                                                                                | Properties | Properties | Project | Other  | Total |
|                                                                                | Assays | $ 72,409 | $ 1,986 | $ 283,755 | $ 117 | $ 358,267 |
|                                                                                | Consultants and contractors | 20,322 | 1,198 | 445,462 | - | 466,982 |
|                                                                                | Drilling | 606,873 | - | 4,014,481 | - | 4,621,354 |
|                                                                                | Engineering | 24,951 | - | 282,595 | 590 | 308,136 |
|                                                                                | Environmental | 5,464 | - | 61,824 | 551 | 67,839 |
|                                                                                | Field camp | 89,535 | 153,577 | 456,501 | 787 | 700,400 |
|                                                                                | Geological | 215,723 | 338,804 | 313,309 | 58,763 | 926,599 |
|                                                                                | Geophysical | - | - | 6,577 | - | 6,577 |
|                                                                                | Hydrology | - | - | 55,477 | - | 55,477 |
|                                                                                | IVA tax | 168,522 | 38,161 | 938,250 | - | 1,144,933 |
|                                                                                | Legal and title | 106,471 | 28,453 | 108,905 | 51,066 | 294,895 |
|                                                                                | Metallurgical | - | - | 60,818 | 7,023 | 67,841 |
|                                                                                | Office operations | 99,373 | 24,827 | 85,856 | - | 210,056 |
|                                                                                | Travel | 177,885 | 112,036 | 269,040 | 37,793 | 596,754 |
|                                                                                | Wages and benefits | 292,436 | 103,982 | 1,137,349 | 20,375 | 1,554,142 |
| **Mineral Property Exploration Expenditures**                                       | $ 1,879,964 | $ 803,024 | $ 8,520,199 | $ 177,065 | $ 11,380,252 |

         

         

| Mineral Property Exploration Expenditures 2005 |
|------------------------------------------------|
|                                           | CVSA

Properties | Don Sixto

Project |  

Other | Total |
| Assays                                         | $ 114,836 | $ 153,139 | $ 3,619 | $ 271,594 |
| Consultants and contractors                    | 20,896 | 54,619 | 5,580 | 81,095 |
| Drilling                                       | 246,826 | 927,275 | - | 1,174,101 |
| Engineering                                    | - | 207,644 | - | 207,644 |
| Environmental                                  | - | 31,488 | - | 31,488 |
| Field camp                                     | 65,674 | 255,815 | 25,215 | 346,704 |
| Geological                                     | 165,479 | 604,475 | 138,798 | 908,752 |
| Geophysics                                     | 8,848 | 20,136 | - | 28,984 |
| Hydrology                                      | - | 8,609 | - | 8,609 |
| IVA tax                                        | 77,766 | 235,947 | - | 313,713 |
| Metallurgical                                  | - | 284,048 | - | 284,048 |
| Office operations                              | 105,402 | 76,951 | 34,632 | 216,985 |
| Legal and title                                | 57,355 | 38,293 | 8,569 | 104,217 |
| Travel                                         | 145,061 | 163,105 | 92,450 | 400,616 |
| Wages and benefits                             | 157,381 | 440,631 | 39,592 | 637,604 |
| **Mineral Property Exploration Expenditures**  | $ 1,165,524 | $ 3,502,175 | $ 348,455 | $ 5,016,154 |

**(c)      Mineral        Property**-**Agreements**

|   | **i)** | **Don Sixto – Argentina** |
|--------|--------|---------------------------------|

By an agreement dated February 27, 2003, Cognito has the right to acquire a        100% interest (subject to a 3.5% net smelter returns royalty (“NSR”) which may        be purchased for US$1 million) in the Don Sixto Project (formerly the La Cabeza Project),        located in Mendoza Province, Argentina, for consideration of cash payments totaling        US$525,000 payable as follows:

         

| 18 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **9.** | **(c) Mineral Property - Agreements                        (continued)** |
|--------|--------------------------------------------------------------------------|

|   | - | US$5,000 due December 15, 2002; (Paid) |
|--------|---|----------------------------------------|

|   | - | US$15,000 on or before December 15, 2003; (Paid) |
|--------|---|--------------------------------------------------|

|   | - | US$25,000 on or before December 15, 2004; (Paid) |
|--------|---|--------------------------------------------------|

|   | - | US$35,000 on or before December 15, 2005; (Paid) |
|--------|---|--------------------------------------------------|

|   | - | US$45,000 on or before December 15, 2006; (Paid) |
|--------|---|--------------------------------------------------|

|   | - | US$50,000 on or before December 15, 2007; (Paid)                        and |
|--------|---|-----------------------------------------------------------------------------|

|   | - | US$50,000 on or before December 15 of each year thereafter                        up to and including December 15, 2014. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------|

         

The Company may terminate the payments described above upon making a        development decision in respect to the project; provided that production must commence        within two years of that decision.

         

Early in 2007, the Company expanded its holding around Don Sixto by signing        an option agreement over an additional 81.5 square kilometres (20,160 acres) of exploration        rights, situated to the immediate north of Don Sixto. The terms for the option agreement        provide for annual payments of US$25,000 over six years followed by a purchase price        comprising three annual payments of US$200,000. Should the Company exercise its option to        purchase the property, the annual payments will cease. There are no expenditure        requirements.

         

In December 2005, Cognito purchased the surface rights covering the area of        the proposed mine development at Don Sixto at a cost of $78,000. In addition, Cognito is        required to build two dwellings elsewhere on the property at an estimated cost of $75,000.        The previous owners of the property will retain the right to re-acquire the property upon        completion of mining activities.

 

On June 20, 2007 the Mendoza Provincial government introduced anti-mining        legislation which may preclude development of mining projects in Mendoza Province. The        Company has delayed 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        $3,155,757.

         

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.

 

|   | **ii)** | **CVSA Properties - Argentina** |
|--------|---------|---------------------------------|

By an Exploration and Option Agreement, dated December 30, 2003, Estelar had        the right to earn a 100% interest (subject to a 2% NSR) in the Cerro Moro, Santa Cruz,        Chubut and Rio Negro Projects (comprised of thirty-nine mineral concessions), located in        Santa Cruz, Chubut and Rio Negro Provinces, Argentina, for consideration of cash payments        of US$100,000 (paid) and incurring US$3,000,000 (incurred) in exploration expenditures        before December 30, 2009.

Under the agreement, once Estelar has incurred exploration expenditures of        US$3,000,000 (incurred) and completed 10,000 metres of drilling on any one of the projects,        the vendor retains the right to buy back a 60% interest in that project, by paying Estelar        an amount equal to 2.5 times its exploration expenditures on the project and funding a        bankable feasibility study on the project. The vendor may earn an additional 10% interest        in the project (for a total 70% interest) by financing Estelar’s share of mine        development costs. Should the vendor elect not to exercise its back in right, its interest        will revert to a 2% NSR on that project.

By December 31, 2006, Estelar had incurred total aggregate expenditures of        US$ 3,000,000, and completed 12,000 metres of drilling on the CVSA Properties, and in early        2007, Estelar notified the vendor that it was exercising the option to acquire the        Properties subject to their back in right. On August 2, 2007, Estelar notified the vendor        that it had completed 10,000 metres of drilling at Cerro Moro, and

 

| 19 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

| **9.** | **(c) Mineral Property - Agreements (continued)** |
|--------|---------------------------------------------------|

 

provided them with a report containing exploration results in early        September. In October, CVSA advised the Company that it had elected not to exercise its        back-in right and its interest has reverted to a 2% NSR in Cerro Moro. The vendor, however,        retains its back-in right over the other projects acquired under the agreement.

         

|   | **iii)** | **Chilean Properties** |
|--------|----------|------------------------|

|   | **(a)** | **Southern Chile** |
|--------|---------|--------------------|

By agreement dated May 9, 2006, the Company has the right to acquire        exploration titles and conduct exploration on 48 targets in southern Chile. Under the terms        of the agreement, upon the completion of 5,000 meters of drilling on a project, the vendor        has a once-only right to “back-in” to a 60% participating interest on that        project by paying the Company three times the amount of its exploration expenditures        incurred on that project. A “project” is defined as a 10 kilometre area of        interest surrounding any of the 48 targets included under the agreement. If the vendor does        not elect to exercise its back-in right, it will be entitled to a 1% NSR return from any        production from that project.

         

|   | **(b)** | **Maricunga Property – including                        Caspiche** |
|--------|---------|--------------------------------------------------------------------------|

         

By an agreement dated October 11, 2005 and subsequently amended, the Company        acquired the right to review a number of properties in the Maricunga region of Chile. Under        the terms of the agreement, the Company can earn a 100% interest in the properties by        incurring aggregate expenditures of US$2,550,000 over five years including conducting        15,500 meters of drilling. The vendor will retain a 3% NSR in the properties. The Company        may withdraw from the agreement at any time after expending US$250,000 including conducting        1,500 meters of drilling.

         

Upon completion of a feasibility study, and where a decision is made to        develop a property, the parties share development costs pro rata, or dilution will        apply.

         

|   | **iv)** | **Other Properties** |
|--------|---------|----------------------|

|   | **(a)** | **Estelar Properties - Argentina** |
|--------|---------|------------------------------------|

         

Estelar has acquired a 100% interest in the Quispe, Rosarita and Uspallata        Projects, located in Catamarca and San Juan Provinces, Argentina, for consideration of a 2%        NSR from any future production from the properties. There are no expenditure commitments on        the properties.

         

|   | **(b)** | **MRP Properties - Argentina** |
|--------|---------|--------------------------------|

         

By an agreement dated October 1, 2003, Estelar obtained the right to acquire        a 100% interest (subject to a 2% NSR which may be acquired for $750,000) in the Agua Nueva,        La Ramada and Rosarita South Projects, located in Mendoza, San Juan and La Rioja Provinces,        Argentina, for consideration of cash payments totaling $440,000 payable as        follows:

         

|   | - | $5,000 on signing of the Agreement; (paid); |
|--------|---|---------------------------------------------|

|   | - | $7,500 on or before October 1, 2004; (paid); |
|--------|---|----------------------------------------------|

|   | - | $12,500 on or before October 1, 2005; (paid) |
|--------|---|----------------------------------------------|

|   | - | $20,000 on or before October 1, 2006; (paid) |
|--------|---|----------------------------------------------|

|   | - | $25,000 on or before October 1, 2007; (paid) |
|--------|---|----------------------------------------------|

|   | - | $30,000 on or before October 1, 2008; |
|--------|---|---------------------------------------|

|   | - | $40,000 on or before October 1, 2009; and |
|--------|---|-------------------------------------------|

|   | - | $50,000 on or before October 1 of each year thereafter to                        2015. |
|--------|---|----------------------------------------------------------------------------------------|

 

| 20 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

| **9.** | **(c) Mineral Property - Agreements                        (continued)** |
|--------|--------------------------------------------------------------------------|

 

In the event that a decision is made to build and operate a mine on any of        the projects, payment of the remaining option payments may be terminated.

         

| **10.** | **Share Capital** |
|---------|-------------------|

         

The authorized share capital of the Company is 100,000,000 shares without        par value.

         

The Company has issued shares of its stock as follows:

         

|                          | **2007**         | 2006         |
|-------------------------------|------------------|--------------|
|                          | Number of Shares | Amount       | Number of Shares | Amount |
| Balance, beginning of year    | 37,836,013       | $ 46,230,295 | 27,845,763 | $ 27,802,270 |
| Issued during the year for:   |             |         |   |   |
| Cash                          | 3,390,474        | 8,036,284    | 9,990,250 | 18,975,198 |
| Contributed surplus allocated | -                | 951,489      | - | 205,203 |
| Warrants                      | -                | 31,274       | - | - |
| Share issue costs             | -                | -            | - | (752,376) |
| Balance, end of year          | 41,226,487       | $ 55,249,342 | 37,836,013 | $ 46,230,295 |

         

Transactions for the Issue of Share CapitalDuring the        Year Ended December 31, 2007:

         

|   | **a)** | The Company issued 1,338,475 shares for proceeds of                        $2,006,287 upon the exercise of options as follows: 30,000 shares at a                        price of $0.405; 75,000 shares at a price of $1.08; 3,750 at a price of                        $0.85; 150,000 shares at a price of $1.12; 300,000 shares at a price of                        $1.10; 145,000 shares at a price of $1.17; 160,000 shares at a price of                        $1.20; 55,000 shares at a price of $1.59; 74,725 shares at a price of                        $1.79; 80,000 shares at a price of $2.01; and 265,000 shares at a price of                        $2.52. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

In addition, an amount totaling $951,489 representing stock-based        compensation recognized on vesting of the above stock options was allocated to share        capital.

 

|   | **b)** | The Company issued 2,051,999 shares for proceeds of                        $6,029,997 upon the exercise of warrants as follows: 252,000 shares at a                        price of $2.50; and 1,799,999 shares at a price of $3.00. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

Transactions for the Issue of Share CapitalDuring the        Year Ended December 31, 2006:

         

|   | **a)** | The Company completed a private placement financing                        consisting of 3,600,000 units, at a price of $2.50 per unit, for a total                        consideration of $9,000,000. Each unit consisted of one common share and                        one-half share purchase warrant. Each whole share purchase warrant is                        exercisable to acquire one additional share at a price of $3.00 per share                        on or before April 4, 2008 except that in the event that the closing price                        of the Company’s stock exceeds $3.25 for ten consecutive trading days                        after February 5, 2007, the Company may accelerate the expiry of the                        warrants by giving notice to the holders thereof, and, in such case, the                        warrants will expire on the 30th calendar day after such                        notice. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

The Company paid costs totaling $752,376 in connection with this private        placement comprised of a finder’s fee of $450,000 cash, the        issuance of 252,000 agents’ warrants, with a fair value of $221,139, (see note 12)        and legal costs of $81,238. Each agent’s warrant entitles the holder to purchase one        common share at a price of $2.50 per share, on or before April 4, 2008.

         

| 21 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

             

| **10.** | **Share Capital (continued)** |
|---------|-------------------------------|

         

|   | **b)** | The Company completed a private placement financing                        consisting of 500,000 units, at a price of $2.50 per unit, for a total                        consideration of $1,250,000. Each unit consisted of one common share and                        one- half share purchase warrant. Each whole share purchase warrant is                        exercisable to acquire one additional share at a price of $3.00 on or                        before April 18, 2008. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **c)** | The Company issued 5,348,250 shares for proceeds of $8,274,                        309 upon the exercise of warrants as follows: 2,336,334 shares at a price                        of $1.35; 3,011,916 shares at a price of $1.70. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **d)** | The Company issued 542,000 shares for proceeds of $450,890                        upon the exercise of stock options as follows: 167,000 shares at a price of                        $0.22; 125,000 shares at a price of $1.00; 40,000 shares at a price of                        $1.08; 50,000 shares at a price of $1.10; 35,000 shares at a price of                        $1.17; 125,000 shares at a price of $1.20. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

Transactions for the Issue of Share CapitalDuring the        Year Ended December 31, 2005:

         

|   | **a)** | The Company completed a private placement financing                        consisting of 1,907,667 units, at a price of $1.20 per unit, for a total                        consideration of $2,289,200. Each unit consisted of one share and one-half                        share purchase warrant. Each whole share purchase warrant was exercisable                        to acquire one additional share at a price of $1.35 on or before April 14,                        2006. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The Company paid costs totaling $158,134 in connection with this private        placement.

         

|   | **b)** | The Company completed a private placement financing                        consisting of 5,979,334 units, at a price of $1.20 per unit, for total                        consideration of $7,773,134. Each unit consisted of one share and one-half                        share purchase warrant. Each share purchase warrant was exercisable to                        acquire one additional share at a price of $1.70 on or before December 21,                        2006. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

The Company paid share issuance costs totaling $149,611 and issued 44,500        units, with a fair value of $57,850, as finders’ fees in connection with this private        placement. Each unit consisted of one share and one-half share purchase warrant. Each share        purchase warrant was exercisable to acquire one additional share at a price of $1.70 on or        before December 21, 2006.

         

|   | **c)** | The Company issued 1,722,500 shares for proceeds of                        $1,147,225 upon the exercise of warrants as follows: 155,000 shares at a                        price of $0.22 per share; 175,000 shares at a price of $0.23; 1,345,000                        shares at a price of $0.75; and 47,500 shares at a price of                        $1.35. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **d)** | The Company issued 335,375 shares for proceeds of $245,891                        upon the exercise of stock options as follows: 80,000 shares at a price of                        $0.41; 149,750 shares at a price of $0.76; 15,625 shares at a price of                        $0.85; 40,000 shares at a price of $0.90; and 50,000 shares at a price of                        $1.00. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **e)** | The Company issued 2,500,000 shares at a price of $1.00 for                        the acquisition of the remaining 50% interest in Cognito. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

         

| **11.** | **Stock Option Plan** |
|---------|-----------------------|

         

The Company has adopted an incentive stock option plan (the        “Plan”), the essential elements of which are as follows: The aggregate number        of shares of the Company’s capital stock issuable pursuant to options granted under        the Plan, which was amended and approved on May 23, 2007, may not exceed 7,627,203. The        Board of Directors has further amended the Plan to increase the ceiling, subject to        approval by the TSX Venture Exchange (“TSX-V”), the American Stock Exchange and        shareholders, to 8,250,352. Options granted under the Plan may have a maximum term of five        years. The exercise price of options granted under the Plan will not be less than the        discounted market price of the shares (defined as the last closing market price of the        Company’s shares immediately preceding the grant date, less the maximum discount        permitted by TSX-V), or such other price as

         

| 22 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

         

| **11.** | **Stock Option Plan (continued)** |
|---------|-----------------------------------|

 

may be agreed to by the Company and accepted by the TSX-V. Options granted        under the Plan are generally exercisable immediately following the grant, however certain        options may be subject to vesting at times as determined by the directors of the Company        and the TSX-V.

         

A summary of the status of options granted by the Company, as of December        31, 2007 and 2006 and changes during the years then ended, is as follows:

|                                   | **2007**    | 2006                            |
|----------------------------------------|-------------|---------------------------------|
|                                   | Shares      | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price |
| Options outstanding, beginning of year | 5,606,750   | $ 1.58                          | 4,949,750 | $ 1.15 |
| Cancelled                              | (570,000)   | 2.75                            | (556,000) | 1.75 |
| Granted                                | 3,525,000   | 3.40                            | 1,755,000 | 2.62 |
| Exercised                              | (1,338,475) | 1.49                            | (542,000) | 0.83 |
| Options outstanding, end of year       | 7,223,275   | $ 2.40                          | 5,606,750 | $ 1.58 |

         

The following table summarizes information about the stock options        outstanding at December 31, 2007:

| Range of Prices $ | Number    | Weighted Average Remaining Life (Years) | Weighted Average Exercise Price |
|-------------------|-----------|-----------------------------------------|---------------------------------|
| 0.00 - 1.00       | 275,000   | 0.63                                    | $                               | 0.41 |
| 1.01 - 2.00       | 3,008,275 | 2.14                                    | $                               | 1.29 |
| 2.01 - 3.00       | 1,245,000 | 4.00                                    | $                               | 2.49 |
| 3.01 - 4.00       | 1,970,000 | 4.37                                    | $                               | 3.51 |
| 4.01 +            | 725,000   | 4.87                                    | $                               | 4.37 |
|              | 7,223,275 | 2.80                                    | $                               | 2.40 |

         

**Stock-based Compensation**

         

The fair values of options and agent’s warrants granted during the        years ended December 31, 2007, 2006 and 2005 were estimated, at the grant date, using the        Black-Scholes option pricing model with the following weighted average        assumptions:

|                       |                    | 2007   |       | 2006   |      | 2005   |       |
|----------------------------|-------------------------|--------|------------|--------|-----------|--------|------------|
| Expected annual volatility |                    | 68.12% |       | 65.82% |      | 67.45% |       |
|                       | Risk-free interest rate |   | 3.99%      |   | 3.89%     |   | 3.44%      |
|                       | Expected life           |   | 3.34 years |   | 3.5 years |   | 3.26 years |
|                       | Expected dividend yield |   | 0.00%      |   | 0.00%     |   | 0.00%      |

Based on the above assumptions, the average fair value of each option        granted and vested during the year ended December 31, 2007, was $1.16 (2006: $1.36, 2005:        $0.74). Compensation expense of $3,777,702 (2006: $2,384,845, 2005: $1,886,463) was        recorded in the statement of operations for the year.

         

Stock based compensation has been allocated as follows:

|                                      |   | **2007**        |   | 2006            |   | 2005            |
|-------------------------------------------|--------|-----------------|--------|-----------------|--------|-----------------|
| Administration salaries and consulting    |   | $ 657,477       |   | $ 661,998       |   | $ 338,933       |
| Director’s fees                     |   | 960,957         |   | 585,369         |   | 700,953         |
| Management fees                           |   | 720,870         |   | -               |   | 165,080         |
| Mineral property exploration expenditures |   | 1,258,446       |   | 506,444         |   | 473,025         |
| Shareholder communications                |   | 179,952         |   | 631,035         |   | 208,472         |
| Total                                     |   | **$ 3,777,702** |   | **$ 2,384,845** |   | **$ 1,886,463** |

         

| 23 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

             

| **11.** | **Stock Option Plan (continued)** |
|---------|-----------------------------------|

 

Option pricing models require the input of highly subjective assumptions        including the expected price volatility of the Company’s shares. Changes in the        subjective input assumptions can materially affect the fair value estimate, and, therefore,        the existing models do not necessarily provide a reliable single measure of the fair value        of the Company’s stock options.

         

At December 31, 2007, the Company had outstanding stock options to issue        7,223,275 shares as follows:

| Number of Options Outstanding | Number of Options Exercisable | Price  | Expiry Date |              |
|-------------------------------|-------------------------------|--------|-------------|-------------------|
| 275,000                       | 275,000                       | $      | 0.41        | August 15, 2008   |
| 1,048,000                     | 1,048,000                     | $      | 1.08        | January 21, 2009  |
| 10,000                        | 10,000                        | $      | 1.41        | April 7, 2009     |
| 225,000                       | 225,000                       | $      | 1.20        | March 21, 2010    |
| 300,000                       | 300,000                       | $      | 1.20        | April 5, 2010     |
| 285,000                       | 285,000                       | $      | 1.12        | July 7, 2010      |
| 50,000                        | 50,000                        | $      | 1.10        | August 19, 2010   |
| 75,000                        | 75,000                        | $      | 1.20        | October 25, 2010  |
| 965,000                       | 865,000                       | $      | 1.59        | December 30, 2010 |
| 275                           | 275                           | $      | 1.79        | February 3, 2011  |
| 80,000                        | 80,000                        | $      | 2.01        | March 2, 2011     |
| 225,000                       | 225,000                       | $      | 2.52        | May 3, 2011       |
| 50,000                        | 50,000                        | $      | 1.89        | June 12, 2011     |
| 415,000                       | 415,000                       | $      | 3.02        | November 30, 2011 |
| 495,000                       | 430,000                       | $      | 2.52        | January 31, 2012  |
| 220,000                       | 220,000                       | $      | 2.52        | February 13, 2012 |
| 1,555,000                     | 1,234,162                     | $      | 3.64        | June 27, 2012     |
| 225,000                       | 25,000                        | $      | 2.52        | August 28, 2012   |
| 725,000                       | -                             | $      | 4.37        | November 13, 2012 |
| 7,223,275                     | 5,812,437                     |   |        |              |
|                               |                               |        |             |                   |  |  |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

| **12.** | **Warrants** |
|---------|--------------|

         

At December 31, 2007 the Company had outstanding share purchase warrants        exercisable to issue 250,000 shares as follows:

         

| **2007** |
|----------|
| Number   | Exercise Price | Expiry Date |
| 250,000  | $                                   3.00 | April 18, 2008 |

         

At December 31, 2006 the Company had outstanding share purchase warrants        exercisable to issue 2,302,000 shares as follows:

         

| 2006      |
|-----------|
| Number    | Exercise Price | Expiry Date |
| 1,800,000 | $                                 3.00 | April 4, 2008 |
| 252,000   | $                                 2.50 | April 4, 2008 |

| 250,000   | $                                 3.00 | April 18, 2008 |
|-----------|-------------------------------------------------------------------------------------|----------------|
| 2,302,000 |                                                                                |           |

 

| 24 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

 

| **13.** | **Contributed Surplus** |
|---------|-------------------------|

|                             | **2007**    | 2006        |
|----------------------------------|-------------|-------------|
| Balance, beginning of year       | $ 4,588,941 | $ 2,188,160 |
| Stock-based compensation expense | 3,777,702   | 2,384,845   |
| Agent’s Warrants           | (31,274)    | 221,139     |
| Bonus Shares                     | (149,661)   | -           |
| Contributed surplus allocated    | (951,489)   | (205,203)   |
| Balance, end of the year         | $ 7,234,219 | $ 4,588,941 |

         

| **14.** | **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 was an                        employee. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **e)** | Exploration 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.

 

| **15.** | **Supplemental Cash Flow Information** |
|---------|----------------------------------------|

         

The Company incurred non-cash financing and investing activities during the        years ended December 31, 2007, 2006 and 2005 as follows:

         

|                           |                              |                                                                                                   |                                                                                                                           |                                                                                                                       | **2007**                                                                                               | 2006                                                                                                                           | 2005                                |
|--------------------------------|-----------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
| Non-cash financing activities: |                              |                                                                                                   |                                                                                                                           |
|                           | Issue of share capital for        |                                                                                                   |                                                                                                                           |                                                                                                                       |
|                           |                              | Acquisition of mineral properties                                                                      | $                                     -                       | $                                        - | $     2,500,000                                                                    |
|                           |                              | Finder's fees                                                                                          | -                                                                                                                              | 221,139                                                                                                                    | 57,850                                                                                                 |
|                           |                              | Share issue costs                                                                                      | -                                                                                                                              | (221,139)                                                                                                                  | (57,850)                                                                                               |
|                           |                              |                                                                                                   |                                                                                                                           |                                                                                                                       | **$                                    -** | **$                                        -** | $     2,500,000 |
| Non-cash investing activity:   |                              |                                                                                                   |                                                                                                                           |                                                                                                                       |
|                           | Acquisition of mineral properties | **$                                    -** | **$                                        -** | $  (2,500,000)                                                                                                        |

 

| 25 |
|----|

 

----

| **Exeter Resource Corporation**                                                                              |
|--------------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                            Statements**

**December 31, 2007** |

 

| **16.** | **Segmented Information – Restated (See note                        3)** |
|---------|--------------------------------------------------------------------------------|

         

The Company operates in one business segment, being the acquisition and        exploration of mineral properties. The Company’s corporate office provides financial        and technical support to its operations in Canada, Argentina and Chile.

         

The Company’s net assets and net losses by geographical segments are        as follows:

         

| **December 31, 2007**     | Canada      | Argentina   | Chile       | Total        |
|---------------------------|-------------|-------------|-------------|--------------|
| Cash and cash equivalents | $ 7,964,731 | $ 578,293   | $ 179,755   | $ 8,722,779  |
| Other current assets      | 349,569     | 85,406      | 13,983      | 448.958      |
| Property and equipment    | 83,856      | 38,103      | 89,003      | 210,962      |
| Mineral properties        | -           | 3,354,379   | -           | 3,354,379    |
|                      | 8,398,156   | 4,056,181   | 282,741     | 12,737,078   |
| Current Liabilities       | (728,890)   | (1,359,669) | (26,131)    | (2,114,690)  |
|                      | 7,669,266   | 2,696,512   | 256,610     | 10,622,388   |
|                      |        |        |        |         |
| Net Loss                  | $ 7,396,711 | $ 6,877,081 | $ 2,594,852 | $ 16,868,644 |

         

         

| **December 31, 2006**     | Canada       | Argentina   | Chile       | Total        |
|---------------------------|--------------|-------------|-------------|--------------|
| Cash and cash equivalents | $ 13,452,871 | $ 994,656   | $ 63,535    | $ 14,511,062 |
| Other current assets      | 54,549       | 62,562      | 6,545       | 123,656      |
| Property and equipment    | 90,779       | 68,216      | 44,363      | 203,358      |
| Mineral properties        | -       | 3,250,016   | -           | 3,250,016    |
|                      | 13,598,199   | 4,375,450   | 114,443     | 18,088,092   |
| Current Liabilities       | (805,239)    | (1,398,421) | (57,725)    | (2,261,385)  |
|                      | $ 12,792,960 | $ 2,977,029 | $ 56,718    | $ 15,826,707 |
|                      |         |        |        |         |
| Net Loss                  | $ 4,967,850  | $ 9,820,821 | $ 1,087,700 | $ 15,876,371 |

         

| **17.** | **Income Taxes – Restated (See note 3)** |
|---------|------------------------------------------------|

         

A reconciliation of consolidated income taxes at statutory rates with the        reported taxes is as follows:

         

|                                                                                        | **2007** | 2006        |
|---------------------------------------------------------------------------------------------|----------|-------------|
| Net loss for the year before income tax                                                     | $        | 16,868,644  | $ | 15,876,371 |
| Combined federal and provincial tax rate                                                    |     | 34.1%       |   | 34.1% |
| Income tax recovery at statutory rates                                                      | $        | (5,756,000) | $ | (5,417,000) |
| Losses and other deductions for which no benefit has been                        recognized |     | 2,726,000   |   | 3,798,000 |
| Stock-based compensation                                                                    |     | 1,289,000   |   | 814,000 |
| Non-deductable mineral property exploration costs                                           |     | 894,000     |   | 727,000 |
| Foreign exchange rate and tax rate differences                                              |     | 796,000     |   | (60,000) |
| Expiry of losses                                                                            |     | 44,000      |   | 38,000 |
| Other                                                                                       |     | 7,000       |   | 100,000 |
| Income tax provision                                                                        | $        | Nil         | $ | Nil |

 

| 26 |
|----|

 

----

| **Exeter Resource Corporation**                                                                              |
|--------------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                            Statements**

**December 31, 2007** |

             

| **17.** | **Income Taxes – Restated (See note 3)                            (continued)** |
|---------|---------------------------------------------------------------------------------------|

The significant components of the Company’s consolidated future tax        assets are as follows:

         

|                                                                         | **2007** | 2006        |
|------------------------------------------------------------------------------|----------|-------------|
| Non-capital loss carry forwards – Canada                               | $        | 2,317,000   | $ | 1,625,000 |
| Non-capital loss carry forwards – Argentina                            |     | 144,000     |   | 111,000 |
| Non-capital loss carry forwards – Chile                                |     | 14,000      |   | 1,000 |
| Exploration and development deductions –                        Canada |     | 5,878,000   |   | 3,921,000 |
| Property and equipment – Canada                                        |     | 25,000      |   | 20,000 |
| Share issue costs                                                            |     | 161,000     |   | 237,000 |
|                                                                         |     | 8,539,000   |   | 5,915,000 |
| Valuation allowance                                                          |     | (8,539,000) |   | (5,915,000) |
|                                                                         | $        | Nil         | $ | Nil |

         

The Company has available non-capital losses for Canadian income tax        purposes which may be carried forward to reduce taxable income in future years. If not        utilized, the non-capital losses in the amount of $7,624,000 expire as follows:

         

| 2008   | $      | 137,000       |
|--------|--------|---------------|
| 2009   |   | 159,000       |
| 2010   |   | 200,000       |
| 2014   |   | 882,000       |
| 2015   |   | 1,578,000     |
| 2026   |   | 2,270,000     |
| 2027   |   | 2,398,000     |
|   | $      | **7,624,000** |

         

At December 31, 2007, the Company also has tax loss carry forwards in        Argentina and Chile totaling $410,000 and $40,000, respectively, that expire over the        period from 2008 to 2012, available to offset future taxable income.

         

Tax benefits have not been recorded as it is not considered more likely than        not that they will be utilized.

         

| **18.** | **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 (see note 9(c)). Other financial        commitments are summarized in the table below:

|          | **Payments Due by Year**

                          |
|---------------|----------------------------------------------------------|
|          | 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** |

         

| **19.** | **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: |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| 27 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

         

| **19.** | **Subsequent Events (continued)** |
|---------|-----------------------------------|

         

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

|   | (ii) | The Company will have the right to earn up to an 80 percent                        interest in 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 |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| **20.** | **Comparative Figures** |
|---------|-------------------------|

Certain comparative figures have been reclassified to conform to the current        year’s consolidated financial statement presentation.

         

| **21.** | **Differences between Canadian and US Generally Accepted                        Accounting Principles – Restated (See note 3)** |
|---------|---------------------------------------------------------------------------------------------------------------------------------------|

The Company’s consolidated financial statements have been prepared in        accordance with generally accepted accounting principles (“GAAP”) in Canada. As        described in Note 3, the Company has changed its accounting policy with respect to mineral        property exploration expenditures to align its policies with those practiced in the United        States. Prior to the year ended December 31, 2007, the Company capitalized all exploration        expenditures and only wrote down capitalized costs when either the property was abandoned        or if the capitalized costs were not considered to be economically recoverable. The Company        now charges exploration expenditures to earnings as they are incurred. As a result there        are no material measurement differences between these Canadian GAAP consolidated financial        statements and those prepared using US GAAP.

**Recent accounting pronouncements**

         

In June 2006, the FASB issued FIN 48, “Accounting for Uncertainty in        Tax Positions, an Interpretation of FASB Statement No. 109” (“FIN 48”).        FIN 48 addresses the recognition and measurement of all tax positions. The recognition        process involves determining whether it is more likely than not that a tax position would        be sustained on audit based solely on its technical merits. The amount of benefit        recognized in the financial statements is the maximum amount which is more likely than not        to be realized based on a cumulative probability approach. FIN 48 became effective for the        Company on January 1, 2007. FIN 48 did not have any material impact on the Company’s        consolidated financial statements.

         

**Impact of recently issued accounting standards**

 

|   | i) | In September 2006, FASB issued SFAS No. 157, “Fair                        Value Measurement” to define fair value, establish a framework for                        measuring fair value and to expand disclosures about fair value                        measurements. The statement only applies to fair value measurements that                        are already required or permitted under current accounting standards and is                        effective for fiscal years beginning after November 5, 2007. The Company                        does not expect that the adoption of this Interpretation will have a                        significant effect on its results of operations or financial                        position. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

 

| 28 |
|----|

 

----

| **Exeter Resource Corporation**                                                                          |
|----------------------------------------------------------------------------------------------------------|
|  

**Notes to the Consolidated Financial                        Statements**

**December 31, 2007** |

         

| **21.** | **Differences between Canadian and US Generally Accepted                        Accounting Principles – Restated (See note 3)                        (continued)** |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii) | In February 2007, FASB issued SFAS No. 159, “Fair                        value option for financial assets and liabilities” which permits                        entities to choose to measure various financial instruments and certain                        other items at fair value. The Company does expect that adoption of this                        Interpretation will have a significant effect on its results of operations                        or financial position. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | iii) | In December 2007, FASB issued SFAS 160 a standard on                        accounting for non-controlling interests and transactions with                        non-controlling interest holders in consolidated financial statements. The                        standard is converged with standards issued by the AcSB and IASB on this                        subject. This statement specifies that non-controlling interests are to be                        treated as a separate component of equity, not as a liability or other item                        outside of equity. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

This standard requires net income and comprehensive income to be displayed        for both the controlling and the non-controlling interests. Additional required disclosures        and reconciliations include a separate schedule that shows the effects of any transactions        with the non-controlling interests on the equity attributable to the controlling interest.        The statement is effective for periods beginning on or after December 15, 2008. SFAS 160        will be applied prospectively to all non-controlling interests, including any that arose        before the effective date. The Company does not expect the adoption of this Interpretation        to have any impact on its results of operations or financial position.

         

|   | iv) | In December 2007, FASB issued a revised standard on                        accounting for business combinations, SFAS 141R. The major changes to                        accounting for business combinations are summarized as follows: |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        | • | all business acquisitions would be measured at fair                        value                                                                                                                                                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        | • | the existing definition of a business would be                        expanded                                                                                                                                                                                                                                                                                                    |
|        | • | pre-acquisition contingencies would be measured at fair                        value                                                                                                                                                                                                                                                                                              |
|        | • | most acquisition-related costs would be recognized as                        expense as incurred                                                                                                                                                                                                                                                                                  |
|        | • | obligations for contingent consideration would be measured                        and recognized at fair value at acquisition date (would no longer need to                        wait until contingency is settled)                                                                                                                                                             |
|   | • | liabilities associated with restructuring or exit activities                        be recognized only if they meet the recognition criteria of SFAS 146,                        Accounting for Costs Associated with Exit or Disposal Activities, as of the                        acquisition date                                                                              |
|        | • | non-controlling interests would be measured at fair value at                        the date of acquisition                                                                                                                                                                                                                                                                       |
|        | • | goodwill, if any, arising on a                    business combination reflects the excess of the fair value of the acquiree, as                    a whole, over the net amount of the recognized identifiable assets acquired and                    liabilities assumed. Goodwill is   allocated to the acquirer and the                    non-controlling interest |

         

The statement is effective for periods beginning on or after December 15,        2008. The Company does not expect the adoption of this Interpretation to have a significant        effect on its results of operations or financial position.

 

 

| 29 |
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