UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 20-F  ___
        REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES    EXCHANGE ACT OF 1934 OR  X
        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2006  OR  ___
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to _______________ or Shell Company report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934  Date of event requiring this shell company report.  _______________________  Commission file number:001-33136  Exeter Resource Corporation (Exact name of Registrant as specified in its charter)  British Columbia (Jurisdiction of incorporation or organization)  Suite 1260, 999 West Hastings Street, Vancouver, British Columbia, Canada V6C 2W2 (Address of principal executive offices)  Securities registered or to be registered pursuant to Section 12(b) of the Act.  Title of each className of each exchange on which registered  Common Shares, No Par Value
        American Stock Exchange  Securities registered or to be registered pursuant to Section 12(g) of the Act.  (Title of Class)  Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.  None  Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:37,836,013  Indicate by check mark if the Registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act Yes
        NoX  If this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. Yes
        NoX         Indicate by check mark whether the Registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes
        X
        No  Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.  (Check one): Large accelerated filer
        Accelerated filer
        Non-accelerated filerX  Indicate by check mark which financial statement item the Registrant has elected to follow. Item 17
        X
        Item 18  If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
        NoX  2      TABLE OF CONTENTS  Table of Contents
        3METRIC EQUIVALENTS
        5GLOSSARY OF MINING TERMS
        5SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
        8PART I
        
        8ITEM 1.
        IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
        8ITEM 2.
        OFFER STATISTICS AND EXPECTED TIMETABLE
        8ITEM 3.
        KEY INFORMATION
        8A.
        Selected Financial Data
        8B.
        Statement of Capitalization and Indebtedness
        10C.
        Reasons for Offer and use of Proceeds
        10D.
        Risk Factors
        10ITEM 4.
        INFORMATION ON THE COMPANY
        16A.
        History and Development of the Company
        16B.
        Business Overview
        18C.
        Organizational Structure
        19D.
        Property, Plants and Equipment
        19ACQUISITION TERMS
        23PROPERTY DESCRIPTION
        24EXPLORATION AND DEVELOPMENT STUDIES
        25RESOURCE ESTIMATES AND DEVELOPMENT STUDIES
        25CERRO MORO PROJECT - SANTA CRUZ PROVINCE
        35ITEM 4A.
        UNRESOLVED STAFF COMMENTS
        43ITEM 5.
        OPERATING AND FINANCIAL REVIEW AND PROSPECTS
        43A.
        Results of Operations
        45B.
        Liquidity and Capital Resources
        47C.
        Research and Development, Patents and Licenses, Etc.
        48D.
        Trends
        48E.
        Off-Balance Sheet Arrangements
        49F.
        Tabular Disclosure of Contractual Obligations
        49ITEM 6.
        DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
        49A.
        Directors and Senior Management
        49B.
        Compensation
        52C.
        Board Practices
        54D.
        Employees
        55E.
        Share Ownership
        55ITEM 7.
        MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
        57A.
        Major shareholders
        57B.
        Related Party Transactions
        57ITEM 8.
        FINANCIAL INFORMATION
        58A.
        Consolidated Statements and Other Financial Information
        58B.
        Significant Changes
        59ITEM 9.
        THE OFFER AND LISTING
        59A.
        Offer and Listing Details
        59B.
        Plan of Distribution
        61C.
        Markets
        61D.
        Selling Shareholders
        62E.
        Dilution
        62F.
        Expenses of the Issue
        62ITEM 10.
        ADDITIONAL INFORMATION
        63A.
        Share Capital
        63          B.
        Memorandum and Articles of Association
        63C.
        Material Contracts
        63D.
        Exchange Controls and Other Limitations Affecting Security Holders
        63E.
        Taxation
        64F.
        Dividends and Paying Agents
        75G.
        Statement by Experts
        75H.
        Documents on Display
        75I.
        Subsidiary Information
        76ITEM 11.
        DISCLOSURES ABOUT MARKET RISK
        76ITEM 12.
        DESCRIPTION OF SECURITIES OTHER THAN EQUITY
        76PART II
        
        77ITEM 13.
        DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
        77ITEM 14.
        MATERIAL MODIFICATIONS OF RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS
        77ITEM 15.
        CONTROLS AND PROCEDURES
        77ITEM 16A.
        AUDIT COMMITTEE FINANCIAL EXPERT
        78ITEM 16B.
        CODE OF ETHICS
        78ITEM 16C.
        PRINCIPAL ACCOUNTANT FEES AND SERVICES
        78Audit Fees
        78Audit-Related Fees
        78Tax Fees
        78All other Fees
        78ITEM 16D.
        EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES
        79ITEM 16E.
        PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
        79PART III
        
        79ITEM 17.
        FINANCIAL STATEMENTS
        79ITEM 18.
        FINANCIAL STATEMENTS
        79ITEM 19.
        EXHIBITS
        79SIGNATURES
        81        4       METRIC EQUIVALENTS  For ease of reference, the following factors for converting metric measurements into imperial equivalents are provided:  To Convert from Metric
        To Imperial
        Multiply byHectares (ha)
        Acres
        2.471Metres (m)
        Feet (ft)
        3.281Kilometres (km)
        Miles
        0.621Tonnes
        Tons (2000 pounds)
        1.102Grams/tonne (g/t)
        Ounces (troy/ton)
        0.029  GLOSSARY OF MINING TERMS  S.E.C Industry Guide
        National Instrument 43-101Reserve:That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The United States Securities and Exchange Commission requires a final or full Feasibility Study to support either Proven or Probable Reserves and does not recognize other classifications of mineralized deposits.
        Mineral Reserve:The economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility study.  This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.Proven (Measured) Reserves:Reserves for which a quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth, and mineral content of reserves are well established.
        Proven Mineral Reserve:The economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.Probable (Indicated) Reserves:For which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced.  The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
        Probable Mineral Reserve:The economically mineable part of an indicated, and in some circumstances, a Measured Mineral Resource, demonstrated by at least a Preliminary Feasibility Study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.  Alteration any change in the mineral composition of a rock brought about by physical or chemical means.  Andesite -A dark-colored, fine-grained extrusive rock that, when porphyritic, contains phenocrysts composed primarily of zoned sodic plagioclase and one or more of the mafic minerals.  Assaying- laboratory examination that determines the content or proportion of a specific metal (e.g. silver) contained within a sample.  Technique usually involves firing/smelting.  Breccia- A rock in which angular fragments are surrounded by a mass of fine-grained minerals.  5      Bulk Sample A collection of representative mineralized material whose location, geologic character and metal assay content can be determined and then used for metallurgical or geotechnical testing purposes.  Carbon In Leach A recovery processin which a slurry of gold ore, carbon granules and cyanide are mixed together. The cyanide dissolves the gold content and the gold is absorbed in the carbon. The carbon is subsequently separated from the slurry for further gold removal.  Channel Sampling cutting a groove in a rock face or outcrop to obtain material for sampling.  Chip Sampling -Taking of small pieces rock with a pick along a line, or at random, from the width or face of an exposure or outcrop for exploration sampling.  Clastic- Fragments of minerals and rocks that have been moved individually from their places of origin.  Cut-off grade -the lowest grade of mineralized material that qualifies as reserve in a deposit.  i.e.: contributing material of the lowest assay that is included in a reserve estimate.  Diorite- An intrusive igneous rock.  Diamond Drilling a type of rotary drilling in which diamond bits are used as the rock-cutting tool to produce a recoverable drill core sample of rock for observation and analysis.  Dip the angle that a structural surface, a bedding or fault plan, makes with the horizontal, measured perpendicular to the strike of the structure.  Disseminated where minerals occur as scattered particles in the rock.  Epithermal low temperature hydrothermal process or product.  Exploration work involved in searching for ore, usually by drilling or driving a drift.  Fault a fracture or break in rock along which there has been movement.  Feasibility is a definitive study of the viability of a mineral project by a qualified professional which defines: (1) mining methods, pit configuration, mine scheduling, mine equipment and all related costing, (2) method of mineral processing and all related plant, equipment and costing, (3) necessary determination of all infrastructure required and relevant costs and (4) all requirements of government and markets for mine operation. A definitive financial analysis of the mineral project taking into consideration all relevant factors which will establish the presence of a Mineral Reserve and the details of its economic viability.  Felsic an adjective describing an igneous rock having mostly light colored minerals and rich in silica, potassium and sodium.  Grade The metal content of rock with precious metals, grade can be expressed as troy ounces or grams per tonne of rock.  Hydrothermal the products or the actions of heated waters in a rock mass such as a mineral deposit precipitating from a hot solution.  Ignimbrite a felsic volcanic tuff in which the fragments were welded together as the tuff cooled.  Intrusion; Intrusive molten rock that is intruded (injected) into spaces that are created by a combination of melting and displacement.  Magnetometer An instrument for detecting and measuring changes in the Earth's magnetic field, including those in different rock formations which may indicate the presence of specific minerals.  Metallurgy the study of the extractive processes which produce minerals from their host rocks.  6    Metallurgical Tests- are scientific examinations of rock/material to determine the optimum extraction of metal contained. Core samples from diamond drill holes are used as representative samples of the mineralization for this test work.  Mineral a naturally formed chemical element or compound having a definitive chemical composition and, usually a characteristic crystal form.  Mineralization a natural concentration in rocks or soil of one or more metalliferous minerals.  Net Smelter Return Royalty/ NSR Royalty A phrase used to describe a royalty payment made by a producer of metals based on gross metal production from the property, less deduction of certain limited costs including smelting, refining, transportation and insurance costs.  Open Pit a mining method whereby the mineral reserves are accessed from surface by the successive removal of layers of material usually creating a large pit at the surface of the earth.  Outcrop -The part of a rock formation that appears at the surface of the ground.  Oxide -A compound of oxygen with another element.  Phyllic Alteration -Hydrothermal alteration common in porphyry base-metal systems.  Porphyry- Any igneous rock in which relatively large crystals are set in a fine-grained matrix of rock.  Pyroclastic- Produced by explosive or aerial ejection of ash, fragments, and glassy material from a volcanic vent. Applied to the rocks and rock layers as well as to the textures so formed.  Quartz crystalline silica; often forming veins in fractures and faults within older rocks.  Resource a concentration of mineral material in such form and amount that economic extraction of a commodity from the concentration is currently or potentially feasible.  Locations, grade, quality or quantity are estimated from specific geologic evidence.  Reverse Circulation (RC) Drilling A type of percussion drilling where hammer force is transmitted down a length of steel drill rods to a rotating bit that breaks the rock into chips. The rock chips are forced to the surface using air or water forced down the outer chamber of a twin-walled drill rod and driven back to the surface through the inner chamber. The rock chips are then collected for analysis.  Rhyolite -A group of extrusive igneous rocks, typically porphyritic and commonly exhibiting flow texture, with phenocrysts of quartz and alkali feldspar in a glassy to cryptocrystalline groundmass; also, any rock in that group; the extrusive equivalent of granite.  Sampling Taking a sample of rock or material in order to test and assay its mineral composition.  Sediments; Sedimentary Rocks formed by the deposition of sediment or pertaining to the process of sedimentation.  Shear zone- a zone in which shearing has occurred on a large scale so that the rock is crushed and brecciated.  Silification the in situ alteration of a rock, which involves an increase in the proportion of silica minerals.  Tuff -A general term for all consolidated pyroclastic rocks.  Stockwork -A mineral deposit consisting of a three-dimensional network of planar to irregular veinlets closely enough spaced that the whole mass can potentially be mined.  Vein a thin, sheet-like, crosscutting body of hydrothermal mineralization, principally quartz. Volcanics those originally molten rocks, generally fine grained, that have reached or nearly reached the Earths surface before solidifying.  7      SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS  Certain statements in this document constitute forward-looking statements.  Some, but not all, forward-looking statements can be identified by the use of words such as anticipate, believe, plan, estimate, expect, and intend, statements that an action or event may, might, could, should, or will be taken or occur, or other similar expressions. Although the Company has attempted to identify important factors that could cause actual results to differ materially from expected results, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or other future events, to be materially different from any future results, performance or achievements expressed
or implied by such forward-looking statements. Such factors include, among others, the following risks: risks associated with project development; the need for additional financing; operational risks associated with mining and mineral processing; fluctuations in metal prices; title matters; uncertainties and risks related to carrying on business in foreign countries; environmental liability claims and insurance; reliance on key personnel; the potential for conflicts of interest among certain officer, directors or promoters of the Company with certain other projects; the absence of dividends; currency fluctuations; competition; dilution; the volatility of the Companys common share price and volume; and tax consequences to U.S. Shareholders. You should not place undue reliance on forward looking statements. The Company does not undertake to update forward looking statements.  PART I  Item 1.  Identity of Directors, Senior Management and Advisors Not Applicable  Item 2.  Offer Statistics and Expected Timetable Not Applicable  Item 3.  Key Information As used within this Annual Report, the terms Exeter, the Company, Issuer and Registrant refer collectively to Exeter Resource Corporation, its predecessors, subsidiaries and affiliates.  A.
        Selected Financial Data The selected financial data of the Company for the years ended December 31, 2006, 2005 and 2004 reflected in the following table, have been derived from the audited consolidated financial statements of the Company which are included elsewhere in this Annual Report. The selected financial data set forth for the years ended December 31, 2003 and 2002 is derived from the Companys audited consolidated financial statements, not included herein. The consolidated financial statements of the Company, which have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with US GAAP, except as disclosed in note 19 to the December 31, 2006 consolidated financial statements.   8       The selected financial data should be read in conjunction with the consolidated financial statements and other financial information included elsewhere in this Annual Report.  The Company has not declared any dividends on its common shares since incorporation and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.  Selected Financial Data (Canadian $ in 000s, except per share data)  Year Ended
Dec. 31, 2006
        Year Ended
Dec. 31, 2005
        Year Ended
Dec. 31, 2004
        Year Ended
Dec. 31, 2003
        Year Ended
Dec. 31, 2002Statement Of Operations And DeficitOperating Revenues
        n/a
        n/a
        n/a
        n/a
        n/aInterest Income
        $226
        $41
        $49
        $2
        $0Net Loss for the PeriodCanadian GAAP
        $5,289
        $3,692
        $1,271
        $385
        $460U.S. GAAP
        $15,709
        $10,512
        $4,112
        $1,357
        $460Basic & Diluted Loss per common shareCanadian GAAP
        $0.17
        $0.20
        $0.10
        $0.09
        $0.38U.S. GAAP
        $0.51
        $0.58
        $0.32
        $0.30
        $0.38Dividends Declared
        n/a
        n/a
        n/a
        n/a
        n/aBalance SheetTotal Assets
        $35,890
        $18,644
        $6,469
        $4,521
        $61Working Capital
        $12,373
        $7,339
        $2,296
        $3,382
        ($126)Mineral Properties
        $21,052
        $10,632
        $3,812
        $971
        $0Net AssetsCanadian GAAP
        $33,629
        $18,089
        $6,247
        $4,382
        ($87)U.S. GAAP
        $12,577
        $7,457
        $2,435
        $3,410
        ($87)Shareholders EquityCanadian GAAP
        $33,629
        $18,089
        $6,247
        $4,382
        ($87)U.S. GAAP
        $12,577
        $7,457
        $2,435
        $3,410
        ($87)Weighted Average Number of Shares Outstanding 000s
        30,688
        18,128
        12,917
        4,506
        1,200  Where applicable, all per share figures have been adjusted for a 1 for 10 reverse split effective October 10, 2002.  In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars.  The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).  The table below sets forth the average rate of exchange for the Canadian Dollar at the end of the five most recent calendar years ended December 31st.  The table also sets forth the high and low rate of exchange for the Canadian Dollar at the end of the six most recent months.  For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.  The table sets forth the number of Canadian dollars required under that formula to buy one U.S. Dollar.  The average rate means the average of the exchange rates on the last day of each month during the period.   9       Canadian Dollar / US Dollar  Year Ended December 312006
        2005
        2004
        2003
        2002Average for Period
        1.13
        1.21
        1.30
        1.39
        1.57   Month EndedMarch 26,2007
        February 28,2007
        January 31,2007
        December 31, 2006
        November 30, 2006
        October 31, 2006High for Period
        1.18 *
        1.19
        1.18
        1.17
        1.15
        1.14Low for Period
        1.15 *
        1.16
        1.17
        1.14
        1.13
        1.11  *Data shown is from March 1, 2007 until March 26, 2007  The noon rate of exchange on March 26, 2007 as reported by the United States Federal Reserve Bank of New York for the conversion of Canadian dollars into United States dollars was $0.86 (US$1.00 = CDN$1.16).  B.
        Statement of Capitalization and Indebtedness Not Applicable  C.
        Reasons for Offer and use of Proceeds Not Applicable  D.
        Risk Factors An investment in the common shares of the Company must be considered speculative due to the nature of the Companys business and the present stage of exploration of its non producing mineral properties. The Company is subject to known and unknown risks which may adversely affect its performance. In particular, the following risk factors, which should not be regarded as a list of all potential risk factors, apply:  Risks Associated with the Companys Operations and Mineral Exploration The Company is involved in the resource industry which is highly speculative and has certain inherent exploration risks which could have a negative effect on the Companys operations -Resource exploration is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover mineral deposits but from finding mineral deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of minerals acquired or discovered by the Company may be affected by numerous factors which are beyond the control of the Company and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government
regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environment protection, the combination of which factors may result in the Company not receiving an adequate return on investment capital.  The Company has no known reserves and no economic reserves may exist on its properties which would have a negative effect on the Companys operations and valuation -Despite exploration work on its mineral claims, no known bodies of commercial ore or economic deposits have been established on any of the Companys mineral properties. In addition, the Company is at the exploration stage on all of its properties and substantial additional work will  10      be required in order to determine if any economic deposits occur on the Companys properties. The Company may expend substantial funds in exploring its properties only to abandon them and lose its entire expenditures on that property if no commercial or economic quantities of minerals are found, similar to the Companys 2006 decision to relinquish certain properties held by Estelar and the 2004 decision to drop the option and abandon its expenditures on the Papagallos project. Even in the event commercial quantities of minerals are discovered, the exploration properties might not be brought into a state of commercial production. Finding mineral deposits is dependent on a number of factors, not the least of which is the technical skill of exploration personnel involved. The commercial viability of a mineral deposit once discovered is also dependent on a number of factors, some of which are
particular attributes of the deposit, such as size, grade and proximity to infrastructure, as well as metal prices. Most of these factors are beyond the control of the entity conducting such mineral exploration. The Company is an exploration stage company with no history of pre-tax profit and no income from its operations. There can be no assurance that the Companys operations will be profitable in the future. There is no certainty that the expenditures to be made by the Company in the exploration of its properties as described herein will result in discoveries of mineralized material in commercial quantities. Most exploration projects do not result in the discovery of commercially mineable deposits and no assurance can be given that any particular level of recovery of mineral reserves will in fact be realized or that any identified mineral deposit will ever qualify as a commercially mineable (or viable) mineral deposit which can be legally and economically exploited. There can
be no assurance that minerals recovered in small scale tests will be duplicated in large scale tests under on-site conditions or in production.If the Company is unsuccessful in its exploration efforts, the Company may be forced to acquire additional projects or cease operations.  The Company does not own certain of its properties but is required to make option payments and exploration expenditures to earn its interest. If the Company is unable to make the required outlays, its entire investment could be lost -Certain of the Companys properties, including its most advanced project, Don Sixto (La Cabeza), are currently held under option. The Company has no ownership interest in these properties until it meets, where applicable, all required property expenditures, cash payments, and common share issuances. If the Company is unable to fulfill the requirements of these option agreements, it is likely that the Company would be considered in default of the agreements and the option agreements could be terminated resulting in the complete loss of all expenditures and required option payments made on the properties to that date.  The Company conducts mineral operations in Argentina which as a developing economy has special risks which could have a negative effect on the Companys operations and valuation -The Companys exploration operations are currently located in Argentina and Chile.  Argentina is currently experiencing economic instability associated with unfavorable exchange rates, high unemployment and foreign debt. These factors could pose serious potential problems associated with the Companys ability to raise additional capital which will be required to explore and/or develop any of the Companys mineral properties in Argentina and Chile.  As a developing economy, operating in Argentina contains certain additional risks, including changes to or invalidation of government mining regulations; expropriation or revocation of land or property rights; changes in foreign ownership rights; changes in foreign taxation rates; corruption; uncertain political climate; terrorist actions or war; lack of a stable economic climate. The presence of any of these conditions could have a negative effect on the Companys operations and could lead  11      to the Company being unable to exploit, or losing outright, its properties in Argentina. This would have a negative effect on the Companys operations and valuation.  Argentinas economy has a history of instability and future instability and uncertainty could negatively effect the Companys ability to operate in the country -Since 1995, Argentinas economy has suffered periods of instability, which include high inflation, capital flight, default on international debts, and high government budget deficits. Results of these problems included domestic disturbances and riots, government resignations and instability in the currency and banking system. Such disorder in the future could make it difficult or impossible for the Company to operate effectively in the country which may require the Company to reduce or suspend its operations in Argentina.  The Companys operations contain significant uninsured risks which could negatively impact future profitability as the Company maintains no insurance against its operations -The Companys exploration of its mineral properties contain certain risks, including unexpected or unusual operating conditions including rock bursts, cave-ins, flooding, fire and earthquakes. It is not always possible to insure against such risks.  The Company currently maintains no insurance against its properties or operations and may decide to not take out any such insurance in the future or such insurance may not be available at economic rates or at all. Should such events arise, they could reduce or eliminate the Companys assets and shareholder equity as well as result in increased costs and a decline in the value of the Companys securities.  The Company has not surveyed any of its properties, has no guarantee of clear title to its mineral properties and the Company could lose title and ownership of its properties which would have a negative effect on the Companys operations and valuation -The Company has only done a preliminary legal survey of the boundaries of some of its properties, and therefore, in accordance with the laws of the jurisdictions in which these properties are situated, their existence and area could be in doubt. The Company has taken the necessary steps to verify title, however this does not guarantee title. If title is disputed, the Company will have to defend its ownership through the courts. In the event of an adverse judgment, the Company would lose its property rights.  The natural resource industry is highly competitive, which could restrict the Companys growth -The Company competes with other developmental resource companies, which have similar operations, and many competitors have operations, financial resources and industry experience greater than those of the Company. This may place the Company at a disadvantage at acquiring, exploring and developing properties. Such companies could outbid the Company for potential projects or produce minerals at lower costs which would have a negative effect on the Companys operations.  Mineral operations are subject to market forces outside of the Companys control which could negatively impact the Companys operations -The marketability of minerals is affected by numerous factors beyond the control of the entity involved in their mining and processing. These factors include market fluctuations, government regulations relating to prices, taxes royalties, allowable production, import, exports and supply and demand. One or more of these risk elements could have an impact on costs of an operation and if significant enough, reduce the profitability of the operation and threaten its continuation.  12       The Company is subject to substantial environmental requirements which could cause a restriction or suspension of Company operations -The current and anticipated future operations of the Company require permits from various governmental authorities and such operations are and will be governed by laws and regulations governing various elements of the mining industry. The Companys exploration activities in Argentina and Chile are subject to various Federal, Provincial and local laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, and other matters. Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies. Exploration generally requires one form of permit while development and production operations require additional permits. There can be no assurance that all permits which the Company may require for future exploration or possible future development will be obtainable on reasonable terms, or that future changes in applicable laws or regulations could result in changes in legal requirements or in the terms of existing permits applicable to the Company or its properties. This could have a negative effect on the Companys exploration activities or its ability to develop its properties.  The Company is also subject to environmental regulations, which require the Company to minimize impacts upon air, water, soils, vegetation and wildlife, as well as historical and cultural resources, if present. In Argentina, prior to conducting operations, miners must submit an environmental impact report to the provincial government, describing the proposed operation and the methods to be used to prevent environmental damage. Approval must be received from the applicable bureau and/or department before exploration can begin, which will also conduct ongoing monitoring of operations. As the Company is at the exploration stage, the disturbance of the environment is limited and the costs of complying with environmental regulations are minimal. However, if operations result in negative effects upon the environment, government agencies will usually require the Company to provide remedial actions to correct the
negative effects.  Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions.  Recent political events in Mendoza, Argentina, where the Companys principal property is located, saw the introduction of new environmental legislation which would have suspended the granting of new exploration and mining licenses until the government had adopted a new environmental plan. That legislation was vetoed by the governor of Mendoza and consequently the existing regulations that existed before the introduction of that legislation remains in-force. Should new legislation be introduced which prohibits or restricts mining in Mendoza, the result would have a serious negative impact on the Company and the value of its securities.  Financing Risks The Company has a history of net losses and expects losses to continue for the foreseeable future and will require additional equity financings, which will cause dilution to existing shareholders -The Company has limited financial resources and has no operating cash flow. As of the end of the last fiscal year dated December 31, 2006, the Companys historical net loss  13      under US GAAP totaled $38,242,545. The continued exploration efforts will require additional capital to help maintain and to expand exploration on the Companys principal exploration properties.  Additionally, if the Company decides to proceed with a full feasibility study on its Don Sixto project; substantial additional funds will be required to complete the study as well as to complete the acquisition of the project under its option agreements. The Company may not be able to obtain additional financing on reasonable terms, or at all. If the Company is unable to obtain sufficient financing, the Company might have to dramatically slow exploration efforts and/or lose control of its projects. The Company has historically obtained the preponderance of its financing through the issuance of equity, and the Company has no current plans to obtain financing through means other than equity financing. If equity
financing is required, then such financings could result in significant dilution to existing or prospective shareholders. These financings may be on terms less favorable to the Company than those obtained previously.  The Company has a lack of cash flow sufficient to sustain operations and does not expect to begin receiving operating revenue in the foreseeable future- None of the Companys properties have advanced to the commercial production stage and the Company has no history of earnings or cash flow from operations. The Company has paid no dividends on its shares since incorporation and does not anticipate doing so in the foreseeable future. Historically, the only source of funds available to the company has been through the sale of its common shares. Any future additional equity financing would cause dilution to current stockholders. If the Company does not have sufficient capital for its operations, management would be forced to reduce or discontinue its activities, which would likely have a negative effect on the stock price.  The Company operates in foreign countries and is subject to currency fluctuations which could have a negative effect on the Companys operating results -While engaged in the business of exploring mineral properties, the Companys operations are located in Argentina and Chile which makes it subject to foreign currency fluctuation as the Companys accounts are maintained in Canadian dollars while certain expenses are numerated in US dollars and the local currency. Such fluctuations may adversely affect the Companys financial position and results. Management may not take any steps to address foreign currency fluctuations that will eliminate all adverse effects and, accordingly, the Company may suffer losses due to adverse foreign currency fluctuations.  Risks Relating to an Investment in the Securities of the Company The market for the Companys stock has been subject to volume and price volatility which could negatively effect a shareholders ability to buy or sell the Companys shares -The market for the common shares of the Company may be highly volatile for reasons both related to the performance of the Company or events pertaining to the industry (i.e. mineral price fluctuation/high production costs/accidents) as well as factors unrelated to the Company or its industry such as changes to legislation in the countries in which it operates. In particular, market demand for products incorporating minerals in their manufacture fluctuates from one business cycle to the next, resulting in change of demand for the mineral and an attendant change in the price for the mineral. In the last 5 fiscal years, the price of the Companys stock has fluctuated between US $0.18 and US
$2.91. The Companys common shares can be expected to continue to be subject to volatility in both price and volume arising from market expectations, announcements and press releases regarding the Companys business, and changes in estimates and evaluations by securities analysts or other events or factors. In recent years the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly small-capitalization companies such as the  14      Company, have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values, or prospects of such companies. For these reasons, the Companys common shares can also be expected to be subject to volatility resulting from purely market forces over which the Company will have no control. Further, despite the existence of a market for trading the Companys common shares in Canada, The United States and Germany, stockholders of the Company may be unable to sell significant quantities of common shares in the public trading markets without a significant reduction in the price of the stock.  The Company has a dependence upon key management employees, the absence of which would have a negative effect on the Companys operations -The Company strongly depends on the business and technical expertise of its management and key personnel, including Bryce Roxburgh, President, and Yale Simpson, Chairman. There is little possibility that this dependence will decrease in the near term. As the Companys operations expand, additional general management resources will be required. The Company may not be able to attract and retain additional qualified personnel and this would have a negative effect on the Companys operations. The Company has entered into formal services agreements with Bryce Roxburgh and Yale Simpson and some of its other officers. The Company maintains no key man life insurance on any members of its management or directors.  Certain officers and directors may have conflicts of interest, which could have a negative effect on the Companys operations -Certain of the directors and officers of the Company are also directors and/or officers and/or shareholders of other natural resource companies. While the Company is engaged in the business of exploiting mineral properties, such associations may give rise to conflicts of interest from time to time. The directors of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest that they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the board of directors, any director in a conflict must disclose his interest and abstain from voting on such matter. In determining whether or not the Company will participate in any
project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at the time.  The Company could be deemed a passive foreign investment company which could have negative consequences for U.S. investors -The Company could be classified as a Passive Foreign Investment Company (PFIC) under the United States tax code. If the Company is declared a PFIC, then owners of the Companys common shares who are U.S. taxpayers generally will be required to treat any so-called "excess distribution" received on its common shares, or any gain realized upon a disposition of common shares, as ordinary income and to pay an interest charge on a portion of such distribution or gain, unless the taxpayer makes a qualified electing fund ("QEF") election or a mark-to-market election with respect to the Companys shares. A U.S. taxpayer who makes a QEF election generally must report on a current basis its share of the Companys net capital gain and ordinary
earnings for any year in which the Company is classified as a PFIC, whether or not the Company distributes any amounts to its shareholders.  U.S. investors may not be able to enforce their civil liabilities against the Company or its directors, controlling persons and officers- It may be difficult to bring and enforce suits against the Company. The Company is a corporation incorporated in British Columbia under theBusiness Corporations Act. A majority of the Companys directors and officers are residents of Canada and all of the Companys assets and its subsidiaries are located outside of the United  15      States. Consequently, it may be difficult for United States investors to effect service of process in the United States upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under United States securities laws. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Company predicated solely upon such civil liabilities under the U.S. Securities Act.  As a foreign private issuer, the Company is exempt from Section 14 proxy rules and Section 16 of the 1934 Securities Act -The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K may result in shareholders having less complete and timely data. The exemption from Section 16 rules regarding sales of common shares by insiders may also result in shareholders having less data.  Item 4.  Information on the Company A.
        History and Development of the Company The Companys name is Exeter Resource Corporation.  The Companys executive office is located at:  Suite 1260, 999 West Hastings Street, Vancouver, British Columbia, Canada V6C 2W2. Telephone: (604) 688-9592 Facsimile: (604) 688-9532 Website: www.exeterresource.com  The Company was incorporated in the Province of British Columbia under the name Square Gold Explorations Inc. on February 10, 1984. On July 13, 1987, the Company changed its name to Glacier Resources Inc., on August 19, 1988 changed its name to Golden Glacier Resources Inc and changed its name to Exeter Resource Corporation on October 11, 2002, is domiciled in Canada and is incorporated under theBusiness Corporations Act, British Columbia, Canada.  Events in the Development of the Business The Company is currently involved in the mineral exploration sector and as of March 30, 2007, had interests in or options to acquire mineral exploration properties in Argentina and Chile.  In 2006, the Company entered into a new agreement with Rio Tinto Mining and Exploration Limited (Rio Tinto). The agreement allows the Company the right to acquire the necessary exploration titles and conduct all exploration on a number of targets in southern Chile. Under the terms of the agreement, upon the completion of 5,000 meters of drilling on a project, Rio Tinto shall have a once-only right to back-in to a 60% participating interest on that project by paying the Company three times the amount of the Companys exploration expenditures. A project is defined as a 10 kilometer area of interest surrounding any of the 48 new anomalies. If Rio Tinto does not elect to exercise its back-in right, it will be entitled to a 1% net smelter return from production from any mine which may be developed by the Company on that project. The Company terminated the previous
agreement established in March of 2005 which gave the Company the right to review exploration data in southern Chile.  In October of 2006, 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  16      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 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 expire on the 30th calendar day after such notice. The Company paid costs totaling $752,377 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 and legal costs of $81,238. Each agent warrant entitles the holder to purchase one common share at a price of $2.50, on or before April 4, 2008.  In October of 2006, 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 except that in the event that the closing price of the Companys stock exceeds $3.25 for ten consecutive trading days after February 19, 2007, the Company may accelerate the expiry of the warrants by giving notice to the holders thereof, and, in such case, the warrants expire on the 30th calendar day after such notice.  On November 9, 2006, the Company began trading its common stock on the American Stock Exchange (AMEX). The Company trades on the AMEX under the symbol "XRA", and continues to trade on both the TSX Venture Exchange ("TSX-V") under the symbol "XRC" and the Frankfurt Exchange under EXB.  Principal Capital Expenditures and Divestitures The Companys principal accounting policies for mineral properties and deferred costs is as follows: (a)
        Mineral properties and deferred costs -Mineral properties consist of exploration and mining concessions, options and contracts. Acquisition and exploration 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. If put into production, the costs of acquisition and exploration will be written off over the life of the property on a unit of production basis.  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 and deferred exploration costs will be written off to operations. Management reviews capitalized costs on its mineral properties on a periodic basis and will recognize impairment in value based upon current exploration results and upon managements assessment of the probability of future revenues from the property or sale of the property. Recorded costs of mineral properties and deferred exploration costs are not intended to reflect present or future values of the mineral properties. 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 by affected by such defects.  17       (b)
        Property examination costs -Property examination costs represent the costs of evaluating the potential merit of mineral properties and new opportunities in which the Company has not yet acquired an interest. For Details of the Companys accounting policies please see the Companys consolidated financial statements included under Item 17- Financial Statements.  The Company has financed its capital expenditures on its mineral properties through the sale of its common shares. As the Company does not have any revenue it will be required to raise additional funds in the future through the sale of its shares, or from the sale of some or all of its mineral properties. While the Company has been successful in raising the required funds to conduct operations through the sale of its shares in the past, there can be no assurance that it will be successful in the future.  The principal capital expenditures and investment in mineral properties over the last three fiscal years is as follows: Fiscal year ended December 31,Projects
        Location
        2006
        2005
        2004Don Sixto
        Argentina
        $    8,062,573
        $   3,052,645
        $   1,720,362CVSA
        Argentina
        1,831,146
        1,142,029
        939,480Magallanes
        Chile
        803,024
        n/a
        n/aOther
        Argentina / Chile
        177,065
        348,455
        159,419$  10,873,808
        $    4,543,129
        $   2,819,259  Principal divestitures during the last three fiscal years consist of the write-offs on the relinquishing of certain mineral properties in the amount of $439,842 in 2006, $85,965 in 2004. There are no significant divestitures currently in progress.  There has been no indication of any public takeovers by third parties in respect of the Companys common shares nor has the Company attempted the takeover of other companys shares during the last and current fiscal years.  B.
        Business Overview The Company operates in the mineral exploration sector and has no current production of minerals.All of the Companys properties are currently at the exploration stage. There is no assurance that an economic and commercially viable deposit exists on any of the Companys properties. Substantial additional work will be required in order to determine if any economic deposits, which it may legally exploit, occur on the Companys properties. The Companys exploration projects are located in Argentina and Chile. Operations are not seasonal as the Company can conduct exploration on many of its properties year-round. However, the high altitude of some of its exploration projects in Chile and the cold weather in the Patagonia region of Argentina and Chile makes exploration difficult during the winter months of May to October.  18       To date, the Companys income has been limited to interest received from investments of its cash balances and therefore it is not currently dependent upon market prices for its operations, nor is it dependent upon any patents, licenses or manufacturing processes. The mineral exploration operations of the Company are subject to regulation by government agencies at the Federal, Provincial and local levels. Management believes it is in compliance with all current requirements and does not anticipate any significant changes to these regulations which will have a material effect on the Companys operations. However, recent political events in Mendoza, Argentina, where the Companys principal property is located, saw the introduction of new environmental legislation which would have suspended the granting of new exploration and mining licenses until the government had adopted a new environmental plan. That legislation was vetoed by the governor of Mendoza and consequently the existing regulations that existed before the introduction of that legislation remains in-force. Should new legislation be introduced which prohibits or restricts mining in Mendoza, the
result would have a serious negative impact on the Company and the value of its securities.  The Company competes with other mining companies for exploration properties, joint venture agreements and for the acquisition of attractive gold companies. There is a risk that this competition could increase the difficulty of concluding negotiations on future transactions on terms that the Company considers acceptable.  C.
        Organizational Structure The following chart represents the inter-corporate relationship between the Company and its wholly owned subsidiaries, as well as the jurisdiction of incorporation.  EXETER RESOURCE CORPORATIONBritish Columbia, CanadaCOGNITO LIMITED(1)(3)British Virgin Islands
        
        ESTELAR RESOURCES LIMITED(1)(3)
British Virgin Islands
        
        SOCIEDAD CONTRACTUAL MINERA ETON CHILE(2)(3)Chile  (1)Cognito Limited (Cognito) and Estelar Limited (Estelar) are registered to conduct activities in Argentina.(2)Sociedad Contractual Minera Eton Chile (Eton) is registered to conduct activities in Chile (3)Wholly owned subsidiaries  D.
        Property, Plants and Equipment At December 31, 2006, the Company did not have any significant plants and equipment, mines or producing properties. The Company is an exploration stage company, and it has not determined whether any of its mineral properties contain ore reserves that are economically recoverable. The Company owns or has options to acquire certain mineral properties as part of its business, as described below.  19      The principal mineral properties include the following:  Projects
        Licence
        Size
        Cumulative  Expenditures To-Date
        Budgeted Expenditure 2007Don Sixto(1)
        various
        various
        $    13,039,318
        $    4,000,000CVSA properties(2)
        various
        various
        $      3,876,962
        $    2,000,000Magallanes(3)
        various
        various
        $         803,024
        $       500,000Other(4)
        various
        various
        $           83,103
        $       120,000$    17,802,407
        $    6,620,000  (1) Cognito has the option to acquire a 100% interest in Don Sixto subject to a 3.5% NSR. (2) Estelar has the right to acquire a 100% interest in the various properties subject to a 2% NSR and back-in provisions. (3) Exeter has the right to acquire 100% interest in the Mallaganes properties which form part of an agreement with Rio Tinto and are subject to a 1% NSR or back in provisions. (4)Other refers to the Estelar, Minera Rio de la Plata (MRP), and the Maricunga Projects. These projects, held under option agreements, some of which, require option payments, have expenditure commitments, are subject to a net smelter return royalty or back-in provisions.  A General Discussion of the Political and Economic Climate in Argentina Country Overview: Argentina or Argentine Republic is located in southern South America, bounded to the north by Bolivia and Paraguay; to the east by Brazil, Uruguay, and the Atlantic Ocean; to the south by the Atlantic Ocean and Chile; and to the west by Chile. The country occupies most of the southern portion of the continent of South America and is somewhat triangular in shape. Buenos Aires is the capital and largest city, with a population of about 14 million. Traditionally, Argentinas economy was based on agriculture centred in the vast Pampas, which extend nearly 1,600 km (1,000 miles) south from the Chaco and are used for extensive grazing and grain production. The Pampas, which are largely made up of a fine sand, clay, and silt and almost wholly free from pebbles and rocks, are ideal for the cultivation of grains. However, the gravelly soil of most of Patagonia, in southern Argentina, is useless for growing crops, therefore it is used primarily as pasture for sheep. Most of the northern Andean foothill region is unsuitable for farming, but several oases favor fruit culture. Argentine mineral resources, especially deposits of petroleum and natural gas, have assumed increasing importance in recent decades. In recent years, the mining and exploration sector has shown increased levels of activity. Government Argentina is a federal republic headed by a president, who is assisted by a council of ministers. Legislative powers are vested in a national congress consisting of a Senate and a House of Deputies. The president and vice president each serve for a four year term and may be re-elected for a further four year term. The constitution of 1853 permits the suspension of parliamentary government and civil liberties should the president deem that a national emergency requires a state of siege. The National Institute of Social Welfare has administered most Argentine welfare programs since its founding in 1944. Health services are provided to workers by the various unions and to others by free hospital clinics. Medical standards are relatively high in the cities, and efforts are constantly being made to improve medical facilities located in outlying rural areas.  20       The organization of the legislature of Argentina is similar to that of the United States. The Argentine national congress consists of a lower chamber, the 257-member House of Deputies, and an upper chamber, the 72-member Senate. Deputies are directly elected to four-year terms; senators are chosen by provincial legislatures for terms of six years.  All citizens 18 years of age or older are entitled to vote. Proportional representation in national elections was initiated in 1962. Under the constitution, the provinces of Argentina elect their own governors and legislators. During periods when the constitution has been suspended, provincial governors have been appointed by the Federal government. Federal courts include the Supreme Court, 17 appellate courts, and district and territorial courts on the local levels. The provincial court systems are similarly organized, comprising supreme, appellate, and lower courts. The Economy of Argentina The Argentine economy is based primarily on the production of agricultural products, including wines and the raising of livestock, but manufacturing and mining industries have shown marked growth in recent decades.  Argentina is one of the world's leading cattle and grain-producing regions; the country's main manufacturing enterprises are meat-packing and flour-milling plants. Since 1995, the Argentinean economy has undergone several problems, including high levels of international debt, slow or negative growth, high inflation and government budget deficits. Negative economic growth in 2000 was followed by a decline in the overall economic situation in 2001 including massive withdrawals from the Argentine banking system.  An attempt to stabilize the banking system and overall economy failed as the economy continued to worsen and the confidence of foreign investors and consumers declined.  In December 2001, President De la Rua resigned and Argentina missed its scheduled interest payments and defaulted on its foreign debt.  The countrys new President quickly abandoned the peg of the Peso to the US dollar and the Peso was floated in February 2002. By mid-2002, the economy began to improve and Gross Domestic Product grew by 8% in 2003, approximately 9% in 2004 and 9.2% in 2005.
However, Argentina continues to maintain large foreign debt levels. Currency The Nuevo Peso Argentino (new Argentine peso, equal to 10,000 australs) was introduced in January 1992, at an exchange rate of 1 peso = US$1.  The peg to the dollar was abandoned in February 2002 and the currency is allowed to float.  The exchange rate as of March 26, 2007 was 3.10 pesos/US dollar. The Mining Industry in Argentina Although the country has a variety of mineral deposits, including petroleum, coal, and a number of metals, mining has been relatively unimportant in the economy.  In recent decades, however, production of petroleum, coal, copper and gold has increased significantly.  In terms of value, the chief mineral product is petroleum.  The country also produces significant amounts of natural gas and the mining industry produces gold, silver, copper, lead, zinc, iron, tin, tungsten, mica, uranium and limestone. Mining taxes are covered by the Mining Investments Act, instituted in 1993 to encourage foreign investment in the Argentina mining sector.  Incentives provided by the Act include guaranteed tax stability for a 30-year period, 100% income tax deductions of exploration costs, accelerated amortization of investments in infrastructure, machinery and equipment, and the exemption from import duties on capital goods, equipment and raw materials used in mining and exploration;  21      however all exports are subject to a 5% export tax.  Argentinas mineral resources, administered by its 23 provinces, are subject to a provincial royalty capped at 3% of the mouth of mine value of production, although provinces may opt to waive this royalty. Various approvals of the proposed program must be obtained before any exploration program begins.  Description of Exploration and Mining Permits There is no actual ground staking of mineral claims for securing mineral rights in Argentina. Mineral rights are acquired by application to the government for concessions to seek, own and sell minerals located within a specified parcel of land.  Generally, all persons or entities qualified to acquire and possess real estate can obtain mineral rights.  The three levels of mineral rights and titles are described below: Cateo An exploration permit, known as a Cateo, allows the holder of the permit to explore the exploration concession by way of prospecting, mapping, sampling and conducting geophysical surveys. The rights of the Cateo holder are subject to surface rights. To conduct drilling and trenching programs on the Cateo, the permit holder has to submit a report to the mining office outlining the proposed program which must include a plan for any reclamation. Term of Cateo Once a Cateo is granted, it has a lifespan that is predicated upon its size. A Cateo is measured in 500 ha units and can range in size from a minimum of 1 unit (500 ha) to a maximum of 20 units (10,000 ha). A one-time fee of Peso 0.80 per ha is due within 5 days of approval. During the term of a Cateo, which begins 30 days after approval, periodic relinquishment of ground is made such that 300 days after approval, 50% of the area in excess of 4 units must be relinquished and after 700 days, 50% of the remaining area must be relinquished.  A Cateo of 1 unit has a duration of 150 days and for each additional unit, its duration is increased by 50 additional days.  Mining Permit A Cateo will expire if, within its specified term or duration, no mineral discovery is reported by the Cateo holder. If a mineral showing or an ore zone has been discovered while exploring the property, where the holder is a company, it may apply for a "Manifestacion de Descubrimiento, or MD" for mining rights to a maximum of 3,500 ha. Once an MD is granted, the property must be surveyed in order to apply for a Mina, or mining lease. This is usually done after the results of exploration indicate a potential ore body.  Environmental Regulations Argentinas federal mining code contains environmental provisions that are administered by each Province. Operators are liable for environmental damage. Before initiating operations, mining companies must prepare and submit an environmental impact report to the Provincial regulators. This report outlines the proposed operations and methods and what measures will be taken to minimize the impact on the environment. Updates which detail the status of operations and results are required. If the regulators determine the protection measures to be inadequate or insufficient, additional environmental protection measures may be required, and violators may be forced to cease operations and rectify any damage.  22        Discussion of the Companys Mineral Properties The Company currently operates in the mineral exploration sector. All of the Companys properties are located in Argentina and Chile and are at the exploration stage.  The properties contain no defined economic reserves of recoverable minerals.  The material individual mineral properties are described below.    Don Sixto Project (La Cabeza) Acquisition terms In 2005, the Company completed the acquisition of Cognito Limited (Cognito), a company that has the option to acquire a 100% interest in the Don Sixto gold project in Argentina. The Company issued a total of 4,100,000 common shares and paid $25,000 to Rowen Company Limited (Rowen) and its principals as consideration for the option to acquire Cognito and in settlement of the purchase consideration.  Bryce Roxburgh, the President and CEO and a director of the Company, is a principal of Rowen.   23       To earn its interest in the Don Sixto property (subject to a 3.5% net smelter royalty (NSR) in favor of the owners of the property), Cognito must pay to the owners of the property a total of US$525,000 in staged payments, by December 2014. On behalf of Cognito, the Company has made all required payments, totaling US$125,000 to date. Cognito may terminate the staged payments upon making a development decision in respect of the project; provided that production commences within two years. Cognito has the option to purchase the NSR outright for US$1,000,000.  Property Description Don Sixto is located 370 km south of the city of Mendoza, in Mendoza Province, and consists of seven gold concessions, covering approximately 100 square kilometres. An additional 176 square kilometres of concessions, comprising the Agua Nueva property, are held under option pursuant to an agreement with Minera Rio de la Plata, described below.  Geologically, it is readily accessed by gravel roads and lies at an elevation of 1,100 metres above sea level.  The area has no grid electricity or water pipeline.  The property was discovered in 1997 by Argentina Mineral Development (AMD), who spent approximately US$3.3 million on exploration to outline ore-grade gold mineralization within epithermal quartz veins and breccias, in hydrothermally altered, Permo-Triassic felsic volcanic rocks.  The Don Sixto mineralization is described as low-sulphidation epithermal. Preliminary metallurgical test work indicated +90% gold recovery for oxidized and sulphide bearing material utilizing conventional leaching methods. Drilling by AMD included 16,000 metres of diamond and reverse circulation testing. This exploration program partially delineated multiple zones of gold mineralization within a 4 square kilometre area and led to resource calculations followed by an in-house scoping study.  Exeter commissioned Ruben S. Verzosa, P. Eng. of Langley, British Columbia, a qualified person (QP) as described in the Canadian Securities Administrators National Instrument 43-101 (NI 43-101), to review the results of the AMD exploration program and in-house scoping study. Mr. Verzosa reviewed the methodology of all exploration procedures and confirmed that the resources established to that date were inferred resources as defined by the Canadian Institute of Mining, Metallurgy and Petroleum code.  Robert Harley, formerly Exeters Vice President, Exploration completed a report, complying with the requirements of NI 43-101, updating all exploration to September, 2004. This report can also be viewed at www.sedar.com.  Subsequently, Matthew Williams, Exeters Exploration Manager, and QP, together with independent QP Peter Allen of Australian Mine Design and Development (AMDAD) of Brisbane, Australia, drafted a new report complying with the requirements of NI 43-101 to accompany the revised statement of Indicated and Inferred Resources. This report was filed on July 27, 2005 and can be viewed on SEDAR at www.sedar.com.  Purchase of Surface Rights The Company purchased the 8,000 hectare property overlying the proposed Don Sixto development site in late 2005 for US $67,000. The purchase agreement requires that the Company build two new houses for the prior landowners and grants them the right to continue grazing livestock away from the contemplated mining operations.   24       Exploration and Development Studies Background  2003-2006 In November 2003, the Company retained independent engineer Sandercock and Associates Pty Ltd (Sandercock), of Australia, to update the AMD scoping study, in order to assist management in assessing whether to proceed with a pre-feasibility study.  The study was not NI 43-101 compliant and is not available to the public.  In early 2005, the Company appointed Jerry Perkins as Vice President, Development and Operations and commenced an internal engineering and development study so that management and the board could determine parameters and timing for a full feasibility study. Resources were estimated mid 2005 based on detailed drilling conducted during 2004 and early 2005. The development study was completed by 2005 year end, with selected study results posted on the Companys website during the first quarter of 2006. Because the internal study indicated significant cost escalation over that
anticipated in the earlier Sandercock study (such cost escalation was experienced throughout the mining industry during this period), management elected to proceed with additional discovery and confirmation drilling programs, which commenced mid-2005 and were completed in December 2006. The discovery drilling program was designed to increase available resources at the project, while confirmation drilling will lift resources categorized as inferred to the indicated or measured categories.  Resource Estimates and Development Studies Following detailed drilling in 2004 and early 2005, the Company contracted Hellman & Schofield (H&S), of Sydney, Australia, to provide an independent estimate of gold resources at Don Sixto.  The revised mineral resources estimates for the Cuello, Luna, Ojo, and Mandibula zones applied Multiple Indicator Kriging (MIK) methodology to the Exeter database and geological models. The models, database, and supporting information were independently validated by Peter Allen of AMDAD. The revised resources were estimated using an additional 67 holes, totaling 4,798 metres of drilling and 2,050 metres of sawn channel sampling, conducted in 2004 and 2005.  The Cachete zone resource was re-calculated internally by Exeter utilizing a manual polygonal cross sectional method of estimation. Although new, three-dimensional, geological models were constructed for Cachete, it was deemed inappropriate to use MIK methods at that time, due to a lack of drilling density. The previous resource estimates and assumptions for the Labio East, South and West zones were utilized, because the 2004 program did no new work in relation to the drilling database for these zones. These estimates will be revised with the benefit of results from the recent drilling in these zones.  AMDAD also carried out conceptual pit designs for the Cuello, Luna, Ojo, and Mandibula zones, which showed that, in addition to the indicated resource within pit perimeters, a significant proportion of the inferred resource remained within the potential open pits.  Development Studies Metallurgy Metallurgical test work, through 2005, confirmed high gold and silver recoveries using a gravity separation circuit, followed by a conventional carbon-in-leach flow sheet. Gravity gold recovery alone averaged 30 percent and exceeded 50 percent from some samples.   25       The test programs were carried out at Metcon Pty Ltd of Sydney, Australia (a member of the AMMTEC group), AMMTEC Limited of Perth, Western Australia, Outokumpu Technology Pty Ltd of Perth, Western Australia and Knight Piesold Pty Ltd of Perth, Western Australia. The program included optical mineralogy, comminution, flotation, gravity separation, cyanide leaching and tailings characterization test work.  The test work was carried out on relatively coarsely ground, 95 micron material taken from individual mineralized intercepts and composites prepared from diamond drill cores selected from the 2004 drilling program. The head assays of composite samples from each of the main mineralized zones are as follows:  Assay
        Units
        Ojo
        Luna
        Cuello
        BulkGold
        g/t
        9.43
        3.13
        7.93
        5.78Silver
        g/t
        6.9
        18.3
        61.3
        25.8Sulphur
        %
        0.10
        0.16
        0.47
        0.28Iron
        %
        1.50
        1.27
        1.24
        1.26Arsenic
        ppm
        4320
        105
        80
        1235Copper
        ppm
        38
        28
        26
        27Lead
        ppm
        35
        32
        19
        28Zinc
        ppm
        78
        33
        55
        52  Specific outcomes from the test work included: Grind Size: The samples must be ground to a fine particle size to optimize gold liberation in the carbon in leach (CIL) circuit. Testwork determined that 95 microns was the optimum grind for the bulk composite samples.  Pulp Density: The ground sample is mixed with water and reagents in the CIL circuit.  The ratio of solid to liquid in the leach circuit is referred to as the pulp density. In the case of the bulk composite sample the optimum pulp density was 40 percent.  Gravity Circuit Recovery:  A portion of the gold at Don Sixto is free or particulate gold that can be recovered with simple gravity separation methods as against chemical leaching in the CIL circuit.  The gravity circuit is that portion of the treatment plant that recovers such free gold. In the case of the bulk composite sample, the gravity circuit recovered 30-50 percent of the total gold.  Carbon in Leach Gold Recovery: The recovery of gold in the CIL circuit from the bulk composite sample testwork was 93 to 94 percent.  Gold Recovery Variability on Deposit Composite Sample: The testwork achieved gold recoveries that varied from 92.7 to 93.9 percent on the composite sample.  This reflects the variability for tests on the same composite.  Gold Recovery Variability on Individual Mineralized Intercepts: Tests were performed on a number of mineralized samples from different sites within the gold deposit in order to determine  26      the gold recovery variability for different mineralized samples. The gold recovery variability was 80 to 97 percent  average 91 percent.  Silver Recovery Variability on Individual Mineralized Intercepts: The testwork determined that silver recovery variability was 80 to 85 percent.  Reagent Consumption: The principal reagents used for the CIL circuit are calcium oxide (lime) and sodium cyanide. For each of these reagents the consumption averaged 0.40 kilograms per metric ton of composite sample.  2006 Testwork Metallurgical testwork was more limited in 2006 than 2005 while a new drill core inventory was built up, however significant programs were completed on flotation and grinding.  Late in 2006 large quantities of drill core samples were prepared for the remaining feasibility level testwork programs planned for the first half of 2007. Flotation optimisation: Detailed flotation and gravity testwork on the 2005 bulk composite was carried out at Metcon leading to a locked-cycle test under optimised conditions.  Gold recovery was 88% and silver recovery was 80% into a concentrate weight of 1.5%.  The grind size for this level of recovery was a P80 of 53 microns. SAG mill Comminution tests:  Thirteen selected quarter-core samples were taken form Cuello, Luna, Mandibula and Ojo for SMC testing at JK Tech in Queensland, Australia.  The samples had acceptable SAG mill properties and were mostly confirmed to be moderately hard to hard.  These results will form part of a comprehensive comminution data base that is being assembled. Recent Work:  Late last year approximately 2.5 tonnes of representative drill core intercepts were transferred to two laboratories in Australia in two nearly identical batches.  Each batch represented over 100 intercepts of mineralization, each of mineable width with a cut-off grade of 0.5g/t Au and included internal and external dilution so as to be representative of production material.  The first batch went to JK Tech for comprehensive comminution variability testwork.  The material for this was obtained from quartered HQ core, with intercepts assembled into 17 composites, representing separate sections of the Cuello, Luna, Mandibula and Ojo deposits.  Each composite is to be tested for SAG-mill, rod mill, ball mill and abrasion parameters to complete the database for comminution circuit design.  The data will be used for the optimization of the crushing and grinding circuit design options during  the planned project option and feasibility studies expected to start later in 2007.  A second batch of almost identical intercepts, prepared from coarse crushed drill core, has arrived at Metcon Laboratories in Sydney and is also being prepared into 17 composites with identical specifications to those sent to JK Tech.  Metcon will carry out a second round of detailed leach optimization work on these composites to finalize the basic flowsheet.  Other samples will then be prepared for specific testwork directed at the engineering design of each section.  The mineralized intercepts for this current program were selected from 114 holes representing 12,670 metres drilled between July 2005 and the end of August 2006.  By comparison the 2005  27      resource estimate, and the parallel metallurgical program then carried out, was based on 4,342 metres and 60 holes.  Geotechnical Studies Geotechnical logging and core orientation by Exeters Argentina staff geologists was used by Vector Chile Limitada (Vector) to carry out a first pass evaluation of open pit slope stability. Using conservative assumptions, Vector estimated an average pit slope angle of 55 degrees, still incorporating 50% safety factors. This is a relatively steep slope and should assist in reducing the amount of waste rock in mining. The logging program is continuing on drill cores and is now being supplemented by on-site point load testing to give a comprehensive evaluation of different rock strengths. These data will be re-evaluated in the coming months by independent consultants to provide data of a quality to design and optimize open pits. Independent experts A Karzulovic Ltda (AKL) of Chile overview and monitor all geotechnical work. A water depth monitor for use on old drill holes was purchased so that regular measurements of the static water levels can be recorded and monitored over time.  This combined with dynamic pump testing of selected holes is providing basic data on groundwater flow quantities and direction. To date, the inferred groundwater flows have been small suggesting that water will not be a significant problem in mining. It is also apparent that mine groundwater will not be a significant source of the overall water requirements for production.  Recent Work: The large database of measurements is currently being collated into a geo-referenced three-dimensional geotechnical model that can then be overlaid with the geological and block models to assist with future pit design work during the feasibility study.  This information has been augmented with a large number of point-load and uni-axial compressive strength tests on whole drill core and a lesser but significant number of tri-axial compressive strength tests. Geotechnical databases have been completed for the Cuello and Luna deposits and the remaining deposits databases will be compiled in 2007. Detailed structural mapping of surface outcrops has been delayed due to lack of qualified personnel.  Conceptual Mine Design In 2005, AMDAD used specialized software to develop conceptual open pits based upon then current costs and Vectors geotechnical slope criteria. Preliminary open pit designs followed for the Cuello, Luna, Mandibula and Ojo zones, based upon H&S resource estimates. AMDADs report provided waste to ore* ratios for each conceptual open pit and led to a base-case production schedule. The average waste to ore ratio for the four zones was 2.5 to 1. These data were used as a basis for a conceptual project infrastructure layout and an internal project evaluation.  No further work was conducted during 2006.  Electricity Supply Exeter engineers, working with power authorities and suppliers of generating equipment, based in Mendoza, Argentina, have compared two electricity supply alternatives for the project: power from the Provincial electricity grid and on-site power generation using diesel fuel. On a cost-  * The use of the term ore is in the context of the common mining expression waste to ore ratio or stripping ratio and is not intended to imply that the inferred resources used in this study have any economic status as ore as defined in NI 43-101 and the relevant CIM guidelines.  28       benefit basis, electricity supply using the Provincial grid was shown to be superior, as it locks in a key component of the project operating cost. The preliminary cost estimate of a transmission line using mid-2005 costs was US$5-7 million. Studies in 2006 evaluated the preferred power supplier, the supply route, expanded transmission capacity to 132Kva to allow for possible increased throughput.  Recent Work: The power options study was completed in the last quarter of 2006 by Penta Sur SA of Tucuman and Buenos Aires. The study identified seven options and sub-options in terms of route and the specific take off point for supply. The initially favored technical option in terms of reliability and environmental approvals was to take supply from Nihuil and follow the current road route south to a substation at La Salinilla.  Capital costs were estimated for supply to site as well as 33Kv lines to the La Salinilla and Agua Escondida communities, including the costs of supply to switchyards in the two communities.  Exeter engineers have suggested a number of ways to reduce the capital cost and requested that Penta Sur review these before finalizing their report, which is expected early in 2007.  Water Supply A San Juan, Argentina water consultant (FUUNSAJ) has carried out geophysical surveys over potentially large aquifers near Don Sixto to evaluate water supplies. FUUNSAJ performed pump tests on exploration drill holes for geotechnical purposes and to evaluate the potential contribution by open water seepage. Two sites were selected as being potentially capable of meeting the project requirement of 3,000 cubic metres of water daily.  Groundwater surveys by FUUNSAJ (now Grupo Ansilto) and Exeter examined water quality for drinking water supplies. The water is slightly, to moderately saline, depending on the source. The range of groundwater salinity is well within the efficient processing range of modern reverse osmosis plants for drinking water.  Recent Work: Reports are awaited from Grupo Ansilito for the drilling program conducted at Manantial Mandibula for water during the year, as well as for catchment storm flows. Preliminary results have indicated water flows were less than expected by the consultants. Other measurements made by Exeter personnel suggest that a large portion of the water may be being diverted down a number of parallel NW-SE structures. An additional drilling program will be required in 2007 to follow up on the 2006 program and to confirm aquifers capable of sustaining up to a 2.5 million tonne per year operation.  Road Access Exeter engineers, Mendoza-based civil construction companies, and the Municipality of Malargüe have reviewed and surveyed the existing 200 kilometre long access routes to the project area. The studies determined the roads to be generally good. First pass cost estimates were obtained for road sections requiring repair or upgrading. Two preferred routes to the project area were selected and are expected to be subject to further evaluation during the development options study and subsequent feasibility study planned for late 2007. With rainfall normally restricted to a three month period of thunderstorms in summer, road maintenance appears to be straightforward.   29       During 2005, Exeter engineers reviewed the transport logistics for typical construction and operational supplies with a number of large Argentinean transport companies. The costs on a first pass basis fall within the range expected for a project of this size.  No further work was conducted during 2006.  Mine Accommodation In 2005, Mendoza-based architect was contracted to produce a sympathetic conceptual design for the accommodation camp and offices incorporating the use of local materials. The design was costed by local construction companies and the cost is well within the expected range.  No work was conducted during 2006.  Engineering Consultants Ausenco Limited of Brisbane, Australia (Ausenco), an independent minerals engineering and construction company specializing in international projects, coordinated mining, metallurgical and infrastructure study results into an engineering review. Capital and operating costs to a 25% level of accuracy were developed using detailed equipment lists and current cost factors. Ausenco made useful recommendations for studies implemented by Exeter in 2006.  Study Outcomes At the end of 2005, all the studies carried out in that year and described above were reviewed and incorporated into an overall development report prepared by Sandercock. Sandercock provided capital and operating cost estimates for a project with production rates of 500,000 to 1,000,000 tonnes of ore per year. The development report formed the basis of the decision by Exeters directors to approve the resource expansion drilling program conducted during 2005 and 2006.  With the escalation in gold and silver prices in early 2006, it was decided to review the possibility of treating significantly higher ore throughputs at Don Sixto. It was considered that by lowering the cut-off grade from that used in the Sandercock study, that a possibility exists that significantly more gold mineralization might be economically recoverable should gold and silver prices remain at elevated levels.  Planned Work A development options study to establish the parameters necessary for feasibility and environmental studies will commence late in the second quarter, 2007 following a new National Instrument 43-101 resource estimation based on the expanded drilling program conducted through 2005 and 2006. Provided the outcome of the development options study is positive, the Company will proceed to a final feasibility evaluation.  Environmental and Social Exeter completed the spring and summer baseline studies in 2005. Autumn to winter baseline environmental studies continue with the field campaign concentrating on the Soil Potential Study in the project area and surrounds.  The detailed nature of this campaign also allows  30      Cunsultores Independientes Socio Ambientales (CISA) to simultaneously collect data on flora and fauna, indigenous and cattle affected vegetation as well as assessing in more detail the geomorphology. CISA was requested to expand its program to carry out a parallel program of water and limnology sampling in the winter period. CISA collected additional soil and water samples on a regional scale to provide data representing the autumn-winter season.  This supplemented the previous baseline campaigns conducted in spring-summer and ensures that all seasonal ecological factors have been sampled.  Other important projects have been completed, aimed at ensuring that a comprehensive social and environmental description of the existing area and its communities is available.  These include land-use potential, landscape analysis, community profiling, archaeological and palaeontological studies. The final
report on the baseline studies has been received from CISA.  Ongoing programs include dust, noise, water level and water quality monitoring. A community-based program to collect seeds and cultivate native plants and shrubs for rehabilitation of disturbed land commenced with expert assistance from the Argentinean national research organization, CRYCIT.  Knight Piesold (KP) was contracted to conduct a Gap Analysis from work conducted on baseline studies, reviewing the quality and scope of results to date against international standards prior to commencement of the company contracting for an Environmental Impact Assessment report. A number of issues were delineated in the KP report, and work is currently being conducted to fill the gaps.  In 2006, a well was drilled at Agua Escondida to provide water for the local community, prior to mobilizing the drill rig to Don Sixto where it was used for water and resource expansion programs.  2006 Exploration Activity and Planned Activities The objective of these coordinated studies is to facilitate the transition from exploration to a final feasibility study. The exploration and resource expansion drilling program conducted in late 2005 and through 2006 was terminated in December 2006 to allow for logging and sampling of the large back-log of drill core from that program. Once core logging has been completed and all assays from the drill holes are received, a new resource estimate study is planned which will be followed by a development options study to examine the most efficient means of mining and processing the mineralization. Provided the development options study indicates viability, a final feasibility study is planned to commence in the final quarter of 2007.  More detailed information on the resource and development studies can be obtained on the Company website:www.exeterresource.com.  Drilling The resource expansion drilling and channel sampling program which commenced in July 2005 continued throughout 2006.  The Company drilled a further 122 diamond drill holes for 16,585 metres, 134 reverse circulation percussion drill holes for 15,381 metres and 307 rotary air blast  31      (RAB) holes for a total of 4731 metres. In addition, 5 holes for 231 metres were drilled to test an underground water aquifer.  Subsequent to the drilling data used for the July 2005 resource statement, the combined 2005 and 2006 drilling that constitutes the Resource Expansion and Resource Definition Program totaled 57 diamond drill holes for 20,137 metres and 194 RC drillholes for 20,400 metres.  The five rig drilling program, which ended in December 2006, utilized the following drills:  (i)
        a BB-37 mobile diamond rig, capable of drilling in confined/difficult access locations with limited surface disturbance; (ii)
        a UDR 200 diamond rig commenced work on the project in May;(iii)
        a Schramm reverse circulation percussion rig capable of drilling deep holes and (iv)
        two UDR 650 multipurpose reverse circulation percussion (RC) diamond drill rigs for testing targets generated by reconnaissance rock chip sampling and channel sampling and the RAB drilling programs.  The Schramm drill rig was used through the final quarter of 2006 to drill deeper holes for the resource expansion work at Don Sixto. Drilling in the final quarter concentrated on the Cuello East, Cuello West and Cuello veins, Ojo, Luna extensions, Ojo extensions, the Central Vein Zone (Labio East) and the Mandibula Zones. On most zones drilling continues to delineate the lateral and depth extent of the new mineralized veins.  Termination of the drilling program December, 2006 will allowed our technical team to geologically log and sample the large back-log of drill cores accumulated through the five rig program in the latter part of 2006. The logging and sampling is expected to be completed during the first quarter, 2007, in preparation for the new resource estimates scheduled for late in the second quarter, 2007.  Drilling Confirmation and Resource Expansion Drilling Programs  The objective of the Drilling Confirmation Program completed in 2006, was to raise the confidence level of much of the 500,000 ounce Inferred Resource defined in the 2005 Resource Estimates to Measured/Indicated Resource categories.  Much of the 2006 program included diamond drilling in areas of higher grade mineralization located near surface over a strike length of 300 metres at the Mandibula zone.  The Resource Expansion Drilling Program was designed to expand the resources outlined by the 2005 Resource Estimate study, so that potentially increased resources could provide the basis for a larger scale gold mining operation, to offset the effect of industry-wide increases in capital and operating costs experienced during 2005 and 2006.  This program was particularly successful and became the focus for drilling during the latter half of 2006. A Rotary Air Blast (RAB) drill rig was initially employed to test large areas of potentially mineralized volcanics below a cover of wind blown sands. The program had some success, but was restricted by the depth capacity of the drill and the unconsolidated character of the sands. The RAB testing program was replaced  32      by fencing drill holes across the prospective deeper sand covered areas. Both approaches to testing the sand covered areas combined with our geologists skills in predicting targets led to the success of the Resource Expansion Program in 2006.  At Cuello, the most southerly area of extensional-type veining, drilling was successful in delineating a +200 metre wide corridor comprising at least seven veins as compared to the single vein originally defined by the 2004 resource drilling. Two major veins were located within the Eastern Cuello system, and another four veins were identified within the Western Cuello system. The Eastern Cuello vein extends to at least a 200 metre vertical depth. The Western Cuello system remains open for expansion along strike and to depth.  At Luna, the original mineralized zone, with dimensions of approximately 200 metres long and 50 metres wide, was expanded to a system of at least 750 metres long and 500 metres wide. This was accomplished by RAB drilling through sand cover, mainly to the south west and north east of the known Luna zone. At year end, the new south western zone remains open for expansion along strike and to depth. The new zone north east of Luna remains open to the north west.  At Ojo, expansion drilling commenced late in 2006. It is considered that this higher grade zone remains open for expansion to the south and at depth towards the north.  At Mandibula, the zone was also expanded by the 2006 Resource Expansion Drilling Program. Formerly, the zone was indicated to be some 50 metres wide and 150 metres long. The new work indicated a 150 metre wide corridor of potential mineralization with a strike length of at least 800 metres. Our technical team predicted the gold mineralized zone would plunge shallowly to the southeast, along the strike direction of the major structure. This hypothesis was based on the interpreted dip of the host volcanic stratigraphy beneath unmineralized silica veining in outcrop. Late in the year three broadly spaced drill holes intersected new gold mineralization, confirming the prediction.  At the Central Vein Zone, which includes the Mercedes, Labio East and Labio West veins, drilling tested an interpretation that the higher grade section of the Labio East vein should also plunge southerly, beneath unmineralized volcanic rocks in outcrop. The interpretation was confirmed by drilling, leaving the zone open for expansion in the down plunge direction.  No drill testing was conducted on the Cachete vein system during 2006.  Channel Sampling Continuous rockchip sampling over outcropping gold mineralized zones (including new discoveries) is followed by sawn channel sampling. Results from those sawn channels will be used for the resource estimates in 2007. The sawn channel sampling technique for grade estimation was used so that Inferred Resources included in the 2005 program could be upgraded to the Measured/Indicated Resource categories. Comprehensive channel sampling programs were conducted through 2006 at Ojo, Luna, Mandibula, Labio East and West, Mercedes and Cuello  33      East zones. Shallow drill holes were required to test near surface mineralization in the Cuello Central and Western Cuello zones.  Visiting Experts Dean Williams and Chris Torrey, consulting expert geologists, visited Don Sixto during 2006 to assist with input into the structural and stratigraphic controls for mineralization. These examinations also assisted in expanding evaluation of the regional tenements outside the detailed Don Sixto project area.  Regional A regional program evaluating potential repetitions within the 500 square kilometre tenure surrounding Don Sixto commenced during the second half of 2006. There has been a significant increase in knowledge of the mineralization generated from the comprehensive exploration and drilling programs carried out over the past three years at Don Sixto. This information provided the basis for the regional evaluation program. Work initially involved targeting areas with similar structural and alteration features as Don Sixto. Ikonos satellite imagery and reprocessed airborne magnetic/radiometric survey data was also used to assist in targeting for mineralized zones. This work remained at an early stage at year end.  CVSA Properties- Patagonia Acquisition Terms In January 2004, the Company announced it had secured an option from Cerro Vanguardia S.A. (CVSA) to acquire all of CVSAs exploration projects, except those surrounding the Cerro Vanguardia gold mine, in Patagonia, Argentina.  CVSA is owned 92.5% by AngloGold Ashanti Ltd. and 7.5% by Fomicruz S.A.  Under the option agreement, Exeter paid CVSA US$100,000 and can earn a 100% interest in the CVSA properties by spending US$3 million within five years, including completing 10,000 metres of drilling on any of the four major projects. CVSA has the right to back into a 60% interest in any project, by paying Exeter 2.5 times its expenditures and paying for all project costs to the completion of a bankable feasibility study. CVSA can increase its interest to 70%, by financing Exeters share of mine development costs, at industry standard terms. Should CVSA not elect to back into a project, its interest will revert to a 2% net smelter royalty.  At the end of 2006, Exeter had already fulfilled the obligation to incur a total aggregate expenditure of US$ 3M on or before the 6th anniversary of the agreement (2009) and to complete at least 8,000 metres of drilling (12,000 metres completed) as required by the agreement. At December 31, 2006, 4,181 metres at the Cerro Moro Project and 7,641 at the Santa Cruz Project (drilled at Cerro Puntudo and Verde) had been drilled of the 10,000 metres required to be drilled on a project before CVSA is required to make a back-in decision on either of the projects. Exeter has not conducted any drilling on either of the Rio Negro or Chubut Province projects.     34       Property Description The CVSA properties are grouped into the four main project areas listed below, of which Cerro Moro was the most advanced at the time of acquisition:  Cerro Moro
        13 properties
        153 sq kmOther Santa Cruz properties
        8 properties
        333 sq kmChubut properties
        10 properties
        132 sq kmRio Negro properties
        3 properties
        120 sq km  Most of the CVSA properties were acquired by CVSA over 10 years ago, prior to the recent interest in Patagonia. All of the projects have favourable geological settings, significant hydrothermal alteration features and/or anomalous gold or silver geochemistry.  Many of the properties under the agreement were identified by CVSA using satellite imagery following structural studies, suggesting large alteration systems. The amount of subsequent exploration varied, but in many cases anomalous gold and/or silver mineralization was identified. No geophysical surveys were conducted and drilling did not extend into covered areas. In 2004, Exeter prospected all of the systems with a view to identifying gold and/or silver targets for follow-up exploration. Exeter conducted drilling at Cerro Moro and Cerro Puntudo during 2004, and a follow-up drilling program at Cerro Puntudo in May, 2005. Further drilling was conducted on all three projects during 2006.  A number of the properties considered to be low priority targets were returned to CVSA in 2005 and in May 2006. Additional properties were acquired around projects considered to have good potential for discoveries. Currently, a total of 25 properties over 11 projects covering 60,273 hectares in three provinces remain subject to the agreement. Prospecting and geochemical surveys have been conducted on many of the Santa Cruz, Chubut and Rio Negro properties and, following that work and the favourable mining regime in Santa Cruz, the Company has decided to focus its attention on the Cerro Moro, Puntudo and Verde projects, all situated in Santa Cruz Province. Other properties in Santa Cruz Province covered by the agreement include the Calandria and Azul properties.  Cerro Moro Project  Santa Cruz Province The 153 square kilometre, Cerro Moro epithermal gold project is located in north-eastern Santa Cruz Province, approximately 70 kilometres southwest of Puerto Deseado. Exploration to date at Cerro Moro has defined 16 vein sets, mostly in areas of limited outcrop. Most of the gold occurrences are within a 10 kilometre by 5 kilometre area. Low-sulphidation-style gold and silver mineralization is primarily associated with quartz veins 240 to 1,250 metres long. Individual veins range in thickness from 0.2 to 4.5 metres and some of the veins are exceptionally high in silver.  CVSA previously drilled 34 shallow diamond and/or reverse circulation percussion drill holes, for total of 2,582 metres, over 11 targets. Drill hole spacing was in the order of 250 metres, with average drill intersection depths of only 30 metres.   35       Exploration by Exeter in 2004 consisted of 40 reverse circulation drill holes, for a total of 2,066 metres. Prospecting and sampling of new veins, and an orientation resistivity survey, was also completed. Poor outcrop restricts mineralized vein mapping at Cerro Moro. To overcome this limitation, the Company elected to explore for new veins or extensions to known vein sets, with the objective of discovering a single vein or a set of closely spaced veins with sufficient contained gold-silver to support a mine. An orientation ground magnetic survey established that this technique can see many of the known veins at Cerro Moro.  2006 Geophysical and Trenching Programs A full ground magnetic survey initiated in 2006, to test a broader area of the property, continued through the year and was essentially completed by year end.  Further surveying is planned to follow up high grade east-west trending veins in the south of the project area in 2007. A trenching program commenced and 61 trenches were excavated for a total metreage of 800 metres. These were mapped and some 440 samples assayed.  Drilling 2006 In 2006 the Company conducted two drilling campaigns, drilling 2,112 metres in 37 holes on the Carla, Dora, Deborah, Escondida, Patricia and Esperanza veins. The earlier program of 20 holes for 1,031 metres was drilled by reverse circulation percussion drilling, and the latter drilling program comprising 17 holes for 1,081 metres was diamond drilled. These programs discovered high grade gold-silver mineralization in the Carla vein, in a new zone situated 2.5 kilometres from previous drilling on the property, and also in an eastern extension of the Escondida vein, with the following results reported: Carla Zone: CMRC-45 intersected 10 metres at a grade of 15.4 grams per tonne (g/t) gold and 981 g/t silver, for a gold equivalent grade* of 28.6 g/t.  Included in the intercept was 2 metres at a grade of 43.6 g/t gold and 2293 g/t silver (81.8 g/t gold equivalent*). MD066 intersected 15.59 metres at a grade of 6.6 g/t gold and 198 g/t silver, for a gold equivalent grade of 9.5 g/t. Includes 3.85 metres at a grade of 22.3 g/t gold and 678 g/t silver for a gold equivalent grade of 32.0 g/t. Escondida Zone: MD064 intersected 10.4 metres at a grade of 11.6 g/t gold and 777 g/t silver, for a gold equivalent grade of 22.7 g/t. MD061 intersected 2.67 metres at a grade of 27.3 g/t gold and 245 g/t silver, for a gold equivalent grade of 30.8 g/t. *Gold equivalent grade is the aggregate of the gold and silver grades using a silver:gold ratio of 60:1 and assumes 100% metallurgical recoveries.  Drilling by Exeter on this project now totals 4,181 metres. Drilling will recommence on the project early in 2007 and is planned to continue through the year.  Cerro Puntudo Project  Santa Cruz Province The 235 square kilometre Cerro Puntudo project is approximately 100 kilometres west of the Cerro Vanguardia mine in Santa Cruz. The known mineralization is considered to be epithermal in character, hosted within Jurassic age, felsic volcanic rocks. Prior to drilling, Exeter completed  36      geological, geochemical and induced polarization geophysical surveys to better define surface mineralization discovered by CVSA. The resistivity response to the known mineralization was best developed at the Rico and La Quebrada zones. Detailed ground magnetic surveys were conducted to better delineate the structures, and to indicate possible plunges to the mineralized zones.  Exeter conducted two drilling programs on the project during 2005, and a third program during second quarter, 2006. The first program consisted of 34 reverse circulation drill holes, drilled to down-hole depths of between 40 to 109 metres, for a total of 2,179 metres. A second drill program was conducted in May, 2005 comprising 21 holes for 1,719 metres.  Drilling 2006 The 2006 drill program included 13 reverse circulation percussion drill holes for a total of 1,699 meters and was aimed at grid testing the potential of three of the five mineralized bodies discovered to date. Drill holes were designed to intersect mineralization at approximate horizontal spacings of 50 meters and 30 meters beneath previous intersections. This drilling program showed mineralization at both the Rico and Quebrada North zones to be open at depth while drilling on the Quebrada Zone appears to close economic tenor mineralization at depth. Reported results from the Rico Zone include drill hole CPRC-61 which intersected 12 metres averaging 4.4 g/t gold, including 1 metre grading 11.2 g/t gold and 1 metre grading 34.1 g/t gold and drill hole CPRC-62 which intersected 15 metres at 3.2 g/t gold and 13 g/t silver. At the Quebrada North Zone drill hole CPRC-64 intersected 9 metres grading 3.9 g/t gold
and 8 g/t silver.  The 1,699 metres drilled in 2006 bought the total metreage drilled at Cerro Puntudo to 5,597 metres.  Verde Silver Project  Santa Cruz Province Silver mineralization on the Verde property, in western Santa Cruz Province, relates to at least 30 geological structures. Mineralization is epithermal in character, with vein quartz and alteration zones in close proximity to a silica lithocap.  The North Vein Zone comprises a 600 metre long vein and a less well exposed quartz stockwork zone, within a rhyolite flow dome. The South Vein Zone consists of 6 outcropping silver-bearing quartz veins within a one kilometre wide target area. Individual veins trend northerly and can be traced over strike lengths up to 700 metres. Previous work by CVSA included geological mapping and rock chip sampling that returned samples strongly anomalous in silver (+15 g/t silver) over a large area.  Exeters exploration program confirmed the anomalous silver values at Verde. Detailed geological mapping and a detailed ground magnetic survey were completed. The magnetic survey was performed to identify drill targets within the +70% of the potentially mineralized area that is covered by shallow sand and gravel.   37       Drilling 2006 In 2006 the Company conducted the first drilling program on the property comprising 42 reverse circulation percussion holes for a total of 2,044 metres. The drilling identified silver mineralization in six epithermal veins and in a broad zone of quartz stockwork mineralization. Reported results from drilling were as follows: Drill hole VRC-21, in the North Vein Zone, intersected mineralization over the entire 52 metre length grading 67 g/t silver and 0.075 g/t gold. The best individual vein intercept in the North Zone was from drill hole VRC-40 which intersected 4 metres at 219 g/t silver. Best results reported from two veins in the South Vein Zone, located 2 kilometres south of the North Vein Zone, returned 2 metres grading 310 g/t silver and 7 metres grading 97 g/t silver respectively.  Further exploration is planned in the latter part of 2007 to evaluate the potential for a large stockwork silver system.  Calandria Project - Santa Cruz Province  The Calandria Project is thought to have potential for high-level low sulphidation style epithermal gold deposits. Geologic mapping was conducted and a ground magnetic survey was underway at year end with some 600 line kilometres completed.  In 2007, it is proposed that the magnetic survey and geochemical sampling will be completed and, if results are encouraging, be followed by a drilling program.  Estelar Projects  Acquisition terms In July 2003, the Company completed the acquisition of Estelar Resources Limited (Estelar), a British Virgin Island corporation that owns the rights to four mineral projects in Argentina. The consideration paid for the acquisition of Estelar was the issuance of 1,000,000 common shares of the Company to Estelars shareholders. The Estelar properties carry a 2% NSR, payable to the previous owner, AMD.  Property Description The Estelar projects currently cover approximately 67 square kilometres of exploration rights in central, western Argentina.  Individually, the properties are referred to as the Quispe, Rosarita and El Salado gold projects - all of which have the potential for the discovery of epithermal gold deposits and/or porphyry gold-copper systems. Following negative exploration results and unsuccessful attempts to joint venture projects, Exeter excluded the Llanos Ricos and Dolores projects, and titles peripheral to the core areas of El Salado, Quispe and Rosarita from the agreement. There are no exploration commitments on the projects.  Quispe Project  Catamarca Province The Quispe Project is located in southwestern Catamarca province in northwest Argentina and covers 30 square kilometres of exploration rights. The project was identified through ground  38      follow-up of satellite-imagery color anomalies. The target is a porphyry copper-gold deposit and/or high-sulphidation epithermal gold system.  Previous mapping, trenching, sampling and geophysical surveys conducted by AMD defined a number of drill-ready copper and gold targets on the main Quispe prospect. The Company continues to offer the property for joint venture.  Rosarita Project  San Juan Province The Rosarita Project, located in San Juan Province, covers 30 square kilometres of exploration rights and has potential for a low-sulphidation epithermal gold system. The project lies immediately south of Intrepids Casposo gold-silver development stage deposit, which is the subject of a pre-feasibility study for the development of an open pit/underground gold mine.  Previous mapping, geochemical sampling and geophysical surveys by AMD and Battle Mountain Gold Company defined several low priority drill targets at Rosarita. Prospecting conducted by Exeter in 2003 did not define any high-priority targets. In 2004, the project was joint-ventured to Intrepid Minerals Corp. (Intrepid), who drilled three holes without encountering significant mineralization. Intrepid withdrew from the agreement in 2005, having fulfilled its minimum commitment. No further work has been conducted. The project is being retained as it is considered to have untested exploration potential.  El Salado Project  San Juan Province The El Salado property has an area of 9 square kilometres and covers a large low grade copper-gold porphyry system. The property is located 200 kilometres north of San Juan City, the capital of San Juan Province, Argentina.  Previous AMD exploration including the drilling of 30 holes, on the El Salado property discovered low-grade copper-gold porphyry system. The system may have potential for smaller zones of higher grade mineralization, which could be extracted profitably with elevated copper prices.  No work was conducted on El Salado, and it is proposed that in due course the Company farm out the project.  Minera Rio de la Plata Projects Acquisition terms In November 2003, the Company entered into an option agreement to acquire a 100% interest in three gold properties, Agua Nueva, La Ramada and Rosarita South, from Minera Rio de la Plata (MRP), a private, arms length Argentine company. Tenements peripheral to the Don Sixto project and Rosarita project were relinquished from the Agreement during 2006 resulting in retention of 40 tenements totaling 176 square kilometres.  The option agreement requires payments totaling $440,000 by October 2015 and provides for a 2% NSR, which Exeter can purchase outright for $750,000 payable to MRP from future  39      production. There are no minimum annual exploration expenditure commitments on these properties.  Property Description  Agua Nueva (Don Sixto North)  Mendoza Province The Agua Nueva property covers an area of approximately 170 square kilometres that adjoins the Companys Don Sixto gold property to the east, west and north. Widely-spaced soil geochemical sampling, six kilometres northwest of Don Sixto has defined a large arsenic soil anomaly. Agua Nueva also covers a set of fault structures that are similar in orientation to the mineralized structures at Don Sixto. The structures will be prospected by Exeter to define targets for drilling, and to test possible extensions to the Don Sixto mineralization.  Recent Work: Regional prospecting and exploration targeting Ikonos alteration and structural anomalies, with signatures similar to Don Sixto, was conducted during final quarter of 2006.  La Ramada  La Rioja Province The property comprises exploration titles over a 2.4 square kilometre area. The Company will undertake mapping and geochemical sampling to define targets for drilling and will likely acquire additional lands in the area.  Conceptual studies identified a section of the Argentine Precordillera in La Rioja Province as having potential for sediment-hosted and replacement-style gold deposits Early stage exploration by a previous operator defined a number of exploration targets that the Company plans to follow up with mapping and geochemical sampling to identify drill targets.  Rosarita South  San Juan Province Following negative exploration results, the Rosarita South property covering 42.8 square kilometres and located immediately south of the Rosarita Project, was relinquished from the MRP Agreement during 2006.  A General Discussion of the Political and Economic Climate in Chile  Country Overview Chile or the Republic of Chile is located in southwestern South America, bounded to the north by Peru; to the northeast by Bolivia; and to the east by Argentina. Chile occupies a long coastal strip of land between the Andes Mountains and the Pacific Ocean. Santiago is the capital and largest city with a population of about 6 million.  Government Chile is a democratic republic headed by a President, who is assisted by a cabinet of ministers. The President is elected to a four-year term in a direct election and must receive a majority of the votes cast. If more than two candidates run for the office of president, and none receives a majority of the votes, a run-off election is held between the two who received the largest pluralities. The President cannot be re-elected to a consecutive second term.  40       The President has the power to introduce bills and promulgate laws; to call referendums; to submit constitutional amendments; to appoint Cabinet members, Ambassadors and regional authorities (no Senate approval is required), the Comptroller General of the Republic (with the consent of the Senate), the Supreme and Appellate court judges (from slates submitted by the Supreme Court), and to appoint and remove the Commanders in Chief of the Armed Forces.  The organization of the legislature of Chile is similar to that of the United States. The Chilean National Congress consists of a lower chamber, the 120-member House of Deputies, and an upper chamber, the 38-member Senate. Currently, 120 Deputies are elected in 60 districts and 38 Senators in 19 districts. Senators serve for 8 years with staggered terms, while Deputies are elected every 4 years.  Chile's judiciary is independent and includes a court of appeal, a system of military courts, a constitutional tribunal, and the Supreme Court. The highest Court is the Supreme Court, made up of 21 members, one of whom is elected president by his peers every three years. In addition, there are appellate, civil and military courts. In June 2005, Chile completed a nation-wide overhaul of its criminal justice system. The reform has replaced inquisitorial proceedings with an adversarial system more similar to that of the United States.  Economy  Chile has pursued a dynamic market-oriented economy characterized by a high level of foreign trade. The government's role in the economy is mostly limited to regulation with generally sound economic policies. The 1973-90 military government sold many state-owned companies, and the three democratic governments since 1990 have continued privatization, though at a slower pace. Chile is strongly committed to free trade and has welcomed large amounts of foreign investment.  After a decade of impressive growth rates, Chile experienced a moderate downturn in 1999, brought on by the global economic slowdown. The economy remained sluggish until 2003, when it began to show clear signs of recovery, achieving 3.3% real GDP (Gross Domestic Product) growth.  Approximately 35% of the countrys GDP comes through its exports. Chiles overall trade profile has traditionally been dependent upon copper exports, and the rise in copper prices has reinforced the dependency further.  Chile has made an effort to expand non-traditional exports. In 1975, non-mineral exports made up just over 30% of total exports, whereas in recent years they account for about 60%. The most important non-mineral exports are forestry and wood products, fresh fruit and processed food, fishmeal and seafood, and wine. Chile's financial sector has grown faster than any of the other areas of the economy over the last few years; a banking reform law approved in 1997 broadened the scope of permissible foreign activity for Chilean banks. The Chilean Government implemented further liberalization of capital markets in 2001.  Currency  The current peso was introduced in 1975, replacing the escudo at a rate of 1 peso = 1,000 escudos (Chiles previous form of currency). The current rate of exchange is approximately 539  41      pesos for every U.S. Dollar. Banknotes currently in use are 1,000, 2,000, 5,000, 10,000 and 20,000 pesos.  Mining Industry  Mining has played a vital role in the Chilean economy since the late 19th century, and it now accounts for approximately 35% of global copper production. The state-owned firm Codelco is the world's largest copper-producing company with estimated copper reserves of 200 years.  Environmental Regulations  Chilean Environmental law number 19.300 was enacted to ensure the right to live in an environment free of pollution, the right to environmental protection [and] preservation of nature, as well as the right to the conservation of the environmental heritage. In accordance to this environmental law, all mining project leaders must submit an EID or Environmental Impact Declaration to the corresponding Regional Environmental Commission. Mining Operations and Development Projects require a further Environmental Impact Study (EIS) to be completed. An EIS must address the following: a description of the project or activity; a detailed description of the project or activity's potential environmental impacts; any possible risks to the environment; measures to eliminate or minimize adverse effects, and restoration plans to be carried out; follow-up plans; and a plan to meet the
requirements of applicable environmental legislation. If the Regional Environmental Commissions ruling on the submitted EIS is negative, the basis for that decision must be set forth along with an explanation of what the party must do to meet applicable standards. Approval is given if the EIS meets environmental standards, accepts responsibility for impacts caused by its project, and proposes appropriate mitigation, compensation, or restoration measures to counteract such impacts.  Discussion of the Companys Mineral Properties in Chile  The material individual mineral properties are described below.  Southern Chile - Magallanes In 2006, Exeter entered into an agreement with Rio Tinto Mining & Exploration Limited (Rio Tinto) covering 48 exploration targets in Magallanes, Chile. Rio Tinto has the right to acquire a 60% interest in any of these targets once Exeter has drilled 5,000 metres on any target by notifying the Company of its intention to acquire an interest. Should Rio Tinto not exercise this option, it will be entitled to a 1% royalty from production on that property.  Following a detailed review of the Rio Tinto data, the Company applied for concessions over some of the targets including Punta Southerland, Pico Batchelor and Monte del Sol covering a total area of 5,400 hectares. Field work commenced in early November 2006, with two field campaigns completed prior to year end. Some encouraging results were returned, particularly from stream sediment and rock chip sampling. Further exploration is planned through to the close of the current field season in the second quarter, 2007.  42       Northern Chile - Maricunga (Caspiche) Property In 2005, the Company entered into an agreement with Minera Anglo American Chile Limitada and Empresa Minera Mantos Blancos S.A. (Anglo American) over seven properties in the Maricunga region of Chile.  The terms of the agreement provide for increasing annual drilling and exploration commitments over five years, and the phased reversion of five properties to Anglo American after the second and third years. Once Exeter has spent a total of US$2.55 million, including 15,500 metres of drilling, it will have earned a 100% interest in the remaining properties. Anglo American will be entitled to a 3% net smelter return from production.  All hard copy data received from Anglo American were digitized, and the satellite (Aster) imagery for the area secured, prior to the commencement of field work in November 2005. Magnetic data acquired for Caspiche has been reprocessed to delineate targets for epithermal gold mineralization. Exploration, including geochemical sampling and prospecting was conducted through the field season in early 2006. This work resulted in early reversion of five of the seven properties to Anglo American and allows Exeter to focus on the two most favorable properties, jointly referred to as the Caspiche project.  2006 Program  In the fourth quarter, contracts were entered into for camp accommodation, catering, geophysical programs, earthmoving and drilling. Camp construction was completed in November, and was immediately used for the geophysical and drill road earthmoving programs.  A geophysical program comprising CSAMT and VLF electromagnetic surveys, completed by Quantec in December, generated significant targets in support of a large, overburden covered high sulphidation gold-silver target.  Planned Work  Drilling is projected for the first quarter, 2007 on the Caspiche III portion of the property.  Cochrane A final report was provided to Rio Tinto in support of surrendering the Tranquillo and Furioso areas.  Mineral rights to the Confluencia project, located outside of the Rio Tinto Agreement contract area were secured in 2006.  Detailed sampling of the vein system is planned in early 2007.  Item 4A.  Unresolved Staff Comments Not applicable.  Item 5.  Operating and Financial Review and Prospects Overview The following discussion of financial condition, changes in cash flows, and results of operations of the Company for the past three fiscal years is based on the Companys consolidated financial  43      statements prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP) and should be read in conjunction with those consolidated financial statements and the related notes included therein.  The Company's consolidated financial statements, stated in Canadian Dollars and prepared in accordance with GAAP, the application of which, in the case of the Company, conforms quantitatively in all material respects for the periods presented with United States GAAP except for the measurement differences referred to in Note 19 to the consolidated financial statements of the Company.  The value of the U.S. Dollar in relationship to the Canadian Dollar was $1.17 as of December 31, 2006 and was $1.16 on March 26, 2007.  The Companys consolidated financial statements were prepared on a going-concern basis, which assumes that the Company will be able to realize assets and discharge liabilities in the normal course of business.  From incorporation in February 1984, the Company has been primarily a natural resource company, engaged in the business of exploration.  At this stage of its development the Company has no producing properties, and, consequently, has no operating income or cash flow.  Since its inception, the Company has financed its activities through the distribution of equity. In October 2006, the Company closed two private placements of 3,600,000 and 500,000 units respectively at a price of $2.50 per unit, for net proceeds of $9,800,000 (the Company paid $450,000 for finders fees in connection with the offering). The Company estimates that with  cash and cash equivalents at December 31, 2006 of $14,511,062 (working capital of approximately $12,250,000), it has sufficient funds to fund its currently planned activities during 2007. Should exploration at Don Sixto, or at other projects, be increased, or new projects be acquired, additional funds will be required.  Because all of its properties are at the exploration stage and it has no other sources of capital with which to fund its activities, over the next several years, the Company expects to raise funds through successive
equity issuances. The timing of such financings will depend, among other factors, on the success of the Companys exploration programs, its ability to attract joint-venture partners (to assist with the cost of exploration), and the general state of the resource industry.  The Companys activities are directed primarily at mineral exploration. It does not have a producing mine or processing facility. Activities over the last three years include the exploration of its Don Sixto gold project and other projects and general exploration to locate and evaluate mineral properties that have been or may be acquired by the Company. Costs incurred for general exploration that did not result in the acquisition of mineral properties with ongoing exploration or development potential were charged to operations. Exploration costs relating to the Companys properties are capitalized as mineral properties and deferred costs. Should the Company abandon a property or project, the related deferred costs will be charged to operations. Administrative costs not associated with property exploration were charged to operations. Costs associated with the evaluation of new opportunities are
charged to operations, as project examination costs, when incurred. Excess cash is invested by the Company in short-term investments.  The Company has not yet determined whether its properties contain ore reserves that are economically recoverable. As a result, the Company is considered an exploration stage company.   44       The recoverability of amounts shown for mineral properties and deferred costs is dependent upon the discovery of economically recoverable reserves, the completion of positive feasibility studies, the confirmation of the Companys interest in the underlying mineral claims, the ability of the Company to obtain necessary regulatory and environmental operating permits, the ability of the Company to obtain necessary financing to complete exploration and development, and the future profitable production therefrom or the disposition thereof.  Variation in Operating Results The Company presently is exploring its properties for sufficient reserves to justify production.  None of its properties are yet in production, and, consequently, the properties do not produce revenue.  Until such time as a production decision is made on one of its properties, little variation is expected in operating results from year to year; except that administration expenditures and exploration expenditures will increase or decrease, depending on the success of the Companys exploration programs, and its ability to finance such programs.  The Company derives interest income on its bank deposits and other short-term deposits.  Changes in the amount of interest received will be affected by changes in the rate of interest received on such deposits and the amount of cash held on deposit. The Company does not have any revenue from operations; consequently, cash balances will decline unless additional cash is received from the issue of shares or from the sale of the Companys projects.  Management periodically reviews the results of exploration, both internally, and externally with the assistance of mining professionals. Decisions to abandon, reduce, or expand exploration efforts on a property are based upon many factors, including geological assessment of the exploration potential of the property, land costs, estimates of future mineral prices, potential extraction methods and costs, the likelihood of positive or negative changes to the environment, permitting, taxation, labor and capital costs.  The dollar amounts shown as deferred exploration expenditures are direct costs of maintaining and exploring properties, including costs of structures and equipment employed on the properties and allocations of certain administrative management salaries, based on time spent, and directly related to specific properties, net of write-downs provided. These deferred amounts may not accurately reflect present or future values.  New Projects The Company continues to seek additional precious and base metals projects, to enhance shareholder value. There is no assurance that the Company will be able to locate suitable new projects on terms acceptable to it.  Administration Administrative expenses during fiscal 2007 are expected to be similar to those of 2006, however, expenses may increase significantly should the Company acquire new projects or increase its activities requiring additional administrative support. Expenses for future periods cannot be predicted.  A.
        Results of Operations Year ended December 31, 2006 vs. Year ended December 31, 2005  45       The Companys exploration program in Argentina and Chile continued, with $8,062,573 and $1,831,146 invested in the Don Sixto and CVSA properties, respectively. Expenditures on the Chilean properties totaled $803,024. Expenditures on the other projects were $177,065, for total exploration expenditures of $10,873,808 during the year ended December 31, 2006, an increase of $6,330,679 over expenditures for the year ended December 31, 2005. The increase was mainly due to the expanded exploration program at the Don Sixto Project.  The Company's loss from operations for the year ended December 31, 2006 increased by $1,596,499 over the loss for the 2005 year, to $5,288,640. The increased loss resulted mainly from increases in stock based compensation, stock exchange listing and filing fees, consulting and administrative salaries, management fees, loss on write-off of mineral properties and deferred costs, investor relations and travel and promotion.  Stock based compensation costs rose by $498,382 reflecting the fair value of options granted to employees and consultants during the year because of an increase in the fair value of options granted mainly due to an increase in the Companys share price, and because of a longer expected life of the options.  The Company saw an increase in consulting and administrative salaries of $377,009 to $559,902 which reflects the Companys continued growth and the necessity for additional human capital and bonuses paid at year end. The loss on write-off of mineral properties and deferred costs of $439,842 was as a result of managements decision to relinquish a number of low potential properties. The Company had an increase of $47,337 to $116,565 in 2006 attributed to stock exchange listing and filing fees associated with the listing of its common shares on the AMEX in the November 2006 and due to the capital raisings completed during the year.  Accounting and audit, consulting, and legal fees rose by $26,625, $377,009 and $40,278, respectively, over the amounts recorded for the 2005 year. These increases were a result of further administrative requirements from the Companys increased level of activity, the payment of bonuses, and the additional filing requirements associated with the AMEX listing.  The Company maintained similar investor relations activities in Canada, Europe and the United States in 2006 resulting in a slight decrease in expenditures of $2,644 over 2005, to $554,688. Travel and promotion costs rose by $172,866 to $463,921, principally because of increased travel by management to investor conferences and the costs associated with investor visits to the Companys properties. Property examination costs decreased by $271,094 to $84,055, reflecting the Companys efforts dedicated to its existing projects.  Year ended December 31, 2005 vs. Year ended December 31, 2004 During the year ended December 31, 2005, the Company invested $3,052,645 and $1,142,029 in the Don Sixto and CVSA properties respectively, on exploration. Expenditures on other projects were $348,455, for total exploration expenditures of $4,543,129 during the year ended December 31, 2005, an increase of $1,723,870 over expenditures for the year ended December 31, 2004.  The Company's loss for the year ended December 31, 2005 increased by $2,421,045 over the loss for the 2004 year, to $3,692,141. The increased loss resulted mainly from increases in stock based compensation, property examination costs, investor relations and travel and promotion.  Stock based compensation costs, primarily reflecting the fair value of options granted to directors, employees and consultants during the year, rose by $1,617,267, due to an increase in the number of options granted, and an increase in the fair value of outstanding options that  46      resulted from higher volatility in the Companys share price and a longer expected life of the options.  Accounting and audit, consulting, and legal fees rose by $37,035, $97,695 and $59,641, respectively, over the amounts recorded for the 2004 year, as a result of increased administrative requirements from the Companys increased level of activity and the filing of a registration statement of the Company in the United States on Form 20-F. The Companys increased investor relations activities in Canada, Europe and the United States in 2005 resulted in an increase in expenditures of $260,895 over 2004, to $557,332. Travel and promotion costs rose by $190,301 to $291,055, principally because of increased travel by management to investor conferences and the costs associated with investor visits to the Companys properties. Property examination costs rose by $295,740 to $355,149, reflecting the Companys increased activity in 2005.  B.
        Liquidity and Capital Resources The Companys primary source of funds, since incorporation, has been the issuance of common shares pursuant to various public and private financings. The Company has no revenues from mining operations to date and does not anticipate mining revenues in the foreseeable future.  The Companys cash and cash equivalent balances at December 31, 2006 totaled $14,511,062, compared with $7,788,697 at December 31, 2005. Aside from such cash and equivalents, the Company has no material unused sources of liquid assets. During the year ended 31 December, 2006, the Company received $18,975,198 from the issue of common shares, through private placements and the exercise of warrants and stock options.  The Company has no loans or bank debt and there are no restrictions on the use of its cash resources.  At December 31, 2006, the Company had met all its expenditure requirements under the various agreements pursuant to which it holds properties or has interests in.See Item 4.D. - Property, Plant and Equipment.  The Company may decide to acquire new properties or increase it exploration activities, at which time it may require additional equity financing.  Any decision to undertake new equity financing will be based upon the results of ongoing exploration and the response of the equity markets to the Companys property holdings, exploration results, and business plan.  The Companys working capital at December 31, 2006 totaled $12,373,333. The Company believes that it will have sufficient cash resources, inclusive of cash and cash equivalents at December 31, 2006, to fund its planned operations for the next twelve months however additional funds will be required, if the Company increases its planned exploration activities or if new projects are acquired. The Company does not have any source of funds, other than from the issuance of capital stock and the possible joint venture or sale of its mineral properties. While the Company has been successful in the past in raising the necessary funds for the exploration of its mineral properties, there is no assurance that funding will continue to be available. If funding cannot be secured, the Company may be forced to curtail its exploration, relinquish certain of its properties, or allow its interest to be diluted pursuant to
the terms of any joint venture or option agreements.   47       Additional funds will be required, if the Company increases its planned activities, particularly planned activities on the Don Sixto project, or if the Company decides to acquire additional exploration projects. Management anticipates that it will raise any required funds through the issuance of common shares. The exact timing, nature and amount of such fundraising will be dependent upon market conditions.  Year Ended December 31, 2006 The Companys cash and cash equivalents at December 31, 2006 totaled $14,511,062, compared with $7,788,697 at December 31, 2005. Cash used for operating activities and for investing in deferred exploration, was $2,289,260 and $10,725,523, respectively, in the year ended December 31, 2006; increases of approximately $475,000 and $6,588,000, respectively over the year ended December 31, 2005. During the year, the issuance of 9,990,250 shares, net of share issue costs, provided cash, before share issue costs, of $18,975,198; an increase of $7,519,748 over the year ended December 31, 2005, and resulting in an increase in cash and cash equivalents of approximately $14,511,000 at December 31, 2006.  The Company continues to use its cash resources to fund project exploration and administration. The Company has no material liquid assets, other than its cash and cash equivalents, and no significant income. The Company expects that, with cash on hand of $14.5 million at December 31, 2006 that it has sufficient resources to meet its planned expenditures in 2007; however, should the Company increase its exploration activity beyond that which is planned or acquire new projects, it will be required to raise additional funds.  Year Ended December 31, 2005 The Companys cash and cash equivalents at December 31, 2005 totaled $7,788,697, compared with $2,458,873 at December 31, 2004. Cash used for operating activities and for investing in deferred exploration, was $1,814,599 and $4,137,379, respectively, in the year ended December 31, 2005; increases of approximately $953,000 and $1,417,000, respectively, over the year ended December 31, 2004, as the Company increased its level of activity.  During the year, the issuance of 9,944,876 shares, net of share issue costs, provided cash of $11,147,705; an increase of $8,253,551 over the year ended December 31, 2004, and resulting in an increase in cash and cash equivalents of approximately $5,330,000 at December 31, 2005.  C.
        Research and Development, Patents and Licenses, Etc. The Company conducts no Research and Development activities, nor is it dependent upon any patents or licenses. For a description of the Companys mineral exploration activities please seeItem 4D  Property, Plant and Equipment.  D.
        Trends None of the Companys mineral properties are currently in production or generate revenue. Please seeItem 4B  Business Overview and Item 4D  Property, Plant and Equipmentfor a description of proposed expenditures in the coming year.   48       E.
        Off-Balance Sheet Arrangements The Company currently has no Off-Balance Sheet Arrangements as defined in the General Instructions Part 1 Item 5E for completing this Form 20F.  F.
        Tabular Disclosure of Contractual Obligations The Company leases offices in Vancouver and Argentina 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, if exploration results so warrant.  Commitments as at December 31, 2006 are summarized in the tables below.  Payments Due by Period (000s)Cash Payments
        Total
        Less than 1 Year
        1-3 Years
        4-5 Years
        After 5 YearsOffice leases
        $    375,000
        $            79,000
        $  160,000
        $      103,000
        $       34,000Cognito-Don Sixto
        466,000
        58,000
        116,000
        116,000
        175,000MRP Properties
        395,000
        25,000
        70,000
        100,000
        200,000Total
        $ 1,236,000
        $          162,000
        $  346,000
        $     319,000
        $     409,000Property Expenditures
        Expenditures Due by Period (000s)Maricunga
        $ 2,801,000
        $          120,000
        $  816,000
        $      1,865,000
        $                -Total
        $ 2,801,000
        $          120,000
        $  816,000
        $      1,865,000
        $                -  Item 6.  Directors, Senior Management and Employees A.
        Directors and Senior Management The following table lists, as of March 30, 2007, the names of the directors of the Company.  The directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.  All the directors and executive officers are residents of Canada, except Bryce Roxburgh, who is a resident of the Philippines.  Directors  Name
        Date First Elected/AppointedBryce Roxburgh
        March 20, 2003Yale Simpson
        June 10, 2003Douglas Scheving (1) (2)
        July 16, 1993Michael McPhie (1) (2)
        October 8, 2004Paul MacNeill (2)
        January 21, 2004William McCartney (1)
        September 1, 2005  (1)
        Denotes member of the Audit Committee. (2)
        Denotes a member of the Compensation Committee.  The following table lists, as of March 30, 2007, the names of the executive officers of the Company. The executive officers serve at the pleasure of the Board of Directors.      49       Executive Officers Name
        Position
        Date ofAppointmentYale Simpson
        Chairman
        June 10, 2003Bryce Roxburgh
        President & Chief Executive Officer
        March 12, 2003Cecil Bond
        Chief Financial Officer
        April 13, 2005R. Jeremy Perkins
        Vice-President, Development and Operations
        February 1, 2005Susan McLeod
        Corporate Secretary
        October 8, 2004  Bryce Roxburghobtained a Bachelor of Science degree in geology and geophysics from Sydney University in 1971 and has 34 years of experience in the exploration and mining industry, including the negotiation of joint venture agreements. Between 1971 and 1989, he worked for international mining groups, Amoco Minerals Australia Company and Cyprus Mines Corporation, where he was Regional Manager for Eastern Australia and South East Asia. Between 1989 and 2000, he was Exploration Manager for Arimco N.L. and Climax Mining Limited in Eastern Australia, South East Asia and South America, including Argentina.  From July 2000 he worked as an independent consultant until appointed as President and CEO of the Company in 2003.  Mr. Roxburgh spends 100% of his time on Company business. Yale Simpsonobtained a Bachelor of Applied Science (geological engineering) degree in 1970. Mr. Simpson has 34 years of experience as a geologist, exploration manager and CEO of companies involved in exploration and development projects in Australia, Africa, Eastern Europe and South America. Those companies included Pennzoil of Australia Ltd. (subsequently Battle Mountain Gold), Chevron Exploration Ltd., Australmin Holdings Ltd. and Black Swan Gold Mines Ltd.  He was CEO and later chairman of Argosy Minerals Inc. from 1993 until 2001.  He is currently also a director of Diamonds North Resources Ltd. and Dynasty Metals & Mining Inc.  Mr. Simpson is the President of the British Columbia Museum of Mining and Co-Chair of the Britannia Development Corporation. Mr. Simpson spends 80% of his time on Company business. Douglas Schevinggraduated with Diplomas of Technology in Mining and Extractive Metallurgy from the British Columbia Institute of Technology in 1972 and has 20 years experience as a mill superintendent and 10 years experience in the administration of public mining exploration companies. He has worked for Falconbridge in Canada, Mosquito Creek Gold Mines, and Sumac Ventures. For three years Mr. Scheving was a contractor and General Manager for the British Columbia Ministry of Environment at Grand Forks B.C. Since 1993, Mr. Scheving has administered junior public companies and currently serves as Corporate Secretary and a director of Golden Dynasty Resources Limited, a mineral exploration company traded on the TSX Venture Exchange. Michael McPhiegraduated with a B.Sc. (honours) from Simon Fraser University and an M.Sc in Management and Environment from Royal Roads University. He is a principal of HBA Management Consultants Ltd., a company that works with both resource companies and government on major project development, regulatory affairs, environmental management, and stakeholder relations issues. In November 2004, he was named President and CEO of the Mining Association of British Columbia.  Previously, he was senior policy adviser and project director for western Canada for Natural Resources Canada, and a consultant with Knight Piesold Ltd. He is currently CEO of the Britannia Development Corporation. Paul MacNeillis an attorney who has practised securities and corporate finance law in Vancouver, British Columbia since 1982. Prior to November 2002, Mr. MacNeill was a partner  50      and Chairman of the Vancouver, British Columbia law firm of Campney & Murphy. Mr. MacNeill is a member of the Bar of the Provinces of British Columbia and Ontario. Mr. MacNeill provides securities and corporate finance legal advice to a large number of public companies, many of which are engaged in the exploration, development and production of mineral and natural resources properties. Mr. MacNeill has a Bachelor of Laws degree from the University of Toronto. In the Past five years, M. MacNeill has also held the following positions with the following public companies: Adastra Minerals Inc. (Director: March, 1998  present; Corporate Secretary: May, 2003  present); Christopher James Gold Corp. (Director: November, 2005  present); New World Resource Corp. (Corporate Secretary: January, 2004  September, 2004); Diagem International Resource Corp. (Director: December, 1997  December, 2003); E-xact Transactions Ltd. (Director: August, 1999  July, 2003); Dynasty Metals and Mining Inc.(Director: May, 2003  present); Minefinders Corporation Ltd. (Director: May, 1995  present; Secretary: July, 1995  present); Northern Lion Gold Corp. (Director: December, 1999  present). William McCartneyis a Chartered Accountant with over 20 years experience. Mr. McCartney is a business consultant and former founding partner of Davidson & Company Chartered Accountants (1984  1990), where he specialized in taxation, mergers and acquisitions, structured financings and business advisory services. He is a chartered accountant and has been in good standing with the Institute of Chartered Accountants of British Columbia since 1980. He is a graduate of Simon Fraser University (1978, Bachelor of Arts Business Administration). Mr. McCartney also holds or has held the following positions with the following public companies in the last five years: Newstrike Capital Inc. (Director: April, 2006  present); Bowram Energy Inc. (Corporate Secretary and Director: December, 2006  present); Woodbridge Energy Ltd. (CFO, Secretary and Director: March, 2006  present) Dynasty Metals and Mining Inc. (CFO: June, 2000  present; Secretary: September, 2003  present); Southwester Resource Corp. (Director: March, 2004  present); Mercer International Inc. (Trustee: January, 2003  present); Aurora Platinum Corp. (Director: March, 2004  June, 2005); Stealth Ventures Ltd. (Director: December, 1996  July, 2004); Olly Industries Inc. (Director: November, 2002  May, 2004; President: November, 2002  May, 2004). Cecil Bondgraduated from the University of Cape Town in 1981 with a Bachelor of Commerce Degree. He obtained his Chartered Accountant designation in 1985. Between 1983 and 1988 he was an accountant with Ernst and Young in South Africa. Between 1988 and 1994 he was involved in various private businesses in South Africa.  In 1995 and 1996 he was an accountant with PricewaterhouseCoopers in Vancouver.  Between 1996 and March 2005 he served in various positions, including President and CEO, CFO, corporate secretary and as a director of Argosy Minerals Inc and Argosy Mining Corp. He currently serves as a director of Argosy Minerals Inc and as CFO of Christopher James Gold Corp. Mr. Bond currently spends 80% of his time on Company business. R. Jeremy Perkins, a project and process consultant,has a chemical engineering background and over 35 years experience in the mining and metallurgical industries. He has held technical, operational, and corporate management positions in Australia, Papua New Guinea, South Africa and the United Kingdom. He has specialized in mineral project development programs and feasibility studies on many mining projects, including gold, platinum group metals, copper, lead-zinc, nickel-cobalt and uranium. His experience includes mine commissioning and production, testwork and R&D, engineering and process design, operations management, project development and optimisation. It also includes environmental design and management as well as  51      community, government and public relations.  Prior to establishing his consultancy in 1999, Mr Perkins was General Manager  Base Metals for Savage Resources Ltd from 1996 to 1999 and General Manager- Mining for Delta Gold NL from 1991 to 1996.  Both Delta and Savage were listed Australian public companies. Mr. Perkins spends approximately 90% of his time on Company business. Susan McLeodis an attorney with Bachelor of Law and Bachelor of Science degrees from the University of British Columbia. She is a member of the Bar of the Province of British Columbia, practising securities and corporate finance law. She is an associate at MacNeill Law.  From September 1997 to September 2003, Ms. McLeod was an associate at the Vancouver, British Columbia law firm of Campney & Murphy.  She provides advice to both private and public companies, many of which are engaged in the exploration, development and production of mineral and natural resources properties. She spends approximately 5% of her time of Company affairs. No director and/or executive officer has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a director and/or executive officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony. There are no family relationships between any two or more directors and executive officers. There are no arrangements or understandings between any two or more directors or executive officers, pursuant to which he was selected as a director or executive officer.  B.
        Compensation The Company had no arrangements, except for a monthly payment of $2,500 to William McCartney for his services as Chairman of the Audit Committee, pursuant to which directors were compensated by the Company or its subsidiaries for their services in their capacity as directors, or for committee participation, involvement in special assignments, or for services as a consultant or expert, during the most recently completed fiscal year. The aggregate amount of compensation paid by the Company and its subsidiaries during the Companys most recent fiscal year, directly and indirectly, including directors fees, to all officers and directors in their capacity as such, was $1,204,005. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board.  The Board may award special remuneration to any director undertaking any special services on behalf of the Company other than services ordinarily required of a director. Other than as indicated above or inItem 6C  Board Practices, no director received any compensation for his or her services as a director, including committee participation and/or special assignments.  To assist the Company in compensating, attracting, retaining and motivating personnel, the Company grants stock options to directors, executive officers and employees.  The Company has adopted an incentive stock option plan (the Plan). The essential elements of the Plan provide that the aggregate number of shares of the Companys capital stock issuable pursuant to options  52      granted under the plan may not exceed 20% of the issued and outstanding shares.  Shareholders approved the issuance of up to 5,893,119 stock options at the annual general meeting held May, 2006. The Board has amended the Plan to increase the ceiling from 5,893,119 to 7,567,203 common shares (20% of the issued and outstanding shares as of that date). The amendment to the Plan is subject to approval by the Companys shareholders at the 2007 Annual Meeting and final Exchange approval.  The following table sets forth the compensation paid to the Companys directors, executive officers and members of its administrative body during the last fiscal year.  Summary Compensation Table Annual Remuneration
        Long Term RemunerationAwards
        PayoutsName and Principal Position
        Salary ($)
        Bonus($)
        Other Annual Compensation ($)
        Securities Under Options/ SARs Grant ed (#)
        Restricted Shares or Restricted Share units ($)
        Long Term Incentive Plan Payouts ($)
        All Other Compensation ($)Bryce Roxburgh, President, CEO and Director
        NIL
        NIL
        $282,000
        172,500
        NIL
        N/A
        NILYale Simpson, Chairman and Director
        NIL
        NIL
        $246,000
        172,500
        NIL
        N/A
        NILWilliam McCartney, Director
        NIL
        NIL
        $30,000
        20,000
        NIL
        N/A
        NILPaul MacNeill, (1)Director
        NIL
        NIL
        NIL
        20,000
        NIL
        N/A
        NILDouglas Scheving,Director
        NIL
        NIL
        NIL
        20,000
        NIL
        N/A
        NILMichael McPhie,Director
        NIL
        NIL
        NIL
        20,000
        NIL
        N/A
        NILCecil Bond, CFO
        NIL
        NIL
        $195,000
        125,000
        NIL
        N/A
        NILR. Jeremy Perkins,Vice President, Development and Operations
        NIL
        NIL
        $266,633
        NIL
        NIL
        N/A
        NIL   (1)
        MacNeill Law, a private corporation controlled by Paul MacNeill was paid $156,372 for legal fees and share issue costs during the year.   No funds were set aside or accrued by the Company during Fiscal 2006 to provide pension, retirement or similar benefits for directors or executive officers.   53       C.
        Board Practices Members of the Board have served in their respective capacities since their election and/or appointment and will serve until the next annual general meeting of shareholders or until a successor is duly elected, unless the office is vacated in accordance with the Articles and Bylaws of the Company. The executive officers of the Company serve at the pleasure of the Board. Please seeItem 6A - Directors and Senior Managementfor details of periods of service as a director.  Board Nomination and Corporate Governance  Nominees for the Companys Board of Directors are selected by a majority of our independent directors. The Company has adopted a formal written board resolution addressing the nomination process and such related matters as may be required under federal securities laws.  The Companys Board of Directors is responsible for the Companys Corporate Governance policies. The Companys Board of Directors has determined that all the members of the Compensation and Audit Committees are independent, based on the criteria for independence and unrelatedness prescribed by the American Stock Exchange under section 121A of the Company guide.  Audit Committee The Companys Board of Directors has a separately designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act.  The Companys Audit Committee is comprised of William McCartney, Michael McPhie and Douglas Scheving, all of whom, in the opinion of the Companys Board of Directors, are independent (as determined under Rule 10A-3 of the Exchange Act and the rules of the American Stock Exchange) and are financially literate.  The members of the Audit Committee do not have fixed terms and are appointed and replaced from time to time by resolution of the board of directors.  The Audit Committee meets with the President and Chief Executive Officer and the Chief Financial Officer of the Company and the Companys independent auditors to review and inquire into matters affecting financial reporting, the system of internal accounting and financial controls, as well as audit procedures and audit plans.  The Audit Committee also recommends to the Board of Directors the auditors to be appointed. In addition, the Committee reviews and recommends to the board of directors, for approval, the annual financial statements, the Management Discussion and Analysis, and undertakes other activities required by regulatory authorities.  The full text of the Audit Committee Charter is available on request from the Company. Compensation Committee The Company has an independent Compensation Committee comprised of Michael McPhie, Douglas Scheving and Paul MacNeill. The committee meets periodically to review the terms and conditions of employment and remuneration of officers and directors of the Company.  54        D.
        Employees The following table sets forth the number of direct and indirect employees of the Company and its subsidiaries at December 31 for each of the indicated periods. Year
        Canada
        Argentina
        Chile
        Total2006
        7
        72
        25
        1042005
        6
        44
        5
        552004
        5
        24
        -
        292003
        3
        9
        -
        12  The number of employees has continued to increase as the Companys activities have expanded in Argentina and Chile.  Employees in Canada are principally the executive officers and those involved in administration. Employees in Argentina are employed as the exploration manager, property title manager, accountant, geologists, exploration assistants and administrative assistants and in Chile as exploration manager and exploration assistants.  None of the Companys employees is a member of a labor union.  E.
        Share Ownership The Company is a publicly-owned Canadian corporation, the shares of which are held by U.S. residents, Canadian residents and other foreign residents. The Company is not controlled by another corporation.  The table below lists, as of March 23, 2007, directors and executive officers who beneficially own the Companys voting securities and the amount of the Company's voting securities owned by the directors and executive officers as a group.  Shareholdings of directors and executive officers  Title ofClass
        Name of Beneficial Owner
        Amount & Nature ofBeneficial Ownership
        Percent of Class**Common
        Bryce Roxburgh (1)
        4,667,250
        12%Common
        Yale Simpson (2)
        2,275,750
        5.85%Common
        Douglas Scheving (3)
        222,400
        0.58%Common
        Michael McPhie (4)
        75,000
        0.20%Common
        Paul MacNeill (5)
        1,225,500
        3.2%Common
        William McCartney(6)
        225,000
        0.59%Common
        Cecil Bond (7)
        425,000
        1.1%Common
        Jerry Perkins (8)
        227,652
        0.60%Total Directors and Officers
        9,343,552
        24.12%  (1)
        Of these shares, 882,500 represent share purchase options; includes 2,500,000 shares registered in the name of Rowen. (2)
        Of these shares, 895,500 represent share purchase options. (3)
        Of these shares, 165,000 represent share purchase options. (4)
        Of these shares, 50,000 represent share purchase options. (5)
        Of these shares, 545,000 represent share purchase options; 675,000 common shares are registered in an account in the name of National Bank Financial of which Mr. MacNeill is the beneficial owner. (6)
        Of these shares, 225,000 represent share purchase options.  55       (7)
        Of these shares, 425,000 represent share purchase options. (8)
        Of these shares, 200,000 represent share purchase options.  **Based on 38,021,013 common shares issued and outstanding as of March 23, 2007 and stock options and warrants held by each beneficial holder exercisable within sixty days.  Stock options outstanding as at March 23, 2007 are detailed below:  Name
        Number of Options
        Exercise Price
        Expiry DateBryce Roxburgh
        82,000358,00070,000200,00072,500100,000
        $  0.405$    1.08$    1.12$    1.59$    2.52$    3.02
        15 August, 200821 January, 20097 July, 201030 December, 20103 May, 201111 November, 2011Yale Simpson
        93,000360,00070,000200,00072,500100,000
        $  0.405$    1.08$    1.12$    1.59$    2.52$    3.02
        15 August, 200821 January, 20097 July, 201030 December, 20103 May, 201111 November, 2001Paul MacNeill
        100,000250,00070,00050,00020,00055,000
        $  0.405$    1.08$    1.12$    1.59$    3.02$    2.52
        15 August, 200821 January, 20097 July, 201030 December, 20101 December, 201113 February, 2012Douglas Scheving
        60,00010,00020,00020,00055,000
        $    1.08$    1.41$    1.59$    3.02$    2.52
        21 January, 20097 April, 200930 December, 201030 November, 201113 February, 2012Michael McPhie
        50,000
        $    1.59
        30 December, 2010William McCartney
        150,00020,00055,000
        $    1.10$            3.02$            2.52
        19 August, 20101 December, 201113 February, 2012Cecil Bond
        300,00050,00020,00055,000
        $    1.20$    2.52$      3.02$            2.52
        5 April, 20093 May, 201110 May, 201113 December, 2011Jerry Perkins
        100,000100,000
        $    1.20$    1.59
        21 March, 201030 December, 2010  There are no other arrangements for involving employees in the capital of the Company. Stock options are granted to employees at the discretion of the Board. All options granted are subject to the terms and conditions of the Companys stock option plan.  56       Item 7.  Major Shareholders and Related Party Transactions A.
        Major shareholders The Company is aware of three persons and/or companies who it believes beneficially own 5% or more of the Companys voting securities.  Person/Company
        Number of securities held
        % of outstanding #Bryce Roxburgh (1)
        4,667,250
        12%Yale Simpson (2)
        2,275,750
        5.85%Macquarie Bank Limited
        2,307,691
        6.07%  (1)
        Of these shares 882,500 represent share purchase options; 2,500,000 shares registered in the name of Rowen. (2)
        Of these shares, 895,500 represent share purchase options.  # based upon 38,021,013 common shares outstanding as of March 23, 2007.  No shareholders of the Company have different voting rights from any other shareholder.  At March 30, 2007, there were a total of 692 record holders of the Companys common shares, of which 37 record holders were resident in the United States, holding 931,131 common shares.  This number represents approximately 2.45 % of the total issued and outstanding common shares of the Company at that date.  The Company is a publicly owned corporation, the common shares of which are owned by Canadian residents, United States residents, and residents of other countries. To the extent known to the Company, it is not directly owned or controlled by another corporation, any foreign government or any other natural or legal person(s) severally or jointly. The Company is not aware of any arrangement, the operation of which may result in a change of control of the Company.  Based on this research and other research into the indirect holdings of other financial institutions, the Company believes that it has in excess of 690 beneficial owners of its common shares.  The Company's common shares are registered to trade in the United States on the American Stock Exchange through the form of share certificates.  The Company has not declared any dividends on its common shares since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.  B.
        Related Party Transactions SeeItem 6.C.  Board Practicesfor further information.  There have been no material transactions since the beginning of the 2006 fiscal year to date, and there are no presently proposed transactions, to which the Company or any of its subsidiaries was or is to be a party, in which any director, officer or significant shareholder of the Company or its subsidiaries, or any relative or spouse of any of the foregoing persons or any relative of such  57      spouse who has the same home as such person, had or is to have a direct or indirect material interest.  Amounts due to related parties are for management, consulting, exploration and legal fees and for expenses incurred while conducting the Companys business.  These amounts are settled as and when due.  A total of $1,204,005 (2005: $681,280; 2004: $576,239) was paid to or accrued for related party transactions as described below.  a)
        Exploration and consulting fees totaling $282,000 (2005: $144,000; 2004:  $147,490) and $58,000 (2005: $21,000; 2004: $nil) for the provision of other consultants was paid or accrued to a corporation of which the President and CEO is a beneficiary.  b)
        Management and consulting fees totaling $238,000 (2005: $96,000; 2004:  $88,000), share issue costs totaling $8,000 (2005: $nil; 2004: $nil) were paid or accrued to a corporation controlled by the Chairman of the Company.  c)
        Management fees of $195,000 (2005: $85,000; 2004: $nil) were paid or accrued to a corporation controlled by the CFO of the Company.  d)
        Legal fees totaling $120,101 (2005: $105,866; 2004: $92,775), and share issue costs totaling $36,271 (2005: $64,984; 2004: $16,969) were paid or accrued to a corporation controlled by a director of the Company of which the Secretary of the Company is an employee.  e)
        Exploration and development costs totaling $266,633 (2005:$134,000; 2004: $118,497) were paid or accrued to a company controlled by the Vice President, Development and Operations.  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.  Management believes the transactions referenced above, if any, were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties. There are no loans outstanding to any of the major shareholders or related parties.  C.
        Interests in Experts and Counsel  Not Applicable  Item 8.  Financial Information A.
        Consolidated Statements and Other Financial Information SeeItem 17  Financial Statements.  The Companys consolidated financial statements for the year ended December 31, 2006, as required under this ITEM 8 are attached hereto and found immediately following the text of this  58      Annual Report.  The audit report of MacKay LLP, Chartered Accountants, is included herein immediately preceding the consolidated financial statements and schedules.  Legal Proceedings There is no pending, threatened or recently concluded legal or arbitration proceedings, including those relating to bankruptcy, receivership or similar proceedings that involve any third party, which may have, or have had in the recent past, significant effects on the Companys financial position. This includes governmental proceedings pending or known to be contemplated.  Details on Dividend Policy The Company has not declared any dividend to date and has no present intention to declare any such dividend in the foreseeable future.  B.
        Significant Changes There have been no significant changes in the financial condition of the Company since the most recent consolidated financial statements for the year ended December 31, 2006.  Item 9. The Offer and Listing A.
        Offer and Listing Details As of December 31, 2006, the authorized capital of the Company consisted of 100,000,000 common shares without par value, and there were 37,836,013 common shares outstanding as of that date.  Nature of Trading Market The Company's common shares are issued in registered form and the following information is taken from the records of Computershare Trust Company located at 510 Burrard Street, 4th Floor, Vancouver, British Columbia, Canada, V6C 3B9.  In recent years, securities markets in Canada and US have experienced a high level of price and volume volatility, and the market price of many resource and resource related companies, have experienced wide fluctuations in price which have not necessarily been related to operating performance or underlying asset values or prospects of such companies.  There can be no assurance that fluctuations in the Companys share price and volume will not occur.  The table below lists the volume of trading and high, low and closing sales prices on the TSX Venture Exchange for the Company's common shares for the last six months, the last nine fiscal quarters and for the last five fiscal years ended December 31, 2006.  TSX Venture Exchange Common Shares Trading Activity  Period
        Volume
        Share Sales  CDN$High
        Low
        CloseMarch 2007
        2,747,000
        $2.28
        $1.70
        $2.20February 2007
        1,285,700
        $2.59
        $2.24
        $2.27January 2007
        2,498,600
        $2.49
        $1.92
        $2.48   59        December 2006
        2,793,400
        $3.19
        $1.71
        $2.10November 2006
        1,974,400
        $3.28
        $2.37
        $3.02October 2006
        1,137,300
        $2.50
        $2.25
        $2.50Three Months Ended  03/31/07
        6,531,300
        $2.59
        $1.70
        $2.20Three Months Ended  12/31/06
        5,905,100
        $3.28
        $1.71
        $2.10Three Months Ended   9/30/06
        1,964,100
        $2.81
        $2.01
        $2.44Three Months Ended   6/30/06
        4,789,100
        $2.95
        $1.72
        $2.11Three Months Ended   3/31/06
        6,245,687
        $3.25
        $1.61
        $2.77Three Months Ended  12/31/05
        3,931,980
        $1.80
        $1.05
        $1.80Three Months Ended   9/30/05
        3,025,729
        $1.50
        $0.90
        $1.19Three Months Ended   6/30/05
        1,423,032
        $1.23
        $0.87
        $1.17Three Months Ended   3/31/05
        2,840,928
        $1.39
        $1.08
        $1.20Fiscal Year Ended  12/31/06
        18,903,987
        $3.28
        $1.61
        $2.10Fiscal Year Ended  12/31/05
        11,221,669
        $1.80
        $0.87
        $1.80Fiscal Year Ended  12/31/04
        8,775,956
        $1.67
        $0.71
        $1.32Fiscal Year Ended  12/31/03
        4,303,666
        $1.25
        $0.22
        $1.08Fiscal Year Ended  12/31/02
        -
        $0.40
        $0.18
        $0.22  In November, 2006, the Company acquired a listing on the AMEX under the symbol XRA. The table below details the common share trading volume, high, low and closing sales prices, in USD, on the AMEX since it began trading.  American Stock Exchange Common Shares Trading Activity  Period
        Volume
        Share Sales  USD$High
        Low
        CloseMarch 2007
        755,300
        $1.94
        $1.57
        $1.91February 2007
        1,118,000
        $2.24
        $1.90
        $1.93January 2007
        1,782,900
        $2.12
        $1.71
        $2.12December 2006
        2,361,900
        $2.77
        $1.47
        $1.78November 2006*
        1,040,000
        $2.91
        $2.26
        $2.65 *Results from November 9, 2006 (first listed day) through to November 30, 2006  In May 2004, the Company acquired a listing on the Frankfurt (Germany) Stock Exchange under the symbol EXB.  The table below details the common share trading volume, high, low and closing sales prices, in Euros, on the Frankfurt Exchange for the last six months, the last nine fiscal quarters and the last two fiscal years ended December 31, 2006.  Frankfurt Stock Exchange Common Shares Trading Activity  Period
        Volume
        High
Euros
        Low
Euros
        Close
Euros   60        March 2007
        244,800
        1.44
        1.12
        1.39February 2007
        234,100
        1.67
        1.47
        1.50January 2007
        248,800
        1.59
        1.27
        1.59December 2006
        553,100
        2.03
        1,10
        1.39November 2006
        332,900
        2.22
        1.63
        2.00October 2007
        226,900
        1.74
        1.59
        1.69Three Months Ended 03/31/07
        727,700
        1.67
        1.12
        1.39Three Months Ended  12/31/06
        1,112,900
        2.22
        1.10
        1.39Three Months Ended   9/30/06
        779,800
        1.94
        1.41
        1.63Three Months Ended   6/30/06
        1,917,300
        2.00
        1.20
        1.45Three Months Ended   3/31/06
        5,010,600
        2.13
        1.10
        2.13Three Months Ended  12/31/05
        6,917,300
        1.25
        0.71
        1.13Three Months Ended   9/30/05
        4,721,100
        1.08
        0.62
        0.88Three Months Ended   6/30/05
        2,501,500
        0.83
        0.55
        0.76Three Months Ended   3/31/05
        1,747,100
        0.85
        0.63
        0.76Fiscal Year Ended 12/31/06
        8,820,600
        2.22
        1.10
        1.39Fiscal Year Ended 12/31/05
        15,887,000
        1.25
        0.55
        1.13 B.
        Plan of DistributionNot applicable.  C.
        Markets The Companys common shares are listed for trading on the TSX Venture Exchange, in Canada, under the stock symbol XRC, the AMEX in the United States, under the stock symbol XRA, and on the Frankfurt Stock Exchange, in Germany, under the symbol EXB.  The Companys CUSIP number is #301835104.  United States Market The Company is subject to the reporting obligations and requirements under theSecurities Exchange Act of 1934 (The Act). However, as a Foreign Private Issuer, the Company will be exempt from sections 14(a), 14(b), 14(c), 14(f) and 16 of the Act, which includes the Proxy Rules of Section 14 and the Short-Swing Profit Rules of Section 16.  61   AMEX CORPORATE GOVERNANCE  The Companys common shares are listed on The American Stock Exchange (AMEX).  Section 110 of the AMEX Company Guide permits AMEX to consider the laws, customs and practices of foreign issuers in relaxing certain AMEX listing criteria, and to grant exemptions from AMEX listing criteria based on these considerations.  A company seeking relief under     these provisions is required to provide written certification from independent local counsel that the non-complying practice is not prohibited by home country law.  A description of the significant ways in which the Companys governance practices differ from those followed by domestic companies pursuant to AMEX standards is as follows:  Shareholder Meeting Quorum Requirement:  The AMEX minimum quorum requirement for a shareholder meeting is one-third of the outstanding shares of common stock.  In addition, a company listed on AMEX is required to state its quorum requirement in its bylaws.  The Companys quorum requirement is set forth in its Memorandum and Articles.  A quorum for a meeting of members of the Company is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the shares entitled to be voted at the meeting. Proxy Delivery Requirement:  AMEX requires the solicitation of proxies and delivery of proxy statements for all shareholder meetings, and requires that these proxies shall be solicited pursuant to a proxy statement that conforms to SEC proxy rules. The Company is a foreign private issuer as defined in Rule 3b-4 under the Exchange Act, and the equity securities of the Company are accordingly exempt from the proxy rules set forth in Sections 14(a), 14(b), 14(c) and 14(f) of the Exchange Act.  The Company solicits proxies in accordance with applicable rules and regulations in Canada. The foregoing are consistent with the laws, customs and practices in Canada. In addition, we may from time-to-time seek relief from AMEX corporate governance requirements on specific transactions under Section 110 of the AMEX Company Guide by providing written certification from independent local counsel that the non-complying practice is not prohibited by our home country law, in which case, we shall make the disclosure of such transactions available on our website at www.exeterresouce.com.  Information contained on our website is not part of this annual report.  D.
        Selling Shareholders Not applicable.  E.
        Dilution Not applicable.  F.
        Expenses of the Issue Not applicable.   62       Item 10.  Additional Information A.
        Share Capital Not applicable.  B.
        Memorandum and Articles of Association  The Company disclosed information regarding its memorandum and articles of association in its annual filing on Form 20-F for the fiscal year ended December 31, 2005.  C.
        Material Contracts The Company has not entered into any new material contracts other than those in the ordinary course of business in the past 2 fiscal years. Material contracts entered into prior to 2005 can be found in the 20-F for the year ended December 31, 2005.  D.
        Exchange Controls and Other Limitations Affecting Security Holders There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of the Companys common shares. Any remittances of dividends to United States residents are, however, subject to a 15% withholding tax (5% if the shareholder is a corporation owning at least 10% of the outstanding common shares of the Company) pursuant to Article X of the reciprocal tax treaty between Canada and the United States. See Item 10. E.  Taxation.  Except as provided in theInvestment Canada Act(ICA), there are no limitations under the laws of Canada, the Province of British Columbia, or in the Companys charter or any other constituent documents of the Company on the right of foreigners to hold or vote the common shares of the Company.  The ICA,which became effective on June 30, 1985, requires a non-Canadian making an investment to acquire control, directly or indirectly, of a Canadian business, to file a notification or an application for review with Investment Canada.  An application for review must be filed if the investor is not a citizen or resident of a World Trade Organization member country, and the investment is over $50,000,000, or, if the investor is a citizen or resident of a World Trade Organization member country and the investment is over $281,000,000.  For all acquisitions of a Canadian business which do not meet the threshold criteria for filing an application for review, the ICA requires the investor to file a notification.  The provisions of the ICA are complex, and the above is a limited summary of the main provisions of the ICA. Any non-Canadian citizen contemplating an investment to acquire control of the Company should consult professional advisors as to whether and how the ICA might apply.  For purposes of the ICA, direct acquisition of control means a purchase of the voting interests of a corporation, partnership, joint venture or trust carrying on a Canadian business, or any purchase of all or substantially all of the assets used in carrying on a Canadian business.  An indirect acquisition of control means a purchase of the voting interest of a corporation, partnership, joint venture or trust, whether a Canadian or foreign entity, which controls a  63      corporation, partnership, joint venture or trust company carrying on a Canadian business in Canada.  E.
        Taxation Canadian Federal Income Tax Consequences The following is a summary of the material Canadian federal income tax considerations generally applicable to U.S. holders of the Companys common shares.  The tax consequences to any particular holder of common shares will vary according to the status of that shareholder as either an individual, trust, corporation or member of a partnership, the jurisdiction in which the shareholder is subject to taxation, the place of residence of the shareholder and, generally, the shareholders particular circumstances.  This summary is applicable to only those shareholders who are resident in the United States, have never been resident in Canada, deal at arms length with the Company, hold their common shares as capital property, and who will not use or hold the common shares in carrying on business in Canada.  Special rules not discussed in this summary may apply to a U.S. shareholder that is an issuer carrying on business in Canada and elsewhere.  This summary is based upon the provisions of theIncome Tax Actof Canada and the regulations thereunder (collectively, either the TaxAct or ITA), theCanada-United States Tax Conventioncurrent at the date of this Annual Report(the Tax Convention), and the current administrative practices of the Canada Revenue Agency. This summary does not take into account provincial income tax consequences.  This summary is not exhaustive of all possible income tax consequences.  It is not intended as legal or tax advice to any particular shareholder and should not be so construed.  Each shareholder should consult his or her own tax advisor with respect to the income tax consequences applicable in that shareholders own particular circumstances.  Dividends Pursuant to theTax Convention, any dividends paid to non-resident shareholders of the Company will generally be subject to Canadian withholding tax (Part XIII Tax) equal to 15% of the gross amount of any dividend paid or deemed to be paid to the non-resident shareholder on his or her shares.   The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General of Canada for the account of the non-resident shareholder. By virtue of Article X of theTax Convention, the rate of tax on dividends paid to U.S. resident shareholders is generally limited to 15% of the gross dividend (or 5% in the case of certain corporate shareholders owning at least 10% of the Companys voting shares).  In the absence of
the treaty provisions, the rate of Canadian withholding tax imposed on non-resident shareholders is 25% of the gross dividend.  In addition, under theTax Convention, dividends may be exempt from Canadian withholding tax if paid to certain US residents that are qualifying religious, scientific, literary, educational or charitable tax-exempt organization and qualifying trusts, companies, organization or arrangements operated exclusively to administer or provide pension, retirement or employee benefits that are exempt from tax in the United States and that have complied with specific administrative procedures.  64        Disposition of Common Shares A non-resident of Canada who disposes of a share, including by deemed disposition on death, will generally not be subject to Canadian tax under the ITA in respect of any capital gains (or be entitled to deduct any capital loss) thereby realized upon the disposition of common shares listed on a prescribed stock exchange unless the shares represent taxable Canadian property (as defined by the ITA) to the shareholder.  A common share of the Company will be deemed to be taxable Canadian property to a non-resident shareholder if, at any time during the five years preceding the disposition, the non-resident shareholder, persons with whom the non-resident shareholder did not deal at arms length, or the non-resident shareholder and persons with whom he/she did not deal at arms length, owned 25% or more of the issued common shares of the Company.  In the case of a non-resident holder to whom
common shares of the Company represent taxable Canadian property and who is a U.S. resident (under the terms of theTax Convention), generally no Canadian tax is payable on a capital gain realized on such shares by reason of theTax Conventionunless the value of such shares is derived principally from real property located in Canada or the U.S. shareholder previously held the shares while resident in Canada.  If a non-resident shareholder disposes of the Companys common shares to another Canadian corporation that deals or is deemed to deal on a non-arms length basis with that shareholder and that, immediately after the disposition, is connected with the Company (i.e., holds 10% or more of the voting rights and market value of the Companys common shares), the amount by which the fair market value of any consideration (other than shares of the purchasing corporation) exceeds the paid-up capital for the common shares sold will be deemed to be taxable as a dividend paid by the purchasing corporation and subject to withholding taxes as described above.  Where a shareholder disposes of common shares to the Company (unless the Company acquired the shares in the open market in like manner to any member of the public) the result will be a deemed dividend to the U.S. shareholder equal to the amount by which the consideration paid by the Company exceeds the paid-up capital of the common shares.  The amount of such dividend will be subject to withholding tax as previously described.  U.S. Federal Income Tax Consequences The following is a summary of the anticipated material U.S. federal income tax consequences to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of common shares of the Company (Common Shares).  This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax consequences that may apply to a U.S. Holder as a result of the acquisition, ownership, and disposition of Common Shares.  In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.  Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder.  Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences of the acquisition, ownership, and disposition of Common Shares.   65       Scope of this Disclosure  Authorities  This summary is based on the Internal Revenue Code of 1986, as amended (the Code), Treasury Regulations (whether final, temporary, or proposed), published rulings of the Internal Revenue Service (IRS), published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the Canada-U.S. Tax Convention), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this registration statement  Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive basis.  This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted,
could be applied on a retroactive basis.  U.S. Holders  For purposes of this summary, a U.S. Holder is a beneficial owner of Common Shares that, for U.S. federal income tax purposes, is (a) an individual who is a citizen or resident of the U.S., (b) a corporation, or any other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized in or under the laws of the U.S. or any state in the U.S., including the District of Columbia, (c) an estate if the income of such estate is subject to U.S. federal income tax regardless of the source of such income, or (d) a trust if (i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or (ii) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.  Non-U.S. Holders  For purposes of this summary, a non-U.S. Holder is a beneficial owner of Common Shares other than a U.S. Holder.  This summary does not address the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares to non-U.S. Holders.  Accordingly, a non-U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences (including the potential application of and operation of any tax treaties) of the acquisition, ownership, and disposition of Common Shares.  U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed This summary does not address the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares to U.S. Holders that are subject to special provisions under the Code, including the following U.S. Holders:  (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial institutions, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are dealers in securities or currencies or U.S. Holders that are traders in securities that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a functional currency other than the U.S. dollar; (e) U.S. Holders that are liable for the alternative minimum tax under the Code; (f) U.S. Holders that own
Common Shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (g) U.S.  66      Holders that acquired Common Shares in connection with the exercise of employee stock options or otherwise as compensation for services; (h) U.S. Holders that hold Common Shares other than as a capital asset within the meaning of Section 1221 of the Code; or (i) U.S. Holders that own, directly or indirectly, 10% or more, by voting power or value, of the outstanding shares of the Company.  U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal, U.S. state and local, and foreign tax consequences of the acquisition, ownership, and disposition of Common Shares.  If an entity that is classified as a partnership (or pass-through entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such partnership (or pass-through entity) and the partners of such partnership (or owners of such pass-through entity) generally will depend on the activities of the partnership (or pass-through entity) and the status of such partners (or owners).  Partners of entities that are classified as partnerships (or owners of pass-through entities) for U.S. federal income tax purposes should consult their own financial advisor, legal counsel or accountant regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.  Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed  This summary does not address the U.S. state and local, U.S. federal estate and gift, or foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares.  Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the U.S. state and local, U.S. federal estate and gift, and foreign tax consequences of the acquisition, ownership, and disposition of Common Shares.  (See TaxationCanadian Federal Income Tax Consequences above).  U.S. Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition of Common Shares Distributions on Common Shares  General Taxation of Distributions  A U.S. Holder that receives a distribution, including a constructive distribution, with respect to the Common Shares will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current or accumulated earnings and profits of the Company.  To the extent that a distribution exceeds the current and accumulated earnings and profits of the Company, such distribution will be treated (a) first, as a tax-free return of capital to the extent of a U.S. Holders tax basis in the Common Shares and, (b) thereafter, as gain from the sale or exchange of such Common Shares.  (See more detailed discussion at Disposition of Common Shares below).  Reduced Tax Rates for Certain Dividends  For taxable years beginning after December 31, 2002 and before January 1, 2009, a dividend paid by the Company generally will be taxed at the preferential tax rates applicable to long-term  67      capital gains if (a) the Company is a qualified foreign corporation (as defined below), (b) the U.S. Holder receiving such dividend is an individual, estate, or trust, and (c) such dividend is paid on Common Shares that have been held by such U.S. Holder for at least 61 days during the 121-day period beginning 60 days before the ex-dividend date (i.e., the first date that a purchaser of such Common Shares will not be entitled to receive such dividend).  The Company generally will be a qualified foreign corporation under Section 1(h)(11) of the Code (a QFC) if (a) the Company is incorporated in a possession of the U.S., (b) the Company is eligible for the benefits of the Canada-U.S. Tax Convention, or (c) the Common Shares are readily tradable on an established securities market in the U.S.  However, even if the Company satisfies one or more of such requirements, the Company will not be treated as a QFC if the Company is a passive foreign investment company (as defined below) for the taxable year during which the Company pays a dividend or for the preceding taxable year.  In 2003, the U.S. Department of the Treasury (the Treasury) and the IRS announced that they intended to issue Treasury Regulations providing procedures for a foreign corporation to certify that it is a QFC.  Although these
Treasury Regulations were not issued in 2004, the Treasury and the IRS have confirmed their intention to issue these Treasury Regulations.  It is expected that these Treasury Regulations will obligate persons required to file information returns to report a distribution with respect to a foreign security issued by a foreign corporation as a dividend from a QFC if the foreign corporation has, among other things, certified under penalties of perjury that the foreign corporation was not a passive foreign investment company for the taxable year during which the foreign corporation paid the dividend or for the preceding taxable year.  As discussed below, the Company believes that it was a passive foreign investment company for the taxable year ended December 31, 2006, and expects that it will be a passive foreign investment company for the taxable year ending December 31, 2007.  (See more detailed discussion at Additional Rules that May Apply to U.S. HoldersPassive Foreign Investment Company below).  Accordingly, the Company does not expect to be a QFC for the taxable year ending December 31, 2007.  If the Company is not a QFC, a dividend paid by the Company to a U.S. Holder, including a U.S. Holder that is an individual, estate, or trust, generally will be taxed at ordinary income tax rates (and not at the preferential tax rates applicable to long-term capital gains).  The dividend rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the dividend rules.   Distributions Paid in Foreign Currency  The amount of a distribution paid to a U.S. Holder in foreign currency generally will be equal to the U.S. dollar value of such distribution based on the exchange rate applicable on the date of receipt.  A U.S. Holder that does not convert foreign currency received as a distribution into U.S. dollars on the date of receipt generally will have a tax basis in such foreign currency equal to the U.S. dollar value of such foreign currency on the date of receipt.  Such a U.S. Holder generally will recognize ordinary income or loss on the subsequent sale or other taxable disposition of such foreign currency (including an exchange for U.S. dollars).   68       Dividends Received Deduction  Dividends paid on the Common Shares generally will not be eligible for the dividends received deduction.  The availability of the dividends received deduction is subject to complex limitations that are beyond the scope of this discussion, and a U.S. Holder that is a corporation should consult its own financial advisor, legal counsel, or accountant regarding the dividends received deduction.  Disposition of Common Shares  A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of Common Shares in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) such U.S. Holders tax basis in the Common Shares sold or otherwise disposed of.  Any such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if the Common Shares are held for more than one year.  Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of Common Shares generally will be treated as U.S. source for purposes of applying the U.S. foreign tax credit rules.   (See more detailed discussion at Foreign Tax Credit below).  Preferential tax rates apply to long-term capital gains of a U.S. Holder that is an individual, estate, or trust.  There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation.  Deductions for capital losses are subject to significant limitations under the Code.  Foreign Tax Credit  A U.S. Holder who pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Common Shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax paid.  Generally, a credit will reduce a U.S. Holders U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holders income subject to U.S. federal income tax.  This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.  Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holders U.S. federal income tax liability that such U.S. Holders foreign source taxable income bears to such U.S. Holders worldwide taxable income.  In applying this limitation, a U.S. Holders various items of income and deduction must be classified, under complex rules, as either foreign source or U.S. source.  In addition, this limitation is calculated separately with respect to specific categories of income (including passive income, high withholding tax interest, financial services income, general income, and certain other categories of income).  Dividends paid by the Company generally will constitute foreign source income and generally
will be categorized as passive income or, in the case of certain U.S. Holders, financial services income.  However, for taxable years beginning after December 31, 2006, the foreign tax credit limitation categories are reduced to passive income and general income (and the other categories of income, including financial services income, are eliminated).  The foreign tax credit rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the foreign tax credit rules.  69       Information Reporting; Backup Withholding Tax  Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from certain sales or other taxable dispositions of, Common Shares generally will be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holders correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax.  However, U.S. Holders that are corporations generally are excluded
from these information reporting and backup withholding tax rules.  Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holders U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS.  Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the information reporting and backup withholding tax rules.  Additional Rules that May Apply to U.S. Holders  If the Company is a controlled foreign corporation or a passive foreign investment company (each as defined below), the preceding sections of this summary may not describe the U.S. federal income tax consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares.  Controlled Foreign Corporation  The Company generally will be a controlled foreign corporation under Section 957 of the Code (a CFC) if more than 50% of the total voting power or the total value of the outstanding shares of the Company is owned, directly or indirectly, by citizens or residents of the U.S., domestic partnerships, domestic corporations, domestic estates, or domestic trusts (each as defined in Section 7701(a)(30) of the Code), each of which own, directly or indirectly, 10% or more of the total voting power of the outstanding shares of the Company (a 10% Shareholder).  If the Company is a CFC, a 10% Shareholder generally will be subject to current U.S. federal income tax with respect to (a) such 10% Shareholders pro rata share of the subpart F income (as defined in Section 952 of the Code) of the Company and (b) such 10% Shareholders pro rata share of the earnings of the Company invested in United States property (as defined in Section 956 of the Code).  In addition, under Section 1248 of the Code, any gain recognized on the sale or other taxable disposition of Common Shares by a U.S. Holder that was a 10% Shareholder at any time during the five-year period ending with such sale or other taxable disposition generally will be treated as a dividend to the extent of the earnings and profits of the Company that are attributable to such Common Shares.  If the Company is both a CFC and a
passive foreign investment company (as defined below), the Company generally will be treated as a CFC (and not as a passive foreign investment company) with respect to any 10% Shareholder.   70       The Company does not believe that it has previously been, or currently is, a CFC.  However, there can be no assurance that the Company will not be a CFC for the current or any future taxable year.  Passive Foreign Investment Company  The Company generally will be a passive foreign investment company under Section 1297 of the Code (a PFIC) if, for a taxable year, (a) 75% or more of the gross income of the Company for such taxable year is passive income or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive income, based on the fair market value of such assets (or on the adjusted tax basis of such assets, if the Company is not publicly traded and either is a controlled foreign corporation or makes an election).  Passive income includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.  For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another foreign corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other foreign corporation and (b) received directly a proportionate share of the income of such other foreign corporation.  In addition, for purposes of the PFIC income test and asset test described above, passive income does not include any interest, dividends, rents, or royalties that are received or accrued by the Company from a related person (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.  The Company believes that it was a PFIC for the taxable year ended December 31, 2006, and expects that it will be a PFIC for the taxable year ending December 31, 2007.  Whether the Company will, in fact, be a PFIC for the taxable year ending December 31, 2006 depends on the assets and income of the Company over the course of the taxable year ending December 31, 2007, as a result, cannot be predicted with certainty as of the date of this registration statement.  In addition, there can be no assurance that the IRS will not challenge the determination made by the Company concerning its PFIC status or that the Company will not be a PFIC for the current or any future taxable year.  Default PFIC Rules Under Section 1291 of the Code  If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership, and disposition of Common Shares will depend on whether such U.S. Holder makes an election to treat the Company as a qualified electing fund or QEF under Section 1295 of the Code (a QEF Election) or a mark-to-market election under Section 1296 of the Code (a Mark-to-Market Election).  A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a Non-Electing U.S. Holder.  A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of Common Shares and (b) any excess distribution paid on the Common Shares.  A distribution generally will be an excess distribution to the extent that such distribution (together with all other distributions received in the current taxable year) exceeds 125% of the average distributions received during the three  71      preceding taxable years (or during a U.S. Holders holding period for the Common Shares, if shorter).  Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of Common Shares, and any excess distribution paid on the Common Shares, must be ratably allocated to each day in a Non-Electing U.S. Holders holding period for the Common Shares.  The amount of any such gain or excess distribution allocated to prior years of such Non-Electing U.S. Holders holding period for the Common Shares (other than years prior to the first taxable year of the Company beginning after December 31, 1986 for which the Company was not a PFIC) will be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such prior year.  A Non-Electing U.S. Holder will be required to pay interest on the resulting tax liability for each such prior year, calculated as if such tax liability had been due in each such prior year.  Such a Non-Electing U.S. Holder
that is not a corporation must treat any such interest paid as personal interest, which is not deductible.  The amount of any such gain or excess distribution allocated to the current year of such Non-Electing U.S. Holders holding period for the Common Shares will be treated as ordinary income in the current year, and no interest charge will be incurred with respect to the resulting tax liability for the current year.  If the Company is a PFIC for any taxable year during which a Non-Electing U.S. Holder holds Common Shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent years.  A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such Common Shares were sold on the last day of the last taxable year for which the Company was a PFIC.  QEF Election  A U.S. Holder that makes a QEF Election generally will not be subject to the rules of Section 1291 of the Code discussed above.  However, a U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such U.S. Holders pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) and the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder.  Generally, net capital gain is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and ordinary earnings are the excess of (a) earnings and profits over (b) net capital gain.  A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each taxable year in which the Company is a PFIC,
regardless of whether such amounts are actually distributed to such U.S. Holder by the Company.  However, a U.S. Holder that makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge.  If such U.S. Holder is not a corporation, any such interest paid will be treated as personal interest, which is not deductible.  A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents earnings and profits of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holders tax basis in the Common Shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election.  72      In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Common Shares.  The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely.  A QEF Election will be treated as timely if such QEF Election is made for the first year in the U.S. Holders holding period for the Common Shares in which the Company was a PFIC.  A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such first year.  However, if the Company was a PFIC in a prior year, then in addition to filing the QEF Election documents, a U.S. Holder must elect to recognize (a) gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if the Common Shares were sold on the qualification date or (b) if the Company was also a CFC, such U.S. Holders
pro rata share of the post-1986 earnings and profits of the Company as of the qualification date.  The qualification date is the first day of the first taxable year in which the Company was a QEF with respect to such U.S. Holder.  The election to recognize such gain or earnings and profits can only be made if such U.S. Holders holding period for the Common Shares includes the qualification date.  By electing to recognize such gain or earnings and profits, such U.S. Holder will be deemed to have made a timely QEF Election.  In addition, under very limited circumstances, a U.S. Holder may make a retroactive QEF Election if such U.S. Holder failed to file the QEF Election documents in a timely manner.  A QEF Election will apply to the taxable year for which such QEF Election is made and to all subsequent taxable years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election.  If a U.S. Holder makes a QEF Election and, in a subsequent taxable year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those taxable years in which the Company is not a PFIC.  Accordingly, if the Company becomes a PFIC in another subsequent taxable year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described above during any such subsequent taxable year in which the Company qualifies as a PFIC.  In addition, the QEF Election will remain in effect (although it will not be applicable) with respect to a U.S. Holder even after such U.S. Holder disposes of all of such U.S.
Holders direct and indirect interest in the Common Shares.  Accordingly, if such U.S. Holder reacquires an interest in the Company, such U.S. Holder will be subject to the QEF rules described above for each taxable year in which the Company is a PFIC.  Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the availability of, and procedure for making, a QEF Election.  U.S. Holders should be aware that there can be no assurance that the Company will satisfy record keeping requirements that apply to a QEF, or that the Company will supply U.S. Holders with information that such U.S. Holders require to report under the QEF rules, in event that the Company is a PFIC and a U.S. Holder wishes to make a QEF Election.  Mark-to-Market Election  A U.S. Holder may make a Mark-to-Market Election only if the Common Shares are marketable stock.  The Common Shares generally will be marketable stock if the Common Shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or  73      supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange ensure active trading of listed stocks.  A U.S. Holder that makes a Mark-to-Market Election generally will not be subject to the rules of Section 1291 of the Code discussed above.  However, if a U.S. Holder makes a Mark-to-Market Election after the beginning of such U.S. Holders holding period for the Common Shares and such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the Common Shares.  A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each taxable year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the Common Shares as of the close of such taxable year over (b) such U.S. Holders tax basis in such Common Shares.  A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the lesser of (a) the excess, if any, of (i) such U.S. Holders adjusted tax basis in the Common Shares over (ii) the fair market value of such Common Shares as of the close of such taxable year or (b) the excess, if any, of (i) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (ii) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years.  A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holders tax basis in the Common Shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election.  In addition, upon a sale or other taxable disposition of Common Shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior taxable years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior taxable years).  A Mark-to-Market Election applies to the taxable year in which such Mark-to-Market Election is made and to each subsequent taxable year, unless the Common Shares cease to be marketable stock or the IRS consents to revocation of such election.  Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the availability of, and procedure for making, a Mark-to-Market Election.  Other PFIC Rules  Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of Common Shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations).  However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which Common Shares are transferred.  Certain additional adverse rules will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election.  For example under  74      Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such Common Shares.  The PFIC rules are complex, and each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.  F.
        Dividends and Paying Agents Not applicable.  G.
        Statement by Experts Not applicable.  H.
        Documents on Display Readers may review a copy of the Companys filings with the U.S. Securities and Exchange Commission (the SEC), including exhibits and schedules filed with it, at the SECs public reference facilities in 100 Fifth Street, N.E., Washington, D.C. 20549. Readers may also obtain copies of such materials from the Public Reference Section of the SEC in 100 Fifth Street, N.E., Washington, D.C. 20549, at prescribed rates. Readers may call the SEC at 1-800-SEC-0220 for further information on the public reference rooms. The SEC maintains a Web site (http://www.sec.gov) that contains reports, submissions and other information regarding registrants that file electronically with the SEC. The Company has only recently become subject to the requirement to file electronically through the EDGAR system most of its securities documents, including registration statements under the Securities Act of
1933, as amended and registration statements, reports and other documents under the Securities Exchange Act of 1934, as amended.  Readers may read a copy of any reports, statements or other information that the Company files with the SEC at the address indicated above and may also access them electronically at the Web site set forth above. These SEC filings are also available to the public from commercial document retrieval services.  Any of the documents referred to above can be viewed at the offices of the Companys solicitors, MacNeill Law, at Suite 950, 1055 West Georgia Street, Vancouver, British Columbia, Canada V6E 3P3. All of the documents referred to above are in English.  THE COMPANY IS REQUIRED TO FILE REPORTS AND OTHER INFORMATION WITH THE SEC UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. REPORTS AND OTHER INFORMATION FILED BY THE COMPANY WITH THE SEC MAY BE INSPECTED AND COPIED AT THE SECS PUBLIC REFERENCE FACILITIES DESCRIBED ABOVE. AS A FOREIGN PRIVATE ISSUER, THE COMPANY IS EXEMPT FROM THE RULES UNDER THE SECURITES EXCHANGE ACT OF 1934, AS AMENDED, PRESCRIBING THE FURNISHING AND CONTENT OF PROXY STATEMENTS AND THE COMPANYS OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS ARE EXEMPT FROM THE REPORTING AND SHORT-SWING PROFIT RECOVERY PROVISIONS CONTAINED IN SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934, AS  75      AMENDED. AS A FOREIGN PRIVATE ISSUER, THE COMPANY IS NOT REQUIRED TO PUBLISH FINANCIAL STATEMENTS AS FREQUENTLY OR AS PROMPTLY AS UNITED STATES COMPANIES.  I.
        Subsidiary Information Not applicable.  Item 11.  Disclosures about Market Risk The Companys mineral properties are all currently at the exploration stage and the Companys operations are limited to exploring those properties. Therefore, Exeters market risks are minimal. The Company does, however, have future property payments due in United States currency. As a Canadian Company, Exeters cash balances are kept primarily in Canadian funds. Therefore, the Company is exposed to some exchange rate risk. The Company considers the amount of risk to be manageable and does not currently, nor is likely in the foreseeable future, conduct hedging to reduce its exchange rate risk.  The Company has not entered into any activities in derivative financial instruments, other financial instruments, or derivative commodity instruments.  The Companys financial assets in the form of cash and cash equivalents are held in short term interest-bearing deposits at institutions with high credit quality ratings.  The Company holds some foreign currency, mainly in US dollars and Argentine Pesos.  As such the Company is exposed to exchange rate risk.  The Company does not currently engage in foreign currency hedging and its operations are subject to foreign currency fluctuations, and such fluctuations may materially affect its financial position and results of operations.  There can be no assurance that steps taken by management to address foreign currency fluctuations will eliminate all adverse effects, and, accordingly, the Company may suffer losses due to adverse foreign currency fluctuations.  The Company has not entered into any agreements or purchased any instruments to hedge any possible currency risks at this time.  As the Company is engaged in exploring mineral properties which, if successful, will produce commodities, it can be seen to be exposed indirectly to commodity risk.  Such exposure cannot be accurately estimated by quantitative means although the risk would increase as the possibility of project success increased.  Industry practice dictates that attempts to hedge commodity risk not begin until at least there are funding agreements in place supported by a bankable feasibility study.  The Company has in the past, and may in the future, finance its activities by the sale of equity and/or debt instruments.  This is also an indirect exposure to equity and/or interest-rate risk, which cannot be accurately estimated by quantitative means.  Item 12.  Description of Securities Other Than Equity Not Applicable.   76      PART II  Item 13.  Defaults, Dividend Arrearages and Delinquencies Not Applicable  Item 14.  Material Modifications of Rights of Securities Holders and Use of Proceeds Not Applicable  Item 15. Controls and Procedures At the end of the period covered by this report, an evaluation was carried out under the supervision of and with the participation of the Companys management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operations of the Companys disclosure controls and procedures (as defined in Rule 13a  15(e) and Rule 15d  15(e) under the Exchange Act).  Based on that evaluation the CEO and the CFO have concluded that as of the end of the period covered by this report, the Companys disclosure controls and procedures were adequately designed and effective in ensuring that: (i) information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.  During the period covered by this report, there has been no change in the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting  As this report is required for U.S. reporting purposes, we are a foreign private issuer as defined in Rule 3b-4 of the Exchange Act, and we are a
non-accelerated filer as defined in Rule 12b-2 of the Exchange Act, we are not required to file our managements report on internal control over financial
reporting until our annual report for the year ended December 31, 2007, and assuming we remain a non-accelerated filer, we are not required to have an
auditor provide an attestation on our managements report on internal control over financial reporting until our annual report for the year ended December
31, 2008.  Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer and Chief Financial Officer, as is appropriate to permit timely decisions regarding public disclosure.  Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures as of December 31, 2006.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures, as defined in Multilateral Instrument 52-109  Certification of Disclosure in Issuers Annual and Interim Filings (52-109), were effective at that time to ensure that the information required to be disclosed in reports that are filed or submitted under Canadian Securities legislation are recorded, processed, summarized and reported within the time period specified in those rules.  In conducting the evaluation it has become apparent that management relies upon certain informal procedures and
communication, and upon hands-on knowledge of senior management.  Management intends to formalize certain of its procedures.  Due to the small staff, however, the Company will continue to rely on an active Board and management with open lines of communication to maintain the effectiveness of the Companys disclosure controls and procedures.  It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable assurance as to the effectiveness, and there can be no  77      assurance that any design will succeed in achieving its stated objectives.  Lapses in the disclosure controls and procedures could occur and/or mistakes could happen.  Should such occur, the Company will take reasonable steps necessary to minimize the consequences thereof.  Item 16A. Audit Committee Financial Expert As of the date of this report, the Companys Board had not yet determined whether one of its audit committee members met the requirements set forth under the SEC rules to be deemed to be an audit committee financial expert however, management believes that William McCartney meets these requirements. Mr. McCartney is an independent director section 121B and section 803 of the AMEX company guide and AMEX listing standards, as such standards may be amended and modified.  Item 16B. Code of Ethics The Board has adopted a written code of conduct for its directors, officers and employees. The Company is committed to the highest standards of legal and ethical business conduct.  This Code of Business Conduct and Ethics (the Code) summarizes the legal, ethical and regulatory standards that the Company must follow and serves as a reminder to the directors, officers and employees, of the seriousness of that commitment. Compliance with this Code and high standards of business conduct is mandatory for every director, officer and employee of the Company. A copy of the Code in full text is available on the Companys websitewww.exeterresource.com. All amendments to the code, and all waivers of the code with respect to any of the officers covered by it, will be posted on the Companys web site, submitted on Form 6-K and provided in print to any shareholder who requests them.  Item 16C. Principal Accountant Fees and Services Audit Fees Fees billed by MacKay LLP (MacKay) for professional services totaled $42,693 for the year ended December 31, 2006 and $26,227 for the year ended 2005.  Such fees were for the audit of the Companys annual consolidated financial statements and for services in connection with statutory and regulatory filings for that fiscal year.  Audit-Related Fees Fees for audit-related services totaled $ nil for the years ended December 31, 2006 and 2005.  Tax Fees Fees for tax services billed by MacKay totaled $4,302 for the year ended December 31, 2006 and $6,964 for the year ended December 31, 2005.  All other Fees No other fees were billed by MacKay for the years ended December 31, 2006 and 2005.   78       The audit committee pre-approves audit engagement terms and fees prior to the commencement of any audit work, other than that which may be necessary for the Companys independent auditors to prepare the proposed audit approach, scope and fee estimates.  The independent auditors annually submit a written proposal that details all audit and audit related services.  Audit fees are fixed and contained in the proposal, and the audit committee reviews the nature and dollar value of services provided under such proposal.  Any revisions to such proposal after the engagement has begun are reviewed and pre-approved by the audit committee.  There were no fees in 2006 or 2005 that were not pre-approved by the audit committee.  All services described above under the captions Audit Fees, Audit Related Fees and Tax Fees and All Other Fees were approved by the audit committee pursuant to SEC Regulation S-X, Rule 2-01(c)(7)(i).  Item 16D. Exemptions from Listing Standards for Audit Committees Not Applicable  Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers Not Applicable  PART III Item 17.  Financial Statements The Company's consolidated financial statements are stated in Canadian Dollars  and are prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP), the application of which, in the case of the Company, conforms in all material respects for the periods presented with United States GAAP, except as disclosed in Note 19 to the December 31, 2006 audited consolidated financial statements.  The financial statements, as required under this Item 17, are attached hereto and found immediately following the text of this Annual Report. The audit report of MacKay LLP, Chartered Accountants, is included herein, immediately preceding the consolidated financial statements and schedules.  Item 18.  Financial Statements The Company has elected to provide financial statements pursuant to Item 17.  Item 19.  Exhibits (A)  The financial statements as required under Item 17 are attached hereto and found immediately following the text of this Annual Report.  The report of MacKay LLP, Chartered Accountants, for the audited consolidated financial statements are included herein, immediately preceding the audited consolidated financial statements.  Audited Consolidated Financial Statements  79       Auditors Report, dated March 19, 2007.  Consolidated Balance Sheets at December 31, 2006 and 2005.  Consolidated Statements of Operations for the years ended December 31, 2006, 2005, and 2004.  Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005, and 2004.  Consolidated Statements of Shareholders Equity for the years ended December 31, 2006, 2005, and 2004.  Notes to the Consolidated Financial Statements.  (B)  Index to Exhibits:  Exhibit No.
        Name of Exhibit1     (1)
        Certificate of Incorporation, Certificates of Name Change, Articles of Incorporation, Articles of Amalgamation and By-Laws4.1  (1)
        Agreement amongst the Company and Cognito Limited and Rowen Limited regarding the acquisition of a 50% interest in Cognito by the Company, dated January 18, 2003.4.2  (1)
        Agreement amongst the Company and Cognito Limited and Rowen Limited regarding the acquisition of a further 50% interest in Cognito by the Company, dated April 30, 2003.4.3  (1)
        Agreement between Cognito Limited and Martin Antonio Carotti and Claudia Viviana Rubenstein regarding the option of the Don Sixto property, dated February 7, 2003.4.4  (1)
        Agreement between the Company and Yale Simpson and Sofisco Nominees Limited regarding the purchase of a 100% interest in Estelar Resources Limited, dated May 2003.4.5  (1)
        Agreement between Estelar Resources Limited and Minera Rio de la Plata S.A. regarding the acquisition of an interest in 3 mineral projects by Estelar dated, October 1, 2003.4.6  (1)
        Agreement between the Company and CVSA, dated December 30, 2003.4.7 (2)
        Agreement amongst the Company and Anglo American Chile Limitada and Empresa Minera Mantos Blancos S.A. regarding exploration of properties in the Maricunga region of Chile, dated October 11, 2005.4.8 (2)
        Agreement between the Company and Rio Tinto Mining and Exploration Limited regarding exploration in Southern Chile, dated May 9, 2006.8 (2)
        List of Subsidiaries10 (2)
        Memorandum and Articles of Association12.1 (2)
        Section 302 CEO Certification12.2 (2)
        Section 302 CFO Certification13.1 (2)
        Section 906 CEO Certification13.2 (2)
        Section 906 CFO Certification  (1)
        Incorporated by reference to Form 20-F filed August 2005. (2)
        Incorporated by reference to Form 20-F filed April 2006.   80       SIGNATURES  The Company hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized this annual report to be signed on its behalf by the undersigned.  EXETER RESOURCE CORPORATION    Date:April 2, 2007
        /s/Bryce Roxburgh Bryce Roxburgh, Chief Executive Officer (Principal Executive Officer)   81                Consolidated Financial Statements (Expressed in Canadian Dollars) Years Ended December 31, 2006, 2005 and 2004      Exeter Resource CorporationConsolidated Financial Statements (Expressed in Canadian Dollars)Years Ended December 31, 2006, 2005 and 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Page     Auditors Report
        
        3Consolidated Balance Sheets
        
        4Consolidated Statements of Operations
        
        5Consolidated Statements of Cash Flows
        
        6Consolidated Statements Shareholders Equity
        
        7Consolidated Statements of Deferred Exploration Costs
        
        8    9Notes to the Consolidated Financial Statements
        
        10  27   2           CHARTERED
ACCOUNTANTSMacKayLLP
        1100  1177 West Hastings StreetVancouver, BC  V6E 4T5Tel:  (604) 687-4511Fax: (604) 687-5805Toll Free: 1-800-351-0426www.MacKayLLP.ca   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     mackay.ca refers to the Canadian firm MacKay LLP  3          Exeter Resource CorporationConsolidated Balance Sheets (Expressed in Canadian Dollars)December 31,
        
        2006
        
        2005    AssetsCurrentCash and cash equivalents                                 (notes 2 and 6)
        $
        14,511,062
        $
        7,788,697Other receivables and prepaid expenses
        
        98,795
        
        69,383Goods and services tax recoverable
        
        24,861
        
        35,30014,634,718
        
        7,893,380Property and equipment(notes 2 and 7)
        
        203,358
        
        118,423Mineral properties and deferred costs(notes 2 and 8)
        
        21,052,423
        
        10,631,943$
        35,890,499
        $
        18,643,746LiabilitiesCurrentAccounts payable and accrued liabilities
        $
        1,884,769
        $
        390,685Due to related parties                                          (note 12)
        
        376,616
        
        164,1132,261,385
        
        554,798Share Capital and DeficitShare capital(note 9)
        
        46,230,295
        
        27,802,270Contributed surplus(note 11)
        
        4,588,941
        
        2,188,160Deficit
        
        (17,190,122)
        
        (11,901,482)33,629,114
        
        18,088,948$
        35,890,499
        $
        18,643,746   Approved by the Directors:   Yale Simpson
        DirectorBryce Roxburgh
        Director  See accompanying notes to the consolidated financial statements.  4          Exeter Resource CorporationConsolidated Statements of Operations (Expressed in Canadian Dollars)For the years ended December 31,
        2006
        2005
        2004  IncomeInterest income
        $
        226,977
        $
        41,335
        $
        48,865ExpensesAccounting and audit
        
        99,019
        
        72,394
        
        35,359Amortization
        
        40,699
        
        21,179
        
        12,658Bank charges
        
        21,623
        
        6,250
        
        5,488Consulting and administration salaries
        
        559,902
        
        182,893
        
        85,198Investor relations
        
        554,688
        
        557,332
        
        296,437Legal fees
        
        179,551
        
        139,273
        
        79,632Loss on write-off of mineral properties and deferred costs (note 8)
        
        439,842
        
        -
        
        85,965Management fees
        
        365,113
        
        60,000
        
        132,000Office and miscellaneous
        
        78,531
        
        41,373
        
        30,442Property examination costs
        
        84,055
        
        355,149
        
        59,409Rent
        
        51,892
        
        41,287
        
        19,791Stock-based compensation                                               (note 10)
        
        2,384,845
        
        1,886,463
        
        269,196Stock exchange listing and filing fees
        
        116,565
        
        69,228
        
        51,891Telecommunications
        
        20,519
        
        9,830
        
        8,552Transfer agent
        
        20,030
        
        7,723
        
        10,951Travel and promotion
        
        463,921
        
        291,055
        
        100,7545,480,795
        
        3,741,429
        
        1,283,723Loss before other items
        
        (5,253,818)
        
        (3,700,094)
        
        (1,234,858)Gain/(loss) on conversion of foreign currencies
        
        (34,822)
        
        7,953
        
        (36,238)Loss for the year
        $
        (5,288,640)
        $
        (3,692,141)
        $
        (1,271,096)Basic and diluted loss per share
        $
        (0.17)
        $
        (0.20)
        $
        (0.10)Weighted average number of common shares outstanding
        
        30,688,058
        
        18,128,363
        
        12,917,420         See accompanying notes to the consolidated financial statements.  5          Exeter Resource CorporationConsolidated Statements of Cash Flows (Expressed in Canadian Dollars)For the year ended December 31,
        2006
        2005
        2004  Operating activitiesLoss for the year
        $
        (5,288,640)
        $
        (3,692,141)
        $
        (1,271,096)Adjustments:Amortization
        
        40,699
        
        21,179
        
        12,658Loss on write-off of mineral properties and deferred costs
        
        439,842
        
        -
        
        85,965Stock-based compensation
        
        2,384,845
        
        1,886,463
        
        269,196Unrealized loss/(gain) on conversion of foreign currencies
        
        34,822
        
        (7,953)
        
        36,238(2,388,432)
        
        (1,792,452)
        
        (867,039)Changes in non-cash working capital items:Other receivables and prepaid expenses
        
        (29,412)
        
        (26,448)
        
        (38,457)Goods and services tax recoverable
        
        10,439
        
        (19,176)
        
        (9,914)Accounts payable and accrued liabilities
        
        10,421
        
        47,591
        
        5,922Due to related parties
        
        107,724
        
        (24,114)
        
        48,011(2,289,260)
        
        (1,814,599)
        
        (861,477)Financing activitiesIssue of share capital for cash
        
        18,975,198
        
        11,455,450
        
        3,206,737Share issue costs
        
        (531,238)
        
        (307,745)
        
        (312,583)18,443,960
        
        11,147,705
        
        2,894,154Investing activitiesExploration activities- Accounts payable and accrued liabilities
        
        1,483,663
        
        253,926
        
        47,486- Due to related parties
        
        104,779
        
        55,040
        
        (18,897)Acquisition costs of property and equipment
        
        (189,863)
        
        (51,199)
        
        (164,206)Acquisition of mineral properties
        
        (70,569)
        
        (131,623)
        
        (167,066)Deferred exploration costs, net of amortization and
property examination costs
        
        (10,725,523)
        
        (4,137,379)
        
        (2,719,919)(9,397,513)
        
        (4,011,235)
        
        (3,022,602)Gain/(loss) on conversion of foreign currencies
        
        (34,822)
        
        7,953
        
        (36,238)Net increase (decrease) in cash and cash equivalents
        
        6,722,365
        
        5,329,824
        
        (1,026,163)Cash and cash equivalents, beginning of year
        
        7,788,697
        
        2,458,873
        
        3,485,036Cash and cash equivalents, end of year
        $
        14,511,062
        $
        7,788,697
        $
        2,458,873Interest paid
        $
        -
        $
        -
        $Income taxes paid
        $
        -
        $
        -
        $
        -Cash equivalents(note 6)
Supplemental cash flow information(note 13)  See accompanying notes to the consolidated financial statements.  6          Exeter Resource CorporationConsolidated Statements of Shareholders Equity (Expressed in Canadian Dollars)For the years ended December 31, 2006, 2005, and 2004Issued Share CapitalNumber of Shares
        Price Per Share
        Amount
        Share Subscription Advances
        Contributed Surplus
        Deficit
        Total Shareholders' EquityBalance at December 31,  2003
        8,512,837
        
        $  8,351,774
        $     2,876,980
        $            91,127
        $       (6,938,245)
        $         4,381,636Additions During the Year:-
        Private Placement net of share issue costs of $63,052
        4,000,000
        $     1.00
        3,736,948
        (2,876,980)
        -
        -
        859,968-
        Private Placement net of share issue costs of $76,500
        1,400,000
        $     1.00
        1,323,500
        -
        -
        -
        1,323,500-
        Exercise of agents warrants
        288,550
        $     1.35
        389,542
        -
        -
        -
        389,542-
        Exercise of warrants
        1,120,000
        $     0.25
        280,000
        -
        -
        -
        280,000-
        Exercise of stock options
        35,000
        $     0.41
        14,175
        -
        -
        -
        14,175-
        Contributed surplus allocated onexercise of stock options
        -
        -
        4,756
        -
        (4,756)
        -
        --
        Stockbased compensation
        -
        -
        -
        -
        269,196
        -
        269,196-
        Agents Warrants
        -
        -
        (28,046)
        -
        28,046
        -
        --
        Contributed surplus allocated onexercise of agents warrants
        -
        -
        5,610
        -
        (5,610)
        -
        --
        Net Loss for the year
        -
        -
        -
        -
        -
        (1,271,096)
        (1,271,096)Balance at December 31, 2004
        15,356,387
        
        14,078,259
        
        378,003
        (8,209,341)
        6,246,921Additions during the year:-
        Exercise of warrants
        155,000
        $     0.22
        34,100
        -
        -
        -
        34,100-
        Exercise of warrants
        175,000
        $     0.23
        40,250
        -
        -
        -
        40,250-
        Exercise of warrants
        1,345,000
        $     0.75
        1,008,750
        -
        -
        -
        1,008,750-
        Exercise of warrants
        47,500
        $     1.35
        64,125
        -
        -
        -
        64,125-
        Exercise of warrants
        80,000
        $     0.41
        32,800
        -
        -
        -
        32,800-
        Exercise of warrants
        149,750
        $     0.76
        113,810
        -
        -
        -
        113,810-
        Exercise of warrants
        15,625
        $     0.85
        13,281
        -
        -
        -
        13,281-
        Exercise of warrants
        40,000
        $     0.90
        36,000
        -
        -
        -
        36,000-
        Exercise of warrants
        50,000
        $     1.00
        50,000
        -
        -
        -
        50,000-
        Private Placement net of share issue costs of $158,134
        1,907,667
        $     1.30
        2,131,066
        -
        -
        -
        2,131,066-
        Private Placement net of share issue costs of $207,461
        5,979,334
        $     1.30
        7,565,673
        -
        -
        -
        7,565,673-
        Finders Fee
        44,500
        $     1.30
        57,850
        -
        -
        -
        57,850-
        Acquisition of Cognito
        2,500,000
        $     1.00
        2,500,000
        -
        -
        -
        2,500,000-
        Contributed surplus allocated on     exercise of stock options
        -
        -
        76,306
        -
        (76,306)
        -
        --
        Stockbased compensation
        -
        -
        -
        -
        1,886,463
        -
        1,886,463-
        Net Loss for the year
        -
        -
        -
        -
        -
        (3,692,141)
        (3,692,141)Balance at December 31, 2005
        27,845,763
        
        27,802,270
        
        2,188,160
        (11,901,482)
        18,088,948Additions during the year:-
        Exercise of warrants
        2,336,334
        $     1.35
        3,154,052
        -
        -
        -
        3,154,052-
        Exercise of warrants
        3,011,916
        $     1.70
        5,120,257
        -
        -
        -
        5,120,257-
        Exercise of stock options
        167,000
        $     0.22
        36,740
        -
        -
        -
        36,740-
        Exercise of stock options
        125,000
        $     1.00
        125,000
        -
        -
        -
        125,000-
        Exercise of stock options
        40,000
        $     1.08
        43,200
        -
        -
        -
        43,200-
        Exercise of stock options
        50,000
        $     1.10
        55,000
        -
        -
        -
        55,000-
        Exercise of stock options
        35,000
        $     1.17
        40,950
        -
        -
        -
        40,950-
        Exercise of stock options
        125,000
        $     1.20
        150,000
        -
        -
        -
        150,000-
        Private Placement net of share issue costs of  $531,238
        3,600,000
        $     2.50
        8,468,762
        -
        -
        -
        8,468,762-
        Agents Warrants
        
        
        (221,139)
        
        221,139
        
        --
        Private Placement
        500,000
        $     2.50
        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
        -
        -
        -
        -
        
        (5,288,640)
        (5,288,640)Balance at December 31, 2006
        37,836,013
        
        $46,230,295
        $                   -
        $       4,588,941
        $     (17,190,122)
        $       33,629,114  See accompanying notes to the consolidated financial statements.  7          Exeter Resource CorporationConsolidated Statements of Deferred Exploration Costs (Expressed in Canadian Dollars)  Don Sixto
        CVSA
        Chilean
        
        2006For the year ended December 31, 2006
        Project
        Properties
        Properties
        Other
        TotalExploration CostsAssays
        $       283,755
        $        72,409
        $      1,986
        $        117
        $       358,267Consultants and contractors
        445,462
        20,322
        1,198
        -
        466,982Drilling
        4,014,481
        606,873
        -
        -
        4,621,354Engineering
        282,595
        24,951
        -
        590
        308,136Environmental
        61,824
        5,464
        -
        551
        67,839Field camp
        456,501
        89,535
        153,577
        787
        700,400Geological surveying
        239,937
        215,723
        338,804
        58,763
        853,227Geophysical
        6,577
        -
        -
        -
        6,577Hydrology
        55,477
        -
        -
        -
        55,477IVA and Chilean tax
        938,250
        168,522
        38,161
        -
        1,144,933Recording fees
        108,905
        106,471
        28,453
        51,066
        294,895Field administration
        85,856
        99,373
        24,827
        -
        210,056Metallurgical
        60,818
        -
        -
        7,023
        67,841Travel
        269,040
        177,885
        112,036
        37,793
        596,754Wages and benefits
        753,095
        243,618
        103,982
        20,375
        1,121,0708,062,573
        1,831,146
        803,024
        177,065
        10,873,808Property examination costs
        -
        -
        -
        (84,055)
        (84,055)Total costs incurred during the year
        8,062,573
        1,831,146
        803,024
        93,010
        10,789,753Balance of costs, beginning of year
        4,976,745
        2,117,037
        -
        120,894
        7,214,67613,039,318
        3,948,183
        803,024
        213,904
        18,004,429Write-off of costs
        -
        (71,221)
        -
        (130,801)
        (202,022)Balance of costs, end of year
        $  13,039,318
        $   3,876,962
        $  803,024
        $   83,103
        $  17,802,407   For the year ended December 31, 2005
        Don Sixto
Project
        CVSA
Properties
        Other
        2005
TotalExploration costsAssays
        $     153,139
        $  114,836
        $     3,619
        $    271,594Consultants and contractors
        54,619
        20,896
        5,580
        81,095Drilling
        927,275
        246,826
        -
        1,174,101Engineering
        207,644
        -
        -
        207,644Environmental
        31,488
        -
        -
        31,488Field camp
        255,815
        65,674
        25,215
        346,704Geological surveying
        402,013
        141,984
        138,798
        682,795Geophysics
        20,136
        8,848
        -
        28,984Hydrology
        8,609
        -
        -
        8,609IVA tax
        235,947
        77,766
        -
        313,713Field administration
        76,951
        105,402
        34,632
        216,985Metallurgical
        167,227
        -
        -
        167,227Recording fees
        38,293
        57,355
        8,569
        104,217Travel
        163,105
        145,061
        92,450
        400,616Wages and benefits
        310,384
        157,381
        39,592
        507,3573,052,645
        1,142,029
        348,455
        4,543,129Property examination costs
        (29,131)
        -
        (326,018)
        (355,149)Total costs incurred during the year
        3,023,514
        1,142,029
        22,437
        4,187,980Balance of costs, beginning of year
        1,953,231
        975,008
        98,457
        3,026,696Balance of costs, end of year
        $ 4,976,745
        $ 2,117,037
        $  120,894
        $7,214,676  See accompanying notes to the consolidated financial statements.  8          Exeter Resource CorporationConsolidated Statements of Deferred Exploration Costs (Expressed in Canadian Dollars)   For the year ended December 31, 2004
        Don Sixto
Project
        CVSA
Properties
        Other
        2004
TotalExploration costsAssays
        $     100,950
        $    38,739
        $      7,159
        $     146,848Camp
        223,935
        58,898
        14,691
        297,524Consultants and contractors
        203,238
        204,570
        41,817
        449,625Drilling
        501,032
        131,968
        -
        633,000Engineering
        64,846
        -                                           
                                          
                           -
        -
        64,846Environmental
        11,105
        1,326
        1,414
        13,845Geological surveying
        175,770
        69,912
        4,824
        250,506Geophysics
        3,648
        -                                           
                                          
                           -
        32,643
        36,291IVA tax
        131,781
        67,697
        -
        199,478Field administration
        34,315
        53,335
        4,197
        91,847Metallurgical
        20,954
        -                                           
                                          
                           -
        -
        20,954Recording fees
        73,710
        101,744
        7,485
        182,939Travel
        68,920
        131,301
        27,211
        227,432Wages and benefits
        106,158
        79,990
        17,976
        204,1241,720,362
        939,480
        159,417
        2,819,259Property examination costs
        -
        -                                           
                                          
                           -
        (59,409)
        (59,409)Total costs incurred during the year
        1,720,362
        939,480
        100,008
        2,759,850Balance of costs, beginning of year
        232,869
        35,528
        84,414
        352,8111,953,231
        975,008
        184,422
        3,112,661Write-off of costs
        -
        -
        (85,965)
        (85,965)Balance of costs, end of year
        $  1,953,231
        $  975,008
        $    98,457
        $  3,026,696               See accompanying notes to the consolidated financial statements.  9       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006     1.
        Nature of Business and Continued 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.  These financial statements have been prepared on the assumption that the Company will continue as a going concern and realize its assets and discharge its liabilities in the normal course of business, rather than through a process of forced liquidation. 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.  2.
        Significant Accounting Policies  a)
        Mineral properties and deferred costs  Mineral properties consist of exploration and mining concessions, options and contracts.  Acquisition and exploration 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. If a property is put into production, the cost of acquisition and exploration 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 and deferred exploration costs will be written off to operations. Management reviews capitalized costs on its mineral properties on a periodic basis and will recognize impairment in value based upon current exploration results and upon managements assessment of the probability of profitable revenues from the property or sale of the property. Recorded costs of mineral properties and deferred exploration costs are not intended to reflect present or future values of resource 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 by affected by such defects.  b)
        Property examination costs  Property examination costs represent the current costs of evaluating the potential merit of mineral properties in which the Company currently has no continuing interest. As no continuing interest has been acquired in the evaluated mineral properties, all related costs are expensed in the year incurred.  10       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    2.
        Significant Accounting Policies(Continued)  c)
        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. 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.  d)
        Cash and cash equivalents  For the purpose of reporting cash flows, the Company considers cash and cash equivalents to include amounts held in banks and highly liquid investments with remaining maturities, at the balance sheet date, of 90 days or less. The Company places its cash and cash investments with institutions of high-credit worthiness.  e)
        Translation of foreign currencies  Foreign currencies 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)
        Deferred exploration and administration costs, at the average during the period in which the transaction occurred. Gains and losses arising on currency translation are included in the Statements of Operations.  f)
        Property and equipment  Property and equipment are carried at cost less accumulated amortization. Amortization is calculated at the following annual rates: CanadaEquipment
        Declining balance -   20%Website
        Straight-line          -    3 yearsComputer equipment
        Declining balance -   30%Computer software
        Declining balance - 100%Office equipment
        Declining balance -   20%Leasehold improvements
        Straight line          -     5 years In the year of acquisition, amortization is recorded at one-half the normal rate on assets located in Canada, except for leasehold improvements. ArgentinaEquipment including vehicles
        Straight-line - 3 yearsComputer equipment
        Straight-line - 3 yearsComputer software
        Straight-line - 2 years  ChileEquipment
        Straight-line - 12 yearsComputer software
        Straight-line - 3 yearsOffice equipment
        Straight-line - 3.5 years    11       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    2.
        Significant Accounting Policies(Continued)  g)
        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.  h)
        Share issue costs  Share issue costs incurred on the issue of the Companys shares are charged directly to share capital.  i)
        Stock-based compensation  The Company has adopted an incentive stock option plan, which is described in note 10.  All stock-based awards are measured and recognized using the fair-value method as determined by the Black-Scholes option 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 recognized in the Statement of Operations over the vesting period.  j)
        Income taxes  Income taxes are accounted for using the future income tax 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.  k)
        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 valuation including asset retirement obligations, valuation of future income tax benefits and contingent liabilities. Actual results could differ from those estimates.  3.
        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.   12       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    3.
        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: 2006
        2005Argentine Pesos
        Chilean Pesos
        Argentine PesosCash and cash equivalents
        2,636,248
        29,024,679
        251,993Other receivables and prepaid expenses
        166,265
        2,989,878
        64,378Accounts payable and accrued liabilities
        3,706,391
        26,370,114
        533,232Rate to convert to $1.00 CDN
        0.377
        0.002154
        0.386   4.
        Principles of Consolidation  The consolidated financial statements include the accounts of the following subsidiaries: Incorporation
        Percentage of OwnershipEstelar Resources Limited
        British Virgin Islands
        100%Cognito Limited
        British Virgin Islands
        100%Sociedad Contractual Minera Eton Chile
        Chile
        100%   5.
        Investments in Subsidiaries  a)
        Cognito Limited  By a Principles of Agreement dated October 27, 2002, and 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 to earn a 100% interest in Cognito Limited ("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 8a)  Effective July 22, 2003, the Company had 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 to hold a 100% interest in Cognito.  b)
        Estelar Resources Limited  By an agreement dated May 2003, the Company acquired the rights to a 100% interest in Estelar Resources Limited (Estelar). Effective July 22, 2003, the Company acquired a 100% interest in Estelar for consideration of 1,000,000 shares (issued at a price of $0.235 per share). At that date, the fair value of the assets acquired was $237,820, which was recorded as a mineral property acquisition cost. Direct costs of the acquisition totaled $2,820    13       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    6.
        Cash and Cash Equivalents 2006
        2005Cash
        $14,511,062
        $      623,697Cashable Guaranteed Investment Certificates
        -
        7,165,000$14,511,062
        $   7,788,697     7.
        Property and Equipment 2006
        2005Cost
        Accumulated Amortization
        Net Book Value
        Cost
        Accumulated Amortization
        Net Book ValueCanadaComputer equipment
        $    48,590
        $       21,608
        $    26,982
        $    34,690
        $       11,591
        $     23,099Website
        25,898
        25,898
        -
        25,898
        17,533
        8,365Leasehold improvements
        26,882
        12,952
        13,930
        11,404
        1,170
        10,234Equipment
        44,178
        6,874
        37,304
        8,500
        2,007
        6,493Computer software
        5,767
        5,767
        -
        5,764
        5,764
        -Office equipment
        15,108
        2,545
        12,563
        4,502
        730
        3,772166,423
        75,644
        90,779
        90,758
        38,795
        51,963ArgentinaEquipment including vehicles
        194,703
        137,041
        57,662
        137,951
        80,924
        57,027Computer equipment
        24,487
        14,410
        10,077
        16,011
        6,578
        9,433Computer software
        3,969
        3,492
        477
        3,216
        3,216
        -223,159
        154,943
        68,216
        157,178
        90,718
        66,460ChileEquipment
        45,570
        3,787
        41,783
        -
        -
        -Computer software
        959
        27
        932
        -
        -
        -Office equipment
        1,688
        40
        1,648
        -
        -
        -48,217
        3,854
        44,363
        -
        -
        -$  437,799
        $     234,441
        $  203,358
        $  247,936
        $     129,513
        $   118,423  8.
        Mineral Properties and Deferred Costs 2006Acquisition Costs
        Deferred
Exploration Costs
        Write-off of
Capitalized
Costs
        TotalDon Sixto
        $ 3,076,444
        $  13,039,318
        $               -
        $  16,115,762CVSA Properties
        128,572
        3,948,183
        (71,221)
        4,005,534Chilean Properties
        -
        803,024
        -
        803,024Other
        282,820
        213,904
        (368,621)
        128,103$ 3,487,836
        $  18,004,429
        $      (439,842)
        $  21,052,4232005Don Sixto
        $ 3,025,875
        $    4,976,745
        $               -
        $    8,002,620CVSA Properties
        128,572
        2,117,037
        -
        2,245,609Estelar Properties
        237,820
        120,435
        -
        358,255MRP Properties
        25,000
        459
        -
        25,459$ 3,417,267
        $    7,214,676
        $               -
        $  10,631,943    14       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    8.
        Mineral Properties and Deferred Costs(Continued)  a)
        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) (comprised of seven mineral concessions), located in Mendoza Province, Argentina, for consideration of cash payments totaling US$525,000 payable as follows:  -
        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) 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.  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 continue to use the property, outside the proposed mine area, for grazing of livestock and retain the right to re-acquire the property upon completion of mining activities.  b)
        CVSA Properties - Argentina By an Exploration and Option Agreement, dated December 30, 2003, Estelar has 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. Once Estelar has incurred exploration expenditures of US$3,000,000 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 prospect. 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.  c)
        Chilean Properties i)
        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 kilometer 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% net smelter return from any production that project. The agreement replaces the agreement with the vendor, dated March 8, 2005, which gave the Company the right to review exploration data in southern Chile.  15       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    8.
        Mineral Properties and Deferred Costs(Continued)   ii)
        Maricunga Properties  By an agreement dated October 11, 2005, 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 will share development costs pro rata, or dilution will apply.  d)
        Other Properties  i)
        Estelar Properties - Argentina  Estelar has acquired a 100% interest in the Quispe, Rosarita and Uspallata Projects (comprised of five mining concessions), 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.  ii)
        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 (comprised of forty-five mineral concessions), located in Mendoza, San Juan and La Rioja Provinces, Argentina, for consideration of cash payments totaling $440,000, 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;-
        $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.  In the event a decision is made to build and operate a mine on any of the projects, payment of the remaining option payments may be terminated.  iii)  Papagallos Properties - Argentina  By an agreement dated November 1, 2003, the Company obtained the right to acquire a 100% interest in the Papagallos Project (comprised of five mineral concessions, of which one was subject to a 2% NSR) located in the Mendoza Province of Argentina for consideration of exploration and cash payments totaling US$3,500,000. In 2004, the Company abandoned this project, and, accordingly, the related capitalized costs were written-off to operations.  16       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    9.
        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:  2006
        2005Number of Shares
        Amount
        Number of Shares
        AmountBalance, beginning of year
        27,845,763
        $  27,802,270
        15,356,387
        $  14,078,259Issued during the year for:Cash
        9,990,250
        18,975,198
        9,944,876
        11,455,450Property
        -
        -
        2,500,000
        2,500,000Finders fee
        -
        -
        44,500
        57,850Contributed surplus allocated
        -
        205,203
        -
        76,306Share Issue costs
        -
        (752,376)
        -
        (365,595)Balance, end of year
        37,836,013
        $  46,230,295
        27,845,763
        $  27,802,270  Transactions for the Issue of Share Capital During 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 10) and legal costs of $81,237. Each agents warrant entitles the holder to purchase one common share at a price of $2.50 per share, on or before April 4, 2008.  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 except that in the event that the closing price of the Companys stock exceeds $3.25 for ten consecutive trading days after February 19, 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.  c)
        The Company issued 5,348,250 shares for proceeds of $8,274,308 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.  17       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    9.
        Share Capital(Continued)  Transactions for the Issue of Share Capital During 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. In addition, an amount totaling $76,306, representing stock-based compensation recognized on vesting of the above stock options, was allocated to share capital.  e)
        The Company issued 2,500,000 shares at a price of $1.00 for the acquisition of the remaining 50% interest in Cognito.  Transactions for the Issue of Share Capital During the Year Ended December 31, 2004:  a)
        The Company completed a private placement financing consisting of 4,000,000 units, at a price of $1.00 per unit, for total consideration of $4,000,000, of which $2,876,980 was received prior to December 31, 2003. Each unit consisted of one share and one-half of a 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 12, 2005, except that, in the event the closing price of trading in the Companys shares equaled or exceeded $1.75 for a period of ten consecutive trading days, the warrants would expire in 30 days.  The Company paid share issuance costs totaling $263,052 in connection with this private placement, of which $26,969 was paid prior to December 31, 2003. In addition, the Company issued 367,700 warrants, with a fair value of $28,046, as finders fees in connection with this transaction. Each warrant was exercisable to acquire one share at a price of $1.35 per share on or before April 12, 2005, except that in the event the closing price of trading in the Companys shares equaled or exceeded $1.75 for a period of ten consecutive trading days, the warrants would expire in 30 days.  18       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006     9.
        Share Capital(Continued)  During the Year Ended December 31, 2004(continued):  b)
        The Company completed a private placement financing consisting of 1,400,000 units, at a price of $1.00 per unit, for total consideration of $1,400,000. Each unit consisted of one share and one share purchase warrant.  Each share purchase warrant was exercisable to acquire one additional share at a price of $1.35 on or before October 22, 2006. The Company paid finders fees of $76,500 in connection with this transaction.  c)
        The Company issued 1,408,550 shares for proceeds of $669,542 of which $22,680 was received after the period end, upon the exercise of warrants as follows: 1,120,000 shares at a price of $0.25 per share; and 288,550 shares at a price of $1.35 per share.  In addition, an amount totaling $5,610, representing stock-based compensation recognized on vesting of the above agents warrants, was allocated to share capital.  d)
        The Company issued 35,000 shares at a price of $0.405 per share for proceeds of $14,175 upon the exercise of stock options.  In addition, an amount totaling $4,756, representing stock-based compensation recognized on the vesting of the above stock options, was allocated to share capital.  10.
        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 may not exceed 5,893,119. The Board of Directors has amended the Plan to increase the ceiling, subject to shareholder approval, to 7,567,203. 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 Venture Exchange policy (TSX-V)), or such other price as 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, 2006 and 2005 and changes during the years then ended, is as follows:  2006
        
        2005Shares
        Weighted Average Exercise Price
        Shares
        Weighted Average Exercise PriceOptions outstanding, beginning of year
        4,949,750
        $      1.15
        2,714,750
        $     0.93Forfeited/cancelled
        (556,000)
        1.75
        (405,625)
        1.14Granted
        1,755,000
        2.62
        2,986,000
        1.31Exercised
        (542,000)
        0.83
        (335,375)
        0.73Options outstanding, end of year
        5,606,750
        $      1.58
        4,959,750
        $     1.15   19       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006    10.
        Stock Option Plan(Continued)  At December 31, 2006, the Company had outstanding stock options to acquire 5,606,750 shares as follows:    The following table summarizes information about the stock options outstanding and exercisable at December 31, 2006:  Range of Prices $
        Number
        Weighted Average Remaining Life (Years)
        Weighted Average Exercise Price
$0.00 -1.00
        308,750
        1.64
        0.411.01 - 2.00
        3,968,000
        3.25
        1.262.01 +
        1,330,000
        4.70
        2.795,606,750
        3.12
        1.58  Stock-based Compensation  The fair values of options and agents warrants granted during the years ended December 31 2006, 2005 and 2004 were estimated, at the grant date, using the Black-Scholes option pricing model with the following weighted average assumptions:  2006
        
        2005
        2004Expected annual volatility
        
        65.82%
        
        67.45%
        27.74%Risk-free interest rate
        
        3.89%
        
        3.44%
        3.56%Expected life
        
        3.50 years
        
        3.26 years
        2.28 yearsExpected dividend yield
        
        0.00%
        
        0.00%
        0.00%   20       Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006     10.
        Stock Option Plan(Continued)  Based on the above assumptions, the average fair value of each option granted and vested during the year ended December 31, 2006, was $ 1.36; accordingly compensation expense of $2,384,845 was recorded in the statement of operations for the year.  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.  Warrants  At December 31, 2006 the Company had outstanding share purchase warrants exercisable to acquire 2,302,000 shares as follows:  Number
        Exercise Price
        Expiry Date1,800,000
        $             3.00
        April 4, 2008252,000
        $             2.50
        April 4, 2008250,000
        $             3.00
        April 18, 20082,302,000   11.
        Contributed Surplus  2006
        2005Balance, beginning of year
        $  2,188,160
        $     378,003Stock-based compensation expense
        2,384,845
        1,886,463Agents Warrants
        221,139
        -Contributed surplus allocated
        (205,203)
        (76,306)Balance, end of the year
        $  4,588,941
        $  2,188,160  21    Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006  12.
        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 $1,204,005 (2005: $681,280; 2004: $576,239) was paid to or accrued for related party transactions as described below.  a)
        Exploration and consulting fees totaling $282,000 (2005: $144,000; 2004: $147,490) and $58,000 (2005: $21,000; 2004: $nil) for the provision of other consultants was paid or accrued to a corporation of which the President and CEO is a beneficiary.  12.
        Related Party Transactions(Continued)  b)
        Management and consulting fees totaling $238,000 (2005: $96,000; 2004:  $88,000) and share issue costs totaling $8,000 (2005: $nil; 2004: $nil) were paid or accrued to a corporation controlled by the Chairman of the Company.  c)
        Management fees of $195,000 (2005: $85,000; 2004: $nil) were paid or accrued to a corporation controlled by the CFO of the company.  d)
        Legal fees totaling $120,101 (2005: $105,866; 2004: $92,775) and share issue costs totaling $36,271 (2005: $64,984; 2004: $16,969) were paid or accrued to a corporation controlled by a director of the Company of which the Secretary of the Company is an employee.  e)
        Exploration and development costs totaling $266,633 (2005:$134,000; 2004: $118,497) were paid or accrued to a company controlled by the Companys Vice President, Exploration and Development.  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.   13.
        Supplemental Cash Flow Information  The Company incurred non-cash financing and investing activities during the years ended December 31, 2006, 2005 and 2004 as follows:  2006
        2005
        2004Non-cash financing activities:Issue of share capital forShare subscription advances
        $        -
        $         -
        $  2,876,980Acquisition of mineral properties
        -
        2,500,000
        -Finder's fees
        -
        57,850
        -Contributed surplus allocated
        205,203
        76,306
        10,366Share issue costs
        (221,139)
        (57,850)
        (28,046)Share subscription advances
        -
        -
        (2,876,980)Contributed surplus
        15,936
        (76,306)
        17,680$        -
        $    2,500,000
        $          -Non-cash investing activity:Acquisition costs of mineral properties
        $        -
        $  (2,500,000)
        $          -   22    Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006  14.
        Segmented Information  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, 2006
        Canada
        Argentina
        Chile
        TotalCash and cash equivalents
        $   13,452,871
        $        994,656
        $         63,535
        $   14,511,062Other current assets
        54,549
        62,562
        6,545
        123,656Property and equipment
        90,779
        68,216
        44,363
        203,358Mineral properties and deferred costs
        -
        20,249,399
        803,024
        21,052,42313,598,199
        21,374,833
        917,467
        35,890,499Current Liabilities
        (805,239)
        (1,398,421)
        (57,725)
        (2,261,385)$    12,792,960
        $   19,976,412
        $       859,742
        $   33,629,114Net Loss
        $    (4,967,850)
        $       (315,342)
        $          (5,448)
        $   (5,288,640)December 31, 2005
        Canada
        Argentina
        Chile
        TotalCash and cash equivalents
        $     7,692,285
        $          96,412
        $            -
        $    7,788,697Other current assets
        80,169
        24,514
        -
        104,683Property and equipment
        51,963
        66,460
        -
        118,423Mineral properties and deferred costs
        -
        10,631,943
        -
        10,631,9437,824,417
        10,819,329
        -
        18,643,746Current Liabilities
        (350,951)
        (203,847)
        -
        (554,798)$     7,473,466
        $   10,615,482
        $            -
        $  18,088,948Net loss
        $   (3,621,282)
        $       (70,859)
        $            -
        $   (3,692,141)   23    Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006  15.
        Income Taxes  A reconciliation of consolidated income taxes at statutory rates with the reported taxes is as follows:  2006
        2005Net loss for the year before income tax
        $
        5,289,000
        $
        3,692,000Combined federal and provincial tax rate
        
        34.1%
        
        34.1%Income tax recovery at statutory rates
        $
        (1,804,000)
        $
        (1,259,000)Effect of tax rate change
        
        171,000
        
        -Unrecognized items for tax purposes
        
        1,561,000
        
        747,000Non-capital losses expired
        
        38,000
        
        -Change in valuation allowance
        
        34,000
        
        512,000Future income taxes (recovery)
        $
        Nil
        $
        Nil  The significant components of the Companys consolidated future tax assets are as follows:  2006
        2005Non-capital loss carry forwards  Canada
        $
        1,680,000
        $
        1,089,000Non-capital loss carry forwards  Argentina
        
        225,000
        
        62,000Non-capital loss carry forwards  Chile
        
        1,000
        
        -Exploration and development deductions  Canada
        
        281,000
        
        309,000Exploration and development deductions - Argentina
        
        -
        
        (62,000)Property and equipment  Canada
        
        20,000
        
        13,000Property and equipment  Argentina
        
        -
        
        23,000Share issue costs
        
        299,000
        
        175,0002,506,000
        
        1,609,000Valuation allowance
        
        (2,506,000)
        
        (1,609,000)$
        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 $5,419,000 expire as follows:  2007
        $
        128,0002008
        
        137,0002009
        
        159,0002010
        
        200,0002014
        
        882,0002015
        
        1,588,0002026
        
        2,325,000$
        5,419,000  At December 31, 2006, the Company has unclaimed Canadian resource and other deductions in the amount of $905,000 (2005 - $905,000) which may be deducted against future taxable income on a discretionary basis. 24    Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006  15.
        Income Taxes(Continued)  In addition, the Company has share issue costs totaling $965,000 (2005 - $513,000) which have not been claimed for income tax purposes.  Tax benefits have not been recorded due to uncertainty regarding their utilization.  16.
        Contractual Obligations  The Company leases offices in Vancouver and Argentina 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 8). Other financial commitments are summarized in the table below:  Payments Due by YearTotal
        2007
        2008 - 2009
        2010 - 2011
        After 2011Office leases
        $      375,120
        $            78,424
        $     159,848
        $    102,636
        $     34,212Total
        $      375,120
        $            78,424
        $     159,848
        $    102,636
        $     34,212   17.
        Subsequent Events  Subsequent to December 31, 2006, the Company granted, subject to shareholder approval, the following:  (i)
        785,000 stock options exercisable at a price of $2.52 per share on or before February 1, 2012.  (ii)
        220,000 stock options exercisable at a price of $2.52 per share on or before February 13, 2012.  The fair value of the stock options reflected above has not been presented as the compensation expense will be measured at the date that the shareholder approval is received.   18.
        Comparative Figures  Certain comparative figures have been reclassified to conform to the current years consolidated financial statement presentation.  25    Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006  19.
        Differences between Canadian and US Generally Accepted Accounting Principles  The Companys consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in Canada.  The material measurement differences between GAAP in Canada and the United States that would have had an effect on these consolidated financial statements are as follows:  Balance Sheet(i) Mineral Properties and Deferred Costs
        2006
        2005Mineral properties and deferred costs - under Cdn GAAP
        $
        21,052,423
        $
        10,631,943Add back write-off of mineral properties - under Canadian GAAP
        
        439,842
        
        -Mineral property expenditures expensed - under US GAAP
        
        (21,492,265)
        
        (10,631,943)Mineral properties and deferred costs - under US GAAP
        $
        -
        $
        -(ii)Shareholders Equity
        2006
        2005Shareholders Equity - under Cdn GAAP
        $
        33,629,114
        $
        18,088,948Deficit - under Canadian GAAP
        
        17,190,122
        
        11,901,482Deficit - under US GAAP
        
        (38,242,545)
        
        (22,533,425)Shareholders Equity - under US GAAP
        $
        12,576,691
        $
        7,457,005  Statement of Operations and Deficit
        2006
        2005
        2004Loss for the year - under Cdn GAAP
        $
        (5,288,640)
        $
        (3,692,141)
        $
        (1,271,096)Add back write-off of mineral properties - under
Canadian GAAP
        
        439,842
        
        -
        
        85,965Mineral property expenditures expensed - under
US GAAP
        
        (10,860,322)
        
        (6,819,603)
        
        (2,926,916)Loss for the year - under US GAAP
        $
        (15,709,120)
        $
        (10,511,744)
        $
        (4,112,047)Basic and diluted loss per share - under US GAAP
        $
        0.51
        $
        0.58
        $
        0.322006
        2005
        2004Deficit under US GAAP - beginning of year
        $
        22,533,425
        $
        12,021,681
        $
        7,909,634Loss - under US GAAP
        
        15,709,120
        
        10,511,744
        
        4,112,047Deficit - under US GAAP - end of year
        $
        38,242,545
        $
        22,533,425
        $
        12,021,681  Statement of Cash Flows
        2006
        2005
        2004Operating Activities - under CDN GAAP
        $
        (2,289,260)
        $
        (1,814,599)
        $
        (861,477)Acquisition of mineral properties
        
        (70,569)
        
        (131,623)
        
        (167,066)Exploration activities - accounts payable
        
        1,588,442
        
        308,965
        
        28,589Deferred exploration costs, net of amortization and property examination costs
        
        (10,725,523)
        
        (4,137,379)
        
        (2,719,919)Operating Activities - under US GAAP
        $
        (11,496,910)
        $
        (5,774,636)
        $
        (3,719,873)Investing Activities - under CDN GAAP
        $
        (9,397,513)
        $
        (4,011,235)
        $
        (3,022,602)Acquisition of mineral properties
        
        70,569
        
        131,623
        
        167,066Exploration activities - accounts payable
        
        (1,588,442)
        
        (308,966)
        
        (28,589)Deferred exploration costs, net of amortization and property examination costs
        
        10,725,523
        
        4,137,379
        
        2,719,919Investing activities - under US GAAP
        $
        (189,863)
        $
        (51,199)
        $
        (164,206)  26    Exeter Resource CorporationNotes to the Consolidated Financial Statements
December 31, 2006  19.
        Differences between Canadian and US Generally Accepted Accounting Principles(Continued)  Exploration expenditures  For US GAAP purposes, the Company expenses exploration expenditures when incurred. When proven and probable reserves are determined for a property, subsequent development costs of the property will be capitalized. The capitalized costs of such properties will then be measured, on a periodic basis for recoverability of carrying values.  Acquisition costs of mineral properties containing proven and probable resources will be capitalized for US GAAP purposes.  New accounting pronouncements  In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 (FIN No. 48), which became effective for the Company on January 1, 2007. This interpretation clarifies the accounting for income tax benefits that are uncertain in nature. Under FIN No. 48, a company will recognize a tax benefit in its financial statements for an uncertain tax position only if managements assessment is that its position is more likely than not (i.e. a greater than 50 percent likelihood) to be upheld on audit based only on the technical merits of the tax position. This accounting interpretation also provides guidance on measurement methodology, derecognition thresholds, financial statement classification and disclosures, interest and penalties
recognition, and accounting for the cumulative effect adjustment. The new interpretation is intended to provide better financial statement comparability among companies.  Required annual disclosures include a tabular reconciliation of unrecognized tax benefits at the beginning and end of the fiscal period; the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate; the amounts of interest and penalties recognized in the financial statements; any expected significant impacts from unrecognized tax benefits on the financial statements over the subsequent 12-month reporting period; and a description of the tax years remaining to be examined in major tax jurisdictions. FIN No. 48 is effective for fiscal years beginning on or after December 15, 2006. The Company is currently assessing the impact, if any, that the adoption of FIN No. 48 will have on its financial statements.  In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements (FAS No. 157), which will become effective for the Company on January 1, 2008. This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Statement does not require any new fair value measurements but would apply to assets and liabilities that are required to be recorded at fair value under other accounting standards. The impact, if any, to the Company from the adoption of FAS 157 in 2008 will depend on the nature of the Companys assets and liabilities at the time that they are required to be measured at fair value.  In September 2006, the Securities Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) SAB No. 108. SAB No.108 provides guidance on how prior year misstatements should be taken into consideration when qualifying misstatements in current years financial statements for purposes of determining whether the current years financial statements are materially misstated. SAB No. 108 permits companies to record the cumulative effect of initial adoption by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of the 2006 year with the offsetting adjustments recorded to the opening balance of retained earnings. SAB No. 108 is effective for fiscal years ending on or after November 15, 2006. The application of SAB No. 108 did not have an impact on the Companys consolidated balance
sheets, statements of operations or statements of shareholders equity for 2006, 2005 or 2004.   27                     MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2006                    ConversionsAu
        GoldAg
        Silverg/t
        grams per tonneoz
        ounce1 tonne
        1.102 tons1 troy ounce
        31.1035 grams1 ounce/ton
        34.2857 grams per tonnekm
        kilometre1 kilometre
        .62 miles1 metre
        3.28 feet   2       MANAGEMENT'S DISCUSSION AND ANALYSIS March 26, 2007  REPORT ON OPERATIONS Operations During 2002, the Company focused on the acquisition of mineral properties and securing capital for the exploration of those properties.  In 2003, the Company acquired, or secured an option to acquire, the rights to five groups of gold properties in Argentina, including its principal and most advanced property, La Cabeza which was recently renamed Don Sixto.  These acquisitions and subsequent, successful, financing efforts represent substantial milestones for the Company.  In 2004, the Company expanded its exploration team, based in Mendoza City, Argentina, and rented new offices to accommodate this expansion. Four projects were advanced to the drilling stage; and one, the Don Sixto project, moved to the evaluation stage. The acquisition and initial exploration of a portfolio of Patagonia gold projects, acquired through an alliance with Cerro Vanguardia S.A. (CVSA), led to the drilling of the Cerro Moro and Cerro Puntudo projects.  In 2005, the Company continued with the exploration programs initiated in 2004, and advanced its Don Sixto project through continued drilling programs and engineering studies. In addition, during the year, the Company commenced work on projects in Chile that were acquired through agreements with Rio Tinto Mining and Exploration Limited (Rio Tinto) and Minera Anglo American Chile Limitada and Empresa Mantos Blancos S.A (Anglo American).  In 2006, the Company continued its exploration program on its Don Sixto project with the objective of expanding the resources outlined in its 2005 Resource Estimate Study and raising the level of confidence in that resource estimate. The Company advanced its exploration activities in Patagonia on its projects held through the alliance with CVSA, and in Chile continued work on the Caspiche property. The Company also entered into a new agreement with Rio Tinto which gave the Company the right to explore 48 targets in Southern Chile.    A summary of the Companys mineral properties follows:  3         PRINCIPAL PROJECT ARGENTINA Don Sixto  (La Cabeza)  Mendoza Acquisition terms In 2005, the Company completed the acquisition of Cognito Limited (Cognito), a company that has the option to acquire a 100% interest in the Don Sixto gold project in Argentina. The Company issued a total of 4,100,000 common shares and paid $25,000 to Rowen Company Limited (Rowen) and its principals as consideration for the option to acquire Cognito and in settlement of the purchase consideration.  Bryce Roxburgh, the President and CEO and a director of the Company, is a principal of Rowen.  To earn its interest in the Don Sixto property (subject to a 3.5% net smelter royalty (NSR) in favor of the owners of the property), Cognito must pay to the owners of the property a total of US$525,000 in staged payments, by December 2014. On behalf of Cognito, the Company has made all required payments, totaling US$125,000 to date. Cognito may terminate the staged payments upon making a development decision in respect of the project; provided that production commences within two years. Cognito has the option to purchase the NSR outright for US$1,000,000.  Property Description Don Sixto is located 370 km south of the city of Mendoza, in Mendoza Province, and consists of seven gold concessions, covering approximately 100 square kilometres. An additional 176 square kilometres of concessions, comprising the Agua Nueva property, are held under option pursuant to an agreement with Minera Rio de la Plata, described below.  Geologically, it is readily accessed by gravel roads and lies at an elevation of 1,100 metres above sea level.  The area has no grid electricity or water pipeline.  The property was discovered in 1997 by Argentina Mineral Development (AMD), who spent approximately US$3.3 million on exploration to outline ore-grade gold mineralization within epithermal quartz veins and breccias, in hydrothermally altered, Permo-Triassic felsic volcanic rocks.  The Don Sixto mineralization is described as low-sulphidation epithermal. Preliminary metallurgical test work indicated +90% gold recovery for oxidized and sulphide bearing material utilizing conventional leaching methods. Drilling by AMD included 16,000 metres of diamond and reverse circulation testing. This exploration program partially delineated multiple zones of gold  4      mineralization within a 4 square kilometre area and led to resource calculations followed by an in-house scoping study.  Exeter commissioned Ruben S. Verzosa, P. Eng. of Langley, British Columbia, a qualified person (QP) as described in the Canadian Securities Administrators National Instrument 43-101 (NI 43-101), to review the results of the AMD exploration program and in-house scoping study. Mr. Verzosa reviewed the methodology of all exploration procedures and confirmed that the resources established to that date were inferred resources as defined by the Canadian Institute of Mining, Metallurgy and Petroleum code.  Robert Harley, formerly Exeters Vice President, Exploration completed a report, complying with the requirements of NI 43-101, updating all exploration to September, 2004. This report can also be viewed at www.sedar.com.  Subsequently, Matthew Williams, Exeters Exploration Manager, and QP, together with independent QP Peter Allen of Australian Mine Design and Development (AMDAD) of Brisbane, Australia, drafted a new report complying with the requirements of NI 43-101 to accompany the revised statement of Indicated and Inferred Resources. This report was filed on July 27, 2005 and can be viewed on SEDAR at www.sedar.com.  Purchase of Surface Rights The Company purchased the 8,000 hectare property overlying the proposed Don Sixto development site in late 2005 for US $67,000. The purchase agreement requires that the Company build two new houses for the prior landowners and grants them the right to continue grazing livestock away from the contemplated mining operations.  Exploration and Development Studies Background  2003-2006 In November 2003, the Company retained independent engineer Sandercock and Associates Pty Ltd (Sandercock), of Australia, to update the AMD scoping study, in order to assist management in assessing whether to proceed with a pre-feasibility study.  The study was not NI 43-101 compliant and is not available to the public.  In early 2005, the Company appointed Jerry Perkins as Vice President, Development and Operations and commenced an internal engineering and development study so that management and the board could determine parameters and timing for a full feasibility study. Resources were estimated mid 2005 based on detailed drilling conducted during 2004 and early 2005. The development study was completed by 2005 year end, with selected study results posted on the Companys website during the first quarter of 2006. Because the internal study indicated significant cost escalation over that
anticipated in the earlier Sandercock study (such cost escalation was experienced throughout the mining industry during this period), management elected to proceed with additional discovery and confirmation drilling programs, which commenced mid-2005 and were completed in December 2006. The discovery drilling program was designed to increase available resources at the project, while confirmation drilling will lift resources categorized as inferred to the indicated or measured categories.  Resource Estimates and Development Studies Following detailed drilling in 2004 and early 2005, the Company contracted Hellman & Schofield (H&S), of Sydney, Australia, to provide an independent estimate of gold resources at Don Sixto. The report estimated an indicated resource at Don Sixto of 390,000 ounces of gold (6.2 million tonnes at an average grade of 2.0 g/t gold) and an inferred resource of 500,000 ounces of gold (12.1 million tonnes at a grade of 1.3 g/t gold), at a cut-off grade of 0.5 g/t. At a higher, 1.0 g/t gold cut-off grade, the indicated resource was estimated to be 3.5 million tonnes at a grade of 3.0 g/t gold, for 330,000 ounces, and the inferred resource was estimated to be 4.8 million tonnes at 2.2 g/t gold, for 340,000 ounces.   5       Indicated and Inferred Resources Indicated (0.5 grams/tonne gold cut-off)Zone
        Tonnes
        Grams/tonne Gold
        Ounces GoldCuello
        1,240,000
        3.08
        123,000Ojo
        1,740,000
        2.22
        124,000Luna
        1,870,000
        1.57
        94,000Mandibula
        1,330,000
        1.16
        50,000Total
        6,200,000
        2.0
        390,000Inferred (0.5 grams/tonne gold cut-off)Zone
        Tonnes
        Grams/tonne Gold
        Ounces GoldCuello
        2,400,000
        1.67
        129,000Ojo
        1,530,000
        0.93
        46,000Luna
        3,620,000
        1.16
        135,000Mandibula
        3,970,000
        1.03
        131,000Cachete
        350,000
        3.08
        35,000Labio East
        100,000
        4.44
        14,000Labio South
        70,000
        2.45
        6,000Labio West
        80,000
        1.67
        4,000Total
        12,100,000
        1.3
        500,000Indicated (1.0 grams/tonne gold cut-off)Zone
        Tonnes
        Grams/tonne Gold
        Ounces GoldCuello
        910,000
        3.93
        115,000Ojo
        910,000
        3.62
        106,000Luna
        1,120,000
        2.15
        77,000Mandibula
        530,000
        1.83
        31,000Total
        3,500,000
        3.0
        330,000Inferred (1.0 grams/tonne gold cut-off)Zone
        Tonnes
        Grams/tonne Gold
        Ounces GoldCuello
        1,260,000
        2.53
        102,000Ojo
        380,000
        1.67
        20,000Luna
        1,270,000
        2.01
        82,000Mandibula
        1,260,000
        1.76
        71,000Cachete
        330,000
        3.39
        36,000Labio East
        90,000
        4.96
        14,000Labio South
        70,000
        2.45
        6,000Labio West
        90,000
        2.04
        6,000Total
        4,800,000
        2.2
        340,000  The revised mineral resources estimates for the Cuello, Luna, Ojo, and Mandibula zones applied Multiple Indicator Kriging (MIK) methodology to the Exeter database and geological models. The models, database, and supporting information were independently validated by Peter Allen of AMDAD. The revised resources were estimated using an additional 67 holes, totaling 4,798 metres of drilling and 2,050 metres of sawn channel sampling, conducted in 2004 and 2005.  The Cachete zone resource was re-calculated internally by Exeter utilizing a manual polygonal cross sectional method of estimation. Although new, three-dimensional, geological models were constructed for Cachete, it was deemed inappropriate to use MIK methods at that time, due to a lack of drilling density. The previous resource estimates and assumptions for the Labio East, South and West zones were utilized, because the 2004 program did no new work in relation to the drilling database for these zones. These estimates will be revised with the benefit of results from the recent drilling in these zones.  AMDAD also carried out conceptual pit designs for the Cuello, Luna, Ojo, and Mandibula zones, which showed that, in addition to the indicated resource within pit perimeters, a significant proportion of the inferred resource remained within the potential open pits.    6       Development Studies Metallurgy Metallurgical test work, through 2005, confirmed high gold and silver recoveries using a gravity separation circuit, followed by a conventional carbon-in-leach flow sheet. Gravity gold recovery alone averaged 30 percent and exceeded 50 percent from some samples.  The test programs were carried out at Metcon Pty Ltd of Sydney, Australia (a member of the AMMTEC group), AMMTEC Limited of Perth, Western Australia, Outokumpu Technology Pty Ltd of Perth, Western Australia and Knight Piesold Pty Ltd of Perth, Western Australia. The program included optical mineralogy, comminution, flotation, gravity separation, cyanide leaching and tailings characterization test work.  The test work was carried out on relatively coarsely ground, 95 micron material taken from individual mineralized intercepts and composites prepared from diamond drill cores selected from the 2004 drilling program. The head assays of composite samples from each of the main mineralized zones are as follows:  Assay
        Units
        Ojo
        Luna
        Cuello
        BulkGold
        g/t
        9.43
        3.13
        7.93
        5.78Silver
        g/t
        6.9
        18.3
        61.3
        25.8Sulphur
        %
        0.10
        0.16
        0.47
        0.28Iron
        %
        1.50
        1.27
        1.24
        1.26Arsenic
        ppm
        4320
        105
        80
        1235Copper
        ppm
        38
        28
        26
        27Lead
        ppm
        35
        32
        19
        28Zinc
        ppm
        78
        33
        55
        52  Specific outcomes from the test work included: Grind Size: The samples must be ground to a fine particle size to optimize gold liberation in the carbon in leach (CIL) circuit. Testwork determined that 95 microns was the optimum grind for the bulk composite samples.  Pulp Density: The ground sample is mixed with water and reagents in the CIL circuit.  The ratio of solid to liquid in the leach circuit is referred to as the pulp density. In the case of the bulk composite sample the optimum pulp density was 40 percent.  Gravity Circuit Recovery:  A portion of the gold at Don Sixto is free or particulate gold that can be recovered with simple gravity separation methods as against chemical leaching in the CIL circuit.  The gravity circuit is that portion of the treatment plant that recovers such free gold. In the case of the bulk composite sample, the gravity circuit recovered 30-50 percent of the total gold.  Carbon in Leach Gold Recovery: The recovery of gold in the CIL circuit from the bulk composite sample testwork was 93 to 94 percent.  Gold Recovery Variability on Deposit Composite Sample: The testwork achieved gold recoveries that varied from 92.7 to 93.9 percent on the composite sample.  This reflects the variability for tests on the same composite.  Gold Recovery Variability on Individual Mineralized Intercepts: Tests were performed on a number of mineralized samples from different sites within the gold deposit in order to determine the gold recovery variability for different mineralized samples. The gold recovery variability was 80 to 97 percent  average 91 percent.  Silver Recovery Variability on Individual Mineralized Intercepts: The testwork determined that silver recovery variability was 80 to 85 percent.  Reagent Consumption: The principal reagents used for the CIL circuit are calcium oxide (lime) and sodium cyanide. For each of these reagents the consumption averaged 0.40 kilograms per metric ton of composite sample.   7       2006 Testwork Metallurgical testwork was more limited in 2006 than 2005 while a new drill core inventory was built up, however significant programs were completed on flotation and grinding.  Late in 2006 large quantities of drill core samples were prepared for the remaining feasibility level testwork programs planned for the first half of 2007. Flotation optimisation: Detailed flotation and gravity testwork on the 2005 bulk composite was carried out at Metcon leading to a locked-cycle test under optimised conditions.  Gold recovery was 88% and silver recovery was 80% into a concentrate weight of 1.5%.  The grind size for this level of recovery was a P80 of 53 microns. SAG mill Comminution tests:  Thirteen selected quarter-core samples were taken form Cuello, Luna, Mandibula and Ojo for SMC testing at JK Tech in Queensland, Australia.  The samples had acceptable SAG mill properties and were mostly confirmed to be moderately hard to hard.  These results will form part of a comprehensive comminution data base that is being assembled. Recent Work:  Late last year approximately 2.5 tonnes of representative drill core intercepts were transferred to two laboratories in Australia in two nearly identical batches.  Each batch represented over 100 intercepts of mineralization, each of mineable width with a cut-off grade of 0.5g/t Au and included internal and external dilution so as to be representative of production material.  The first batch went to JK Tech for comprehensive comminution variability testwork.  The material for this was obtained from quartered HQ core, with intercepts assembled into 17 composites, representing separate sections of the Cuello, Luna, Mandibula and Ojo deposits.  Each composite is to be tested for SAG-mill, rod mill, ball mill and abrasion parameters to complete the database for comminution circuit design.  The data will be used for the optimization of the crushing and grinding circuit design options during  the planned project option and feasibility studies expected to start later in 2007.  A second batch of almost identical intercepts, prepared from coarse crushed drill core, has arrived at Metcon Laboratories in Sydney and is also being prepared into 17 composites with identical specifications to those sent to JK Tech.  Metcon will carry out a second round of detailed leach optimization work on these composites to finalize the basic flowsheet.  Other samples will then be prepared for specific testwork directed at the engineering design of each section.  The mineralized intercepts for this current program were selected from 114 holes representing 12,670 metres drilled between July 2005 and the end of August 2006.  By comparison the 2005 resource estimate, and the parallel metallurgical program then carried out, was based on 4,342 metres and 60 holes.  Geotechnical Studies Geotechnical logging and core orientation by Exeters Argentina staff geologists was used by Vector Chile Limitada (Vector) to carry out a first pass evaluation of open pit slope stability. Using conservative assumptions, Vector estimated an average pit slope angle of 55 degrees, still incorporating 50% safety factors. This is a relatively steep slope and should assist in reducing the amount of waste rock in mining. The logging program is continuing on drill cores and is now being supplemented by on-site point load testing to give a comprehensive evaluation of different rock strengths. These data will be re-evaluated in the coming months by independent consultants to provide data of a quality to design and optimize open pits. Independent experts A Karzulovic Ltda (AKL) of Chile overview and monitor all geotechnical work. A water depth monitor for use on old drill holes was purchased so that regular measurements of the static water levels can be recorded and monitored over time.  This combined with dynamic pump testing of selected holes is providing basic data on groundwater flow quantities and direction. To date, the inferred groundwater flows have been small suggesting that water will not be a significant problem in mining. It is also apparent that mine groundwater will not be a significant source of the overall water requirements for production.  Recent Work: The large database of measurements is currently being collated into a geo-referenced three-dimensional geotechnical model that can then be overlaid with the geological and block models to assist with future pit design work during the feasibility study.  This information has been augmented with a large number of point-load and uni-axial compressive strength tests on whole drill core and a lesser but significant number of tri-axial compressive strength tests. Geotechnical databases have been completed for the Cuello and Luna deposits and the remaining deposits databases will be compiled in 2007. Detailed structural mapping of surface outcrops has been delayed due to lack of qualified personnel.    8       Conceptual Mine Design In 2005, AMDAD used specialized software to develop conceptual open pits based upon then current costs and Vectors geotechnical slope criteria. Preliminary open pit designs followed for the Cuello, Luna, Mandibula and Ojo zones, based upon H&S resource estimates. AMDADs report provided waste to ore* ratios for each conceptual open pit and led to a base-case production schedule. The average waste to ore ratio for the four zones was 2.5 to 1. These data were used as a basis for a conceptual project infrastructure layout and an internal project evaluation.  No further work was conducted during 2006.  Electricity Supply Exeter engineers, working with power authorities and suppliers of generating equipment, based in Mendoza, Argentina, have compared two electricity supply alternatives for the project: power from the Provincial electricity grid and on-site power generation using diesel fuel. On a cost-benefit basis, electricity supply using the Provincial grid was shown to be superior, as it locks in a key component of the project operating cost. The preliminary cost estimate of a transmission line using mid-2005 costs was US$5-7 million. Studies in 2006 evaluated the preferred power supplier, the supply route, expanded transmission capacity to 132Kva to allow for possible increased throughput.  Recent Work: The power options study was completed in the last quarter of 2006 by Penta Sur SA of Tucuman and Buenos Aires. The study identified seven options and sub-options in terms of route and the specific take off point for supply. The initially favored technical option in terms of reliability and environmental approvals was to take supply from Nihuil and follow the current road route south to a substation at La Salinilla.  Capital costs were estimated for supply to site as well as 33Kv lines to the La Salinilla and Agua Escondida communities, including the costs of supply to switchyards in the two communities.  Exeter engineers have suggested a number of ways to reduce the capital cost and requested that Penta Sur review these before finalizing their report, which is expected early in 2007.  Water Supply A San Juan, Argentina water consultant (FUUNSAJ) has carried out geophysical surveys over potentially large aquifers near Don Sixto to evaluate water supplies. FUUNSAJ performed pump tests on exploration drill holes for geotechnical purposes and to evaluate the potential contribution by open water seepage. Two sites were selected as being potentially capable of meeting the project requirement of 3,000 cubic metres of water daily.  Groundwater surveys by FUUNSAJ (now Grupo Ansilto) and Exeter examined water quality for drinking water supplies. The water is slightly, to moderately saline, depending on the source. The range of groundwater salinity is well within the efficient processing range of modern reverse osmosis plants for drinking water.  Recent Work: Reports are awaited from Grupo Ansilito for the drilling program conducted at Manantial Mandibula for water during the year, as well as for catchment storm flows. Preliminary results have indicated water flows were less than expected by the consultants. Other measurements made by Exeter personnel suggest that a large portion of the water may be being diverted down a number of parallel NW-SE structures. An additional drilling program will be required in 2007 to follow up on the 2006 program and to confirm aquifers capable of sustaining up to a 2.5 million tonne per year operation.  Road Access Exeter engineers, Mendoza-based civil construction companies, and the Municipality of Malargüe have reviewed and surveyed the existing 200 kilometre long access routes to the project area. The studies determined the roads to be generally good. First pass cost estimates were obtained for road sections requiring repair or upgrading. Two preferred routes to the project area were selected and are expected to be subject to further evaluation during the development options study and subsequent feasibility study planned for late 2007. With rainfall normally restricted to a three month period of thunderstorms in summer, road maintenance appears to be straightforward. During 2005, Exeter engineers reviewed the transport logistics for typical construction and operational supplies with a number of large Argentinean transport companies. The costs on a first pass basis fall within the range expected for a project of this size. No further work was conducted during 2006. _________________________ *The use of the term ore is in the context of the common mining expression waste to ore ratio or stripping ratio and is not intended to imply that the inferred resources used in this study have any economic status as ore as defined in NI 43-101 and the relevant CIM guidelines.   9       Mine Accommodation In 2005, Mendoza-based architect was contracted to produce a sympathetic conceptual design for the accommodation camp and offices incorporating the use of local materials. The design was costed by local construction companies and the cost is well within the expected range.  No work was conducted during 2006.  Engineering Consultants Ausenco Limited of Brisbane, Australia (Ausenco), an independent minerals engineering and construction company specializing in international projects, coordinated mining, metallurgical and infrastructure study results into an engineering review. Capital and operating costs to a 25% level of accuracy were developed using detailed equipment lists and current cost factors. Ausenco made useful recommendations for studies implemented by Exeter in 2006.  Study Outcomes At the end of 2005, all the studies carried out in that year and described above were reviewed and incorporated into an overall development report prepared by Sandercock. Sandercock provided capital and operating cost estimates for a project with production rates of 500,000 to 1,000,000 tonnes of ore per year. The development report formed the basis of the decision by Exeters directors to approve the resource expansion drilling program conducted during 2005 and 2006.  With the escalation in gold and silver prices in early 2006, it was decided to review the possibility of treating significantly higher ore throughputs at Don Sixto. It was considered that by lowering the cut-off grade from that used in the Sandercock study, that a possibility exists that significantly more gold mineralization might be economically recoverable should gold and silver prices remain at elevated levels.  Planned Work A development options study to establish the parameters necessary for feasibility and environmental studies will commence late in the second quarter, 2007 following a new National Instrument 43-101 resource estimation based on the expanded drilling program conducted through 2005 and 2006. Provided the outcome of the development options study is positive, the Company will proceed to a final feasibility evaluation.  Environmental and Social Exeter completed the spring and summer baseline studies in 2005. Autumn to winter baseline environmental studies continue with the field campaign concentrating on the Soil Potential Study in the project area and surrounds.  The detailed nature of this campaign also allows Cunsultores Independientes Socio Ambientales (CISA) to simultaneously collect data on flora and fauna, indigenous and cattle affected vegetation as well as assessing in more detail the geomorphology. CISA was requested to expand its program to carry out a parallel program of water and limnology sampling in the winter period. CISA collected additional soil and water samples on a regional scale to provide data representing the autumn-winter season.  This supplemented the previous baseline campaigns conducted in spring-summer and ensures that all seasonal ecological factors have been sampled.  Other important
projects have been completed, aimed at ensuring that a comprehensive social and environmental description of the existing area and its communities is available.  These include land-use potential, landscape analysis, community profiling, archaeological and palaeontological studies. The final report on the baseline studies has been received from CISA.  Ongoing programs include dust, noise, water level and water quality monitoring. A community-based program to collect seeds and cultivate native plants and shrubs for rehabilitation of disturbed land commenced with expert assistance from the Argentinean national research organization, CRYCIT.  Knight Piesold (KP) was contracted to conduct a Gap Analysis from work conducted on baseline studies, reviewing the quality and scope of results to date against international standards prior to commencement of the company contracting for an Environmental Impact Assessment report. A number of issues were delineated in the KP report, and work is currently being conducted to fill the gaps.   10       In 2006, a well was drilled at Agua Escondida to provide water for the local community, prior to mobilizing the drill rig to Don Sixto where it was used for water and resource expansion programs.  2006 Exploration Activity and Planned Activities The objective of these coordinated studies is to facilitate the transition from exploration to a final feasibility study. The exploration and resource expansion drilling program conducted in late 2005 and through 2006 was terminated in December 2006 to allow for logging and sampling of the large back-log of drill core from that program. Once core logging has been completed and all assays from the drill holes are received, a new resource estimate study is planned which will be followed by a development options study to examine the most efficient means of mining and processing the mineralization. Provided the development options study indicates viability, a final feasibility study is planned to commence in the final quarter of 2007.  More detailed information on the resource and development studies can be obtained on the Company website: www.exeterresource.com.  Drilling The resource expansion drilling and channel sampling program which commenced in July 2005 continued throughout 2006.  The Company drilled a further 122 diamond drill holes for 16,585 metres, 134 reverse circulation percussion drill holes for 15,381 metres and 307 rotary air blast (RAB) holes for a total of 4731 metres. In addition, 5 holes for 231 metres were drilled to test an underground water aquifer.  Subsequent to the drilling data used for the July 2005 resource statement, the combined 2005 and 2006 drilling that constitutes the Resource Expansion and Resource Definition Program totaled 57 diamond drill holes for 20,137 metres and 194 RC drillholes for 20,400 metres.  The five rig drilling program, which ended in December 2006, utilized the following drills:  (i)
        a BB-37 mobile diamond rig, capable of drilling in confined/difficult access locations with limited surface disturbance; (ii)
        a UDR 200 diamond rig commenced work on the project in May;(iii)
        a Schramm reverse circulation percussion rig capable of drilling deep holes and (iv)
        two UDR 650 multipurpose reverse circulation percussion (RC) diamond drill rigs for testing targets generated by reconnaissance rock chip sampling and channel sampling and the RAB drilling programs.  The Schramm drill rig was used through the final quarter of 2006 to drill deeper holes for the resource expansion work at Don Sixto. Drilling in the final quarter concentrated on the Cuello East, Cuello West and Cuello veins, Ojo, Luna extensions, Ojo extensions, the Central Vein Zone (Labio East) and the Mandibula Zones. On most zones drilling continues to delineate the lateral and depth extent of the new mineralized veins.  Termination of the drilling program December, 2006 will allowed our technical team to geologically log and sample the large back-log of drill cores accumulated through the five rig program in the latter part of 2006. The logging and sampling is expected to be completed during the first quarter, 2007, in preparation for the new resource estimates scheduled for late in the second quarter, 2007.  Drilling Confirmation and Resource Expansion Drilling Programs  The objective of the Drilling Confirmation Program completed in 2006, was to raise the confidence level of much of the 500,000 ounce Inferred Resource defined in the 2005 Resource Estimates to Measured/Indicated Resource categories.  Much of the 2006 program included diamond drilling in areas of higher grade mineralization located near surface over a strike length of 300 metres at the Mandibula zone.  The Resource Expansion Drilling Program was designed to expand the resources outlined by the 2005 Resource Estimate study, so that potentially increased resources could provide the basis for a larger scale gold mining operation, to offset the effect of industry-wide increases in capital and operating costs experienced during 2005 and  11      2006.  This program was particularly successful and became the focus for drilling during the latter half of 2006. A Rotary Air Blast (RAB) drill rig was initially employed to test large areas of potentially mineralized volcanics below a cover of wind blown sands. The program had some success, but was restricted by the depth capacity of the drill and the unconsolidated character of the sands. The RAB testing program was replaced by fencing drill holes across the prospective deeper sand covered areas. Both approaches to testing the sand covered areas combined with our geologists skills in predicting targets led to the success of the Resource Expansion Program in 2006.  At Cuello, the most southerly area of extensional-type veining, drilling was successful in delineating a +200 metre wide corridor comprising at least seven veins as compared to the single vein originally defined by the 2004 resource drilling. Two major veins were located within the Eastern Cuello system, and another four veins were identified within the Western Cuello system. The Eastern Cuello vein extends to at least a 200 metre vertical depth. The Western Cuello system remains open for expansion along strike and to depth.  At Luna, the original mineralized zone, with dimensions of approximately 200 metres long and 50 metres wide, was expanded to a system of at least 750 metres long and 500 metres wide. This was accomplished by RAB drilling through sand cover, mainly to the south west and north east of the known Luna zone. At year end, the new south western zone remains open for expansion along strike and to depth. The new zone north east of Luna remains open to the north west.  At Ojo, expansion drilling commenced late in 2006. It is considered that this higher grade zone remains open for expansion to the south and at depth towards the north.  At Mandibula, the zone was also expanded by the 2006 Resource Expansion Drilling Program. Formerly, the zone was indicated to be some 50 metres wide and 150 metres long. The new work indicated a 150 metre wide corridor of potential mineralization with a strike length of at least 800 metres. Our technical team predicted the gold mineralized zone would plunge shallowly to the southeast, along the strike direction of the major structure. This hypothesis was based on the interpreted dip of the host volcanic stratigraphy beneath unmineralized silica veining in outcrop. Late in the year three broadly spaced drill holes intersected new gold mineralization, confirming the prediction.  At the Central Vein Zone, which includes the Mercedes, Labio East and Labio West veins, drilling tested an interpretation that the higher grade section of the Labio East vein should also plunge southerly, beneath unmineralized volcanic rocks in outcrop. The interpretation was confirmed by drilling, leaving the zone open for expansion in the down plunge direction.  No drill testing was conducted on the Cachete vein system during 2006.  Channel Sampling Continuous rockchip sampling over outcropping gold mineralized zones (including new discoveries) is followed by sawn channel sampling. Results from those sawn channels will be used for the resource estimates in 2007. The sawn channel sampling technique for grade estimation was used so that Inferred Resources included in the 2005 program could be upgraded to the Measured/Indicated Resource categories. Comprehensive channel sampling programs were conducted through 2006 at Ojo, Luna, Mandibula, Labio East and West, Mercedes and Cuello East zones. Shallow drill holes were required to test near surface mineralization in the Cuello Central and Western Cuello zones. Visiting Experts Dean Williams and Chris Torrey, consulting expert geologists, visited Don Sixto during 2006 to assist with input into the structural and stratigraphic controls for mineralization. These examinations also assisted in expanding evaluation of the regional tenements outside the detailed Don Sixto project area. Regional A regional program evaluating potential repetitions within the 500 square kilometre tenure surrounding Don Sixto commenced during the second half of 2006. There has been a significant increase in knowledge of the mineralization generated from the comprehensive exploration and drilling programs carried out over the past three years at Don Sixto. This information provided the basis for the regional evaluation program. Work initially involved targeting areas with similar structural and alteration features as Don Sixto. Ikonos satellite imagery and reprocessed  12      airborne magnetic/radiometric survey data was also used to assist in targeting for mineralized zones. This work remained at an early stage at year end.  OTHER PROJECTS CVSA Properties  Patagonia Acquisition terms In January 2004, the Company announced it had secured an option from Cerro Vanguardia S.A. (CVSA) to acquire all of CVSAs exploration projects, except those surrounding the Cerro Vanguardia gold mine, in Patagonia, Argentina.  CVSA is owned 92.5% by AngloGold Ashanti Ltd. and 7.5% by Fomicruz S.A.  Under the option agreement, Exeter paid CVSA US$100,000 and can earn a 100% interest in the CVSA properties by spending US$3 million within five years, including completing 10,000 metres of drilling on any of the four major projects. CVSA has the right to back into a 60% interest in any project, by paying Exeter 2.5 times its expenditures and paying for all project costs to the completion of a bankable feasibility study. CVSA can increase its interest to 70%, by financing Exeters share of mine development costs, at industry standard terms. Should CVSA not elect to back into a project, its interest will revert to a 2% net smelter royalty.  At the end of 2006, Exeter had already fulfilled the obligation to incur a total aggregate expenditure of US$ 3M on or before the 6th anniversary of the agreement (2009) and to complete at least 8,000 metres of drilling (12,000 metres completed) as required by the agreement. At December 31, 2006, 4,181 metres at the Cerro Moro Project and 7,641 at the Santa Cruz Project (drilled at Cerro Puntudo and Verde) had been drilled of the 10,000 metres required to be drilled on a project before CVSA is required to make a back-in decision on either of the projects. Exeter has not conducted any drilling on either of the Rio Negro or Chubut Province projects.  Property Description The CVSA properties are grouped into the four main project areas listed below, of which Cerro Moro was the most advanced at the time of acquisition:  Cerro Moro
        13 properties
        153 sq kmOther Santa Cruz properties
        8 properties
        333 sq kmChubut properties
        10 properties
        132 sq kmRio Negro properties
        3 properties
        120 sq km  Most of the CVSA properties were acquired by CVSA over 10 years ago, prior to the recent interest in Patagonia. All of the projects have favourable geological settings, significant hydrothermal alteration features and/or anomalous gold or silver geochemistry.  Many of the properties under the agreement were identified by CVSA using satellite imagery following structural studies, suggesting large alteration systems. The amount of subsequent exploration varied, but in many cases anomalous gold and/or silver mineralization was identified. No geophysical surveys were conducted and drilling did not extend into covered areas. In 2004, Exeter prospected all of the systems with a view to identifying gold and/or silver targets for follow-up exploration. Exeter conducted drilling at Cerro Moro and Cerro Puntudo during 2004, and a follow-up drilling program at Cerro Puntudo in May, 2005. Further drilling was conducted on all three projects during 2006.  A number of the properties considered to be low priority targets were returned to CVSA in 2005 and in May 2006. Additional properties were acquired around projects considered to have good potential for discoveries. Currently, a total of 25 properties over 11 projects covering 60,273 hectares in three provinces remain subject to the agreement. Prospecting and geochemical surveys have been conducted on many of the Santa Cruz, Chubut and Rio Negro properties and, following that work and the favourable mining regime in Santa Cruz, the Company has decided to focus its attention on the Cerro Moro, Puntudo and Verde projects, all situated in Santa Cruz Province. Other properties in Santa Cruz Province covered by the agreement include the Calandria and Azul properties.   13       Cerro Moro Project  Santa Cruz Province  The 153 square kilometre, Cerro Moro epithermal gold project is located in north-eastern Santa Cruz Province, approximately 70 kilometres southwest of Puerto Deseado. Exploration to date at Cerro Moro has defined 16 vein sets, mostly in areas of limited outcrop. Most of the gold occurrences are within a 10 kilometre by 5 kilometre area. Low-sulphidation-style gold and silver mineralization is primarily associated with quartz veins 240 to 1,250 metres long. Individual veins range in thickness from 0.2 to 4.5 metres and some of the veins are exceptionally high in silver.  CVSA previously drilled 34 shallow diamond and/or reverse circulation percussion drill holes, for total of 2,582 metres, over 11 targets. Drill hole spacing was in the order of 250 metres, with average drill intersection depths of only 30 metres.  Exploration by Exeter in 2004 consisted of 40 reverse circulation drill holes, for a total of 2,066 metres. Prospecting and sampling of new veins, and an orientation resistivity survey, was also completed. Poor outcrop restricts mineralized vein mapping at Cerro Moro. To overcome this limitation, the Company elected to explore for new veins or extensions to known vein sets, with the objective of discovering a single vein or a set of closely spaced veins with sufficient contained gold-silver to support a mine. An orientation ground magnetic survey established that this technique can see many of the known veins at Cerro Moro.  2006 Geophysical and Trenching Programs A full ground magnetic survey initiated in 2006, to test a broader area of the property, continued through the year and was essentially completed by year end.  Further surveying is planned to follow up high grade east-west trending veins in the south of the project area in 2007. A trenching program commenced and 61 trenches were excavated for a total metreage of 800 metres. These were mapped and some 440 samples assayed.  Drilling 2006 In 2006 the Company conducted two drilling campaigns, drilling 2,112 metres in 37 holes on the Carla, Dora, Deborah, Escondida, Patricia and Esperanza veins. The earlier program of 20 holes for 1,031 metres was drilled by reverse circulation percussion drilling, and the latter drilling program comprising 17 holes for 1,081 metres was diamond drilled. These programs discovered high grade gold-silver mineralization in the Carla vein, in a new zone situated 2.5 kilometres from previous drilling on the property, and also in an eastern extension of the Escondida vein, with the following results reported: Carla Zone: CMRC-45 intersected 10 metres at a grade of 15.4 grams per tonne (g/t) gold and 981 g/t silver, for a gold equivalent grade* of 28.6 g/t.  Included in the intercept was 2 metres at a grade of 43.6 g/t gold and 2293 g/t silver (81.8 g/t gold equivalent*). MD066 intersected 15.59 metres at a grade of 6.6 g/t gold and 198 g/t silver, for a gold equivalent grade of 9.5 g/t. Includes 3.85 metres at a grade of 22.3 g/t gold and 678 g/t silver for a gold equivalent grade of 32.0 g/t. Escondida Zone: MD064 intersected 10.4 metres at a grade of 11.6 g/t gold and 777 g/t silver, for a gold equivalent grade of 22.7 g/t. MD061 intersected 2.67 metres at a grade of 27.3 g/t gold and 245 g/t silver, for a gold equivalent grade of 30.8 g/t. *Gold equivalent grade is the aggregate of the gold and silver grades using a silver:gold ratio of 60:1 and assumes 100% metallurgical recoveries.  Drilling by Exeter on this project now totals 4,181 metres. Drilling will recommence on the project early in 2007 and is planned to continue through the year. Cerro Puntudo Project  Santa Cruz Province The 235 square kilometre Cerro Puntudo project is approximately 100 kilometres west of the Cerro Vanguardia mine in Santa Cruz. The known mineralization is considered to be epithermal in character, hosted within Jurassic age, felsic volcanic rocks. Prior to drilling, Exeter completed geological, geochemical and induced polarization geophysical surveys to better define surface mineralization discovered by CVSA. The resistivity response to the  14      known mineralization was best developed at the Rico and La Quebrada zones. Detailed ground magnetic surveys were conducted to better delineate the structures, and to indicate possible plunges to the mineralized zones.  Exeter conducted two drilling programs on the project during 2005, and a third program during second quarter, 2006. The first program consisted of 34 reverse circulation drill holes, drilled to down-hole depths of between 40 to 109 metres, for a total of 2,179 metres. A second drill program was conducted in May, 2005 comprising 21 holes for 1,719 metres.  Drilling 2006 The 2006 drill program included 13 reverse circulation percussion drill holes for a total of 1,699 meters and was aimed at grid testing the potential of three of the five mineralized bodies discovered to date. Drill holes were designed to intersect mineralization at approximate horizontal spacings of 50 meters and 30 meters beneath previous intersections. This drilling program showed mineralization at both the Rico and Quebrada North zones to be open at depth while drilling on the Quebrada Zone appears to close economic tenor mineralization at depth. Reported results from the Rico Zone include drill hole CPRC-61 which intersected 12 metres averaging 4.4 g/t gold, including 1 metre grading 11.2 g/t gold and 1 metre grading 34.1 g/t gold and drill hole CPRC-62 which intersected 15 metres at 3.2 g/t gold and 13 g/t silver. At the Quebrada North Zone drill hole CPRC-64 intersected 9 metres grading 3.9 g/t gold
and 8 g/t silver.  The 1,699 metres drilled in 2006 bought the total metreage drilled at Cerro Puntudo to 5,597 metres.  Verde Silver Project  Santa Cruz Province Silver mineralization on the Verde property, in western Santa Cruz Province, relates to at least 30 geological structures. Mineralization is epithermal in character, with vein quartz and alteration zones in close proximity to a silica lithocap.  The North Vein Zone comprises a 600 metre long vein and a less well exposed quartz stockwork zone, within a rhyolite flow dome. The South Vein Zone consists of 6 outcropping silver-bearing quartz veins within a one kilometre wide target area. Individual veins trend northerly and can be traced over strike lengths up to 700 metres. Previous work by CVSA included geological mapping and rock chip sampling that returned samples strongly anomalous in silver (+15 g/t silver) over a large area.  Exeters exploration program confirmed the anomalous silver values at Verde. Detailed geological mapping and a detailed ground magnetic survey were completed. The magnetic survey was performed to identify drill targets within the +70% of the potentially mineralized area that is covered by shallow sand and gravel.  Drilling 2006 In 2006 the Company conducted the first drilling program on the property comprising 42 reverse circulation percussion holes for a total of 2,044 metres. The drilling identified silver mineralization in six epithermal veins and in a broad zone of quartz stockwork mineralization. Reported results from drilling were as follows: Drill hole VRC-21, in the North Vein Zone, intersected mineralization over the entire 52 metre length grading 67 g/t silver and 0.075 g/t gold. The best individual vein intercept in the North Zone was from drill hole VRC-40 which intersected 4 metres at 219 g/t silver. Best results reported from two veins in the South Vein Zone, located 2 kilometres south of the North Vein Zone, returned 2 metres grading 310 g/t silver and 7 metres grading 97 g/t silver respectively.  Further exploration is planned in the latter part of 2007 to evaluate the potential for a large stockwork silver system.  Calandria Project - Santa Cruz Province The Calandria Project is thought to have potential for high-level low sulphidation style epithermal gold deposits. Geologic mapping was conducted and a ground magnetic survey was underway at year end with some 600 line kilometres completed.  In 2007, it is proposed that the magnetic survey and geochemical sampling will be completed and, if results are encouraging, be followed by a drilling program.   15       CHILE PROJECTS Southern Chile In 2006, Exeter entered into an agreement with Rio Tinto Mining & Exploration Limited (Rio Tinto) covering 48 exploration targets in Magallanes, Chile. Rio Tinto has the right to acquire a 60% interest in any of these targets once Exeter has drilled 5,000 metres on any target by notifying the Company of its intention to acquire an interest. Should Rio Tinto not exercise this option, it will be entitled to a 1% royalty from production on that property.  Following a detailed review of the Rio Tinto data, the Company applied for concessions over some of the targets including Punta Southerland, Pico Batchelor and Monte del Sol covering a total area of 5,400 hectares. Field work commenced in early November 2006, with two field campaigns completed prior to year end. Some encouraging results were returned, particularly from stream sediment and rock chip sampling. Further exploration is planned through to the close of the current field season in the second quarter, 2007.  Northern Chile - Maricunga Property In 2005, the Company entered into an agreement with Minera Anglo American Chile Limitada and Empresa Minera Mantos Blancos S.A. (Anglo American) over seven properties in the Maricunga region of Chile.  The terms of the agreement provide for increasing annual drilling and exploration commitments over five years, and the phased reversion of five properties to Anglo American after the second and third years. Once Exeter has spent a total of US$2.55 million, including 15,500 metres of drilling, it will have earned a 100% interest in the remaining properties. Anglo American will be entitled to a 3% net smelter return from production.  All hard copy data received from Anglo American were digitized, and the satellite (Aster) imagery for the area secured, prior to the commencement of field work in November 2005. Magnetic data acquired for Caspiche has been reprocessed to delineate targets for epithermal gold mineralization. Exploration, including geochemical sampling and prospecting was conducted through the field season in early 2006. This work resulted in early reversion of five of the seven properties to Anglo American and allows Exeter to focus on the two most favorable properties, jointly referred to as the Caspiche project.  2006 Program  In the fourth quarter, contracts were entered into for camp accommodation, catering, geophysical programs, earthmoving and drilling. Camp construction was completed in November, and was immediately used for the geophysical and drill road earthmoving programs.  A geophysical program comprising CSAMT and VLF electromagnetic surveys, completed by Quantec in December, generated significant targets in support of a large, overburden covered high sulphidation gold-silver target.  Planned Work  Drilling is projected for the first quarter, 2007 on the Caspiche III portion of the property.  Cochrane A final report was provided to Rio Tinto in support of surrendering the Tranquillo and Furioso areas.  Mineral rights to the Confluencia project, located outside of the Rio Tinto Agreement contract area were secured in 2006.  Detailed sampling of the vein system is planned in early 2007.  ARGENTINA Estelar Properties Acquisition terms In July 2003, the Company completed the acquisition of Estelar Resources Limited (Estelar), a British Virgin Island corporation that owns the rights to four mineral projects in Argentina. The consideration paid for the acquisition of Estelar was the issuance of 1,000,000 common shares of the Company to Estelars shareholders. The Estelar properties carry a 2% NSR, payable to the previous owner, AMD.   16       Property Description The Estelar projects currently cover approximately 67 square kilometres of exploration rights in central, western Argentina.  Individually, the properties are referred to as the Quispe, Rosarita and El Salado gold projects - all of which have the potential for the discovery of epithermal gold deposits and/or porphyry gold-copper systems. Following negative exploration results and unsuccessful attempts to joint venture projects, Exeter excluded the Llanos Ricos and Dolores projects, and titles peripheral to the core areas of El Salado, Quispe and Rosarita from the agreement. There are no exploration commitments on the projects.  Quispe Project  Catamarca Province The Quispe Project is located in southwestern Catamarca province in northwest Argentina and covers 30 square kilometres of exploration rights. The project was identified through ground follow-up of satellite-imagery color anomalies. The target is a porphyry copper-gold deposit and/or high-sulphidation epithermal gold system.  Previous mapping, trenching, sampling and geophysical surveys conducted by AMD defined a number of drill-ready copper and gold targets on the main Quispe prospect. The Company continues to offer the property for joint venture.  Rosarita Project  San Juan Province The Rosarita Project, located in San Juan Province, covers 30 square kilometres of exploration rights and has potential for a low-sulphidation epithermal gold system. The project lies immediately south of Intrepids Casposo gold-silver development stage deposit, which is the subject of a pre-feasibility study for the development of an open pit/underground gold mine.  Previous mapping, geochemical sampling and geophysical surveys by AMD and Battle Mountain Gold Company defined several low priority drill targets at Rosarita. Prospecting conducted by Exeter in 2003 did not define any high-priority targets. In 2004, the project was joint-ventured to Intrepid Minerals Corp. (Intrepid), who drilled three holes without encountering significant mineralization. Intrepid withdrew from the agreement in 2005, having fulfilled its minimum commitment. No further work has been conducted. The project is being retained as it is considered to have untested exploration potential.  El Salado Project  San Juan Province The El Salado property has an area of 9 square kilometres and covers a large low grade copper-gold porphyry system. The property is located 200 kilometres north of San Juan City, the capital of San Juan Province, Argentina.  Previous AMD exploration including the drilling of 30 holes, on the El Salado property discovered low-grade copper-gold porphyry system. The system may have potential for smaller zones of higher grade mineralization, which could be extracted profitably with elevated copper prices.  No work was conducted on El Salado, and it is proposed that in due course the Company farm out the project.  MRP Properties Acquisition terms In November 2003, the Company entered into an option agreement to acquire a 100% interest in three gold properties, Agua Nueva, La Ramada and Rosarita South, from Minera Rio de la Plata (MRP), a private, arms length Argentine company. Tenements peripheral to the Don Sixto project and Rosarita project were relinquished from the Agreement during 2006 resulting in retention of 40 tenements totaling 176 square kilometres.  The option agreement requires payments totaling $440,000 by October 2015 and provides for a 2% NSR, which Exeter can purchase outright for $750,000 payable to MRP from future production. There are no minimum annual exploration expenditure commitments on these properties.  Description Agua Nueva (Don Sixto North)  Mendoza Province The Agua Nueva property covers an area of approximately 170 square kilometres that adjoins the Companys Don Sixto gold property to the east, west and north. Widely-spaced soil geochemical sampling, six kilometres northwest  17      of Don Sixto has defined a large arsenic soil anomaly. Agua Nueva also covers a set of fault structures that are similar in orientation to the mineralized structures at Don Sixto. The structures will be prospected by Exeter to define targets for drilling, and to test possible extensions to the Don Sixto mineralization.  Recent Work: Regional prospecting and exploration targeting Ikonos alteration and structural anomalies, with signatures similar to Don Sixto, was conducted during final quarter of 2006.  La Ramada  La Rioja Province The property comprises exploration titles over a 2.4 square kilometre area. The Company will undertake mapping and geochemical sampling to define targets for drilling and will likely acquire additional lands in the area.  Conceptual studies identified a section of the Argentine Precordillera in La Rioja Province as having potential for sediment-hosted and replacement-style gold deposits Early stage exploration by a previous operator defined a number of exploration targets that the Company plans to follow up with mapping and geochemical sampling to identify drill targets.  Rosarita South  San Juan Province Following negative exploration results, the Rosarita South property covering 42.8 square kilometres and located immediately south of the Rosarita Project, was relinquished from the MRP Agreement during 2006.  RESULTS FROM OPERATIONS The Company began 2006 with 27,845,763 shares outstanding and ended the year with 37,836,013 shares outstanding.  During the year, the Company received net proceeds of $9,718,762 from private placement offerings totalling 4,100,000 shares; and $8,725,198 from the issuance of 5,890, 250 shares upon the exercise of warrants and options. Shares issued and proceeds received are summarized below: Private Placements
        Options Exercised
        Warrants Exercised
        TotalsShares Issued
        4,100,000
        542,000
        5,348,250
        9,990,250Net Proceeds/Deemed Value
        $9,718,762
        $450,890
        $8,274,308
        $  18,443,960  As of March 30, 2007 the Company had 38,021,013 shares outstanding.  SUMMARY OF FINANCIAL RESULTS Selected Information The Companys consolidated financial statements for the years ended December 31, 2006, 2005 and 2004 (the Consolidated Financial Statements) have been prepared in accordance with Canadian generally accepted accounting principles and practices.  Currency amounts are in Canadian dollars, except where stated otherwise.  The following selected financial information is taken from the Consolidated Financial Statements and should be read in conjunction with those statements. Year ended December 31,
        2006
        2005
        2004Interest income
        $             226,977
        $              41,335
        $              48,865Write off of mineral properties and deferred costs,
including property examination costs
        $           (523,897)
        $          (355,149)
        $          (145,374)Stock-based compensation
        $        (2,384,845)
        $       (1,886,463)
        $          (269,196)Loss
        $        (5,288,640)
        $        (3,692,141)
        $       (1,271,096)Basic and diluted loss per common share
        $                 (0.17)
        $                (0.20)
        $                (0.10)  As at December 31,
        2006
        2005
        2004Working capital
        $        12,373,333
        $          7,338,582
        $         2,295,578Total assets
        $        35,890,499
        $        18,643,746
        $         6,469,275Total liabilities
        $          2,261,385
        $             554,798
        $            222,354Share capital
        $        46,230,295
        $        27,802,270
        $       14,078,259Deficit
        $      (17,190,122)
        $      (11,901,482)
        $       (8,209,341)   18       Year ended December 31, 2006 compared to the year ended December 31, 2005 The Companys exploration program in Argentina and Chile continued with $8,062,573 and $1,831,146 invested in the Don Sixto Project and CVSA properties, respectively.  Expenditures in Chile and on other projects amounted to $980,089 for total exploration expenditures of $10,873,808 during the year ended December 31, 2006, an increase of $6,330,679 over expenditures for the year ended December 31, 2005. The increase was mainly due to the expanded exploration program at the Don Sixto Project.  The Company's loss from operations for the year ended December 31, 2006 increased by $1,596,499 over the loss for the 2005 year, to $5,288,640. The increased loss resulted mainly from increases in stock based compensation, stock exchange listing and filing fees, consulting and administrative salaries, management fees, loss on write-off of mineral properties and deferred costs, investor relations and travel and promotion.  Stock based compensation costs rose by $498,382 reflecting the fair value of options granted to employees and consultants during the year because of an increase in the fair value of options granted mainly due to an increase in the Companys share price, and because of a longer expected life of the options.  The Company saw an increase in consulting and administrative salaries of $377,009 to $559,902 which reflects the Companys continued growth and the necessity for additional human capital and bonuses paid at year end. The loss on write-off of mineral properties and deferred costs of $439,842 was as a result of managements decision to relinquish a number of low potential properties. The Company had an increase of $47,337 to $116,565 in 2006 attributed to stock exchange listing and filing fees associated with the listing of its common shares on the American Stock Exchange (AMEX) in the November 2006 and due to the capital raisings completed during the year.  Accounting and audit, consulting, and legal fees rose by $26,625, $377,009 and $40,278, respectively, over the amounts recorded for the 2005 year. These increases were a result of further administrative requirements from the Companys increased level of activity, the payment of bonuses, and the additional filing requirements associated with the AMEX listing.  The Company maintained similar investor relations activities in Canada, Europe and the United States in 2006 resulting in a slight decrease in expenditures of $2,644 over 2005, to $554,688. Travel and promotion costs rose by $172,866 to $463,921, principally because of increased travel by management to investor conferences and the costs associated with investor visits to the Companys properties. Property examination costs decreased by $271,096 to $84,053, reflecting the Companys efforts dedicated to its existing projects.  Third Quarter 2006 to Fourth Quarter 2006 The Company's quarterly rate of loss from operations for the three months ended December 31, 2006 increased by approximately $1,623,000 from the third quarter 2006. This increase is attributable principally to an increase of $1,136,000 in stock based compensation costs and the payment of bonuses totalling approximately $400,000 at year end.  Exploration expenditures in Argentina and Chile were $1,369,000 higher in the quarter, reflecting the Companys increased level of activity, principally at Don Sixto, consistent with the its exploration plans.  The following is a summary of quarterly results taken from the Companys unuadited quarterly consolidated financial statements: Comparison to Prior Quarterly Periods $ 000's2006
        20054th Quarter
        3rd Quarter
        2nd Quarter
        1st Quarter
        4th Quarter
        3rd Quarter
        2nd Quarter
        1st QuarterInterest
        86
        17
        68
        56
        11
        8
        14
        8Net loss from operations
        2,168
        545
        1,544
        1,032
        1,956
        759
        667
        316Administration Expenditures
        1,059
        423
        630
        495
        616
        299
        336
        247Stock based compensation
        1,214
        78
        527
        566
        1,159
        368
        307
        52Property examination costs and
Mineral property write-offs
        18
        61
        454
        27
        192
        100
        38
        25Deferred exploration costs
        4,157
        2,674
        2,461
        1,582
        1,279
        1,066
        976
        867Basic and diluted loss/share in cents/share
        $0.06
        $0.02
        $  0.05
        $  0.04
        $  0.10
        $  0.04
        $  0.04
        $  0.02   19       The quarterly results above reflect the Companys continued focus on its exploration activities and particularly the expanded exploration program at the Don Sixto Project. Interest Income increased in 2006 as a result of the investment of cash on-hand following the private placements in October 2006 and the exercise of warrants in November and December. Administration expenditures are calculated by removing interest, stock based compensation, mineral property write-offs and property examination costs from the net loss from operations.  Administration expenditures have generally increased each quarter mainly due to the increase in the Companys level of activity requiring additional personnel, business development expenditures, and the costs associated with the increased activities.  Stock based compensation costs have oscillated considerably over the last eight quarters, in accordance with the
number of options granted to employees and consultants and changes in the fair value of the options granted.  LIQUIDITY AND CAPITAL RESOURCES The Companys cash and cash equivalents at December 31, 2006 totalled $14,511,062 compared to $7,788,697 at December 31, 2005 and $2,458,873 at December 31, 2004. The increase in the Companys cash and cash equivalents is due to the completion of the private placements in October 2006 which raised approximately $9.7 million and the exercise of warrants which raised a further $8.3 million. The Company continues to utilize its cash resources to fund project exploration and administrative requirements. Aside from such cash, the Company has no material liquid assets. As the Company has no significant income, cash balances, unless replenished by capital fundraising, will continue to decline as the Company utilizes these funds to conduct its operations.  The Company has no loans or bank debt and there are no restrictions on the use of its cash resources.  The funds will be used for planned exploration programs and for general corporate purposes. The Company will be required to undertake additional financing to fund the continued exploration of existing projects, if it acquires new projects or if it exercises options to acquire projects currently under option.  CONTRACTUAL OBLIGATIONS The Company leases offices in Vancouver and Argentina 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, if exploration results so warrant.  Existing financial commitments are summarized in the tables below: Payments Due by YearsCash Payments
        Total
        Less than 1 Year
        1-3 Years
        4-5 Years
        After 5 YearsOffice leases
        $    375,000
        $          79,000
        160,000
        $         103,000
        $       34,000Cognito-Don Sixto
        466,000
        58,000
        116,000
        116,000
        175,000MRP Properties
        395,000
        25,000
        70,000
        100,000
        200,000Total
        $1,236,000
        $        162,000
        $  346,000
        $         319,000
        $     409,000Property Expenditures
        Expenditures Due by YearsMaricunga
        $  2,801,000
        $        120,000
        $  816,000
        $      1,865,000
        $                -Total
        $2,801,000
        $        120,000
        $  816,000
        $      1,865,000
        $                -  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.  These amounts are settled as and when due.  A total of $1,204,005 (2005: $681,280; 2004: $576,239) was paid to or accrued for related party transactions as described below.  a)
        Exploration and consulting fees totalling $282,000 (2005: $144,000; 2004: 147,490) and $58,000 (2005: $21,000; 2004: $nil) for the provision of other consultants was paid or accrued to a corporation of which the President and CEO is a beneficiary.  b)
        Management and consulting fees totalling $238,000 (2005: $96,000; 2004: $88,000), share issue costs totalling $8,000 (2005: $nil; 2004: $nil) were paid or accrued to a corporation controlled by the Chairman of the Company.   20       c)
        Management fees of $195,000 (2005: $85,000; 2004: $nil) were paid or accrued to a corporation controlled by the CFO of the company.  d)
        Legal fees totalling $120,101 (2005: $105,866; 2004: $92,775), and share issue costs totalling $36,271 (2005: $64984; 2004: $16,969) were paid or accrued to a corporation controlled by a director of the Company of which the Secretary of the Company is an employee.  e)
        Exploration and development costs totalling $266,633 (2005:$134,000; 2004: $118,497 were paid or accrued to a company controlled by the Vice-President, Development and Operations.  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.  Forward Looking Statements This discussion contains forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, (the Litigation Reform Act) and information relating to the Companys expectations with regard to its existing and future mineral projects, including, without limitation, the timing and results of the future exploration and development of those projects, and the size and growth in size thereof. Such forward looking statements are based on the Companys plans and expectations and involvement of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any performance or achievement expressed or implied by such forward looking statements. The Company is relying on the safe harbour provisions of the Litigation Reform Act and does not undertake to update
or amend any such forward looking statement. See Risk Factors, below.  RISKS The exploration and development of mineral deposits involve significant risks which careful evaluation, experience and knowledge may not, in some cases, eliminate. The commercial viability of any mineral deposit depends on many factors, not all of which are within the control of management. Some of the factors that affect the financial viability of a given mineral deposit include its size, grade and proximity to infrastructure. Government regulation, taxes, royalties, land tenure, land use, environmental protection and reclamation and closure obligations all have an impact on the economic viability of a mineral deposit.  The Company has no current production of minerals. The Companys properties are all currently at the exploration stage. There is no assurance that a commercially viable mineral deposit exists on any of the Companys properties, and substantial additional work will be required in order to determine the presence of any such deposit.  Although the Company can conduct exploration on most of its properties year-round, exploration on some of its Patagonia properties and properties at higher altitude in Chile and Argentina is difficult during the winter months of June to October.  The Company is subject to substantial environmental requirements which could cause a restriction or suspension of Company operations. The current and anticipated future operations of the Company require permits from various governmental authorities and such operations are and will be governed by laws and regulations governing various elements of the mining industry.  The Companys exploration activities in Argentina and Chile are subject to various Federal, Provincial and local laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, and other matters.  Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that the Company obtain permits from various governmental agencies. The Company
expects that it will be able to obtain the necessary permits to conduct its operations; however there is no certainty that it will be able to do so.  The Company relies on equity and debt financings to fund its activities. While it has been successful in the past, there is no guarantee that the Company will be successful in raising funds through those means in the future.  Risk factors are more fully described in the Companys Form 20-F Registration Statement, File No. 000-51016 filed with the SEC. You can review and obtain copies of our filings from the SECs website at http://www.sec.gov/edgar.shtml  21       OUTLOOK In 2007, Exeter will continue to advance the Don Sixto Project towards a decision to proceed to a full feasibility study. The Company expects to complete a new resource estimate which will be followed by a project options study before a decision to proceed to full feasibility study is made. Exploration drilling of extensions and targets that represent possible new discoveries on the property is also expected to continue with a view to significantly expanding the known gold resource.  In Patagonia, the exploration focus will continue to be on the CVSA property portfolio, and, specifically, the Cerro Moro project.  The new agreement with Rio Tinto is a great opportunity for the Company to expand its exploration activities in southern Chile. This new agreement along with the existing agreements withCVSA and Anglo American, provide the Company with a strategic opportunity to reduce its discovery costs while leveraging its existing presence and expertise in the region.  PROPOSED TRANSACTIONS The Company continues to evaluate new property acquisitions.  Should it enter into agreements on new properties it may be required to make cash payments and complete work expenditure commitments under those agreements.  CRITICAL ACCOUNTING ESTIMATES AND POLICIES The Companys accounting policies are discussed in detail in the Annual Consolidated Financial Statements; however, accounting policies require the application of managements judgement in respect of the following relevant matters: (i)
        mineral property valuations  management uses its best estimate in recording any mineral property value based on the results of any exploration conducted, prevailing market conditions, similar transactions and factors such as stability of the country in which the asset is located; and (ii)
        contingent liabilities  management evaluates any clams against the Company and provides for those claims, where necessary, based on information available to it, including in some instances legal advice.  CHANGES IN ACCOUNTING POLICIES There have been no changes in accounting policies of the Company during the year ended December 31, 2006.  MANAGEMENT'S RESPONSIBILITY AND OVERSIGHT Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer and Chief Financial Officer, as is appropriate to permit timely decisions regarding public disclosure.  Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures as of December 31, 2006.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures, as defined in Multilateral Instrument 52-109  Certification of Disclosure in Issuers Annual and Interim Filings (52-109), were effective at that time to ensure that the information required to be disclosed in reports that are filed or submitted under Canadian Securities legislation are recorded, processed, summarized and reported within the time period specified in those rules.  In conducting the evaluation it has become apparent that management relies upon certain informal procedures and
communication, and upon hands-on knowledge of senior management.  Management intends to formalize certain of its procedures.  Due to the small staff, however, the Company will continue to rely on an active Board and management with open lines of communication to maintain the effectiveness of the Companys disclosure controls and procedures.  It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable assurance as to the effectiveness, and there can be no assurance that any design will succeed in achieving its stated objectives.  Lapses in the disclosure controls and procedures could occur and/or mistakes could happen.  Should such occur, the Company will take reasonable steps necessary to minimize the consequences thereof.  INTERNAL CONTROLS AND PROCEDURES OVER FINANCIAL REPORTING Management is also responsible for the design of the Companys internal control over financial reporting in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial  22      statements for external purposes in accordance with Canadian generally accepted accounting principles.  It should be noted that a control system, no matter how well conceived or operated, can only provide reasonable assurance, not absolute assurance, that the objectives of the control system are met.  CAUTIONARY NOTE TO U.S. INVESTORS The United States Securities and Exchange Commission (SEC) permits mining companies in their filings with the SEC to disclose only those mineral deposits that a company can economically and legally extract or produce.  We use certain terms, such as inferred resource, that the SEC guidelines strictly prohibit us from including in our filing with the SEC. U.S. investors are urged to consider closely the disclosure contained in our Form 20-F Registration Statement, File No. 000-51016.  You can review and obtain copies of our filings from the SECs website at http://www.sec.gov/edgar.shtml.   23         Exhibit 12.1 CERTIFICATION  I, Bryce Roxburgh, certify that:  1.
        I have reviewed this annual report on Form 20-F of Exeter Resource Corporation;  2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;  4.The Companys other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in theExchange ActRules 13a-15 (e) and 15d-15 (e)) for the Company and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c)Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and  5.The Companys other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the Companys Board of Directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting.    Date:  _April 2, 2007_____________________
        ______/s/Bryce Roxburgh_______________ Bryce Roxburgh, Chief Executive Officer (Principal Executive Officer)  82       Exhibit 12.2 CERTIFICATION  I, Cecil Bond, certify that:  1.
        I have reviewed this annual report on Form 20-F of Exeter Resource Corporation;  2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;  4.The Companys other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in theExchange ActRules 13a-15 (e) and 15d-15 (e)) for the Company and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c)Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and  5.The Companys other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys Board of Directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting.    Date:  __April 2, 2007
        ________________
        _______/s/ Cecil Bond_________________ Cecil Bond, Chief Financial Officer (Principal Financial Officer)  83       Exhibit 13.1  CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  In connection with the annual report of Exeter Resource Corporation (the Company) on Form 20-F for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Bryce Roxburgh, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:  (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of theSecurities Exchange Act of 1934; and  (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.    Date:
        __April 2, 2007/s/Bryce Roxburgh___________________ Bryce Roxburgh, Chief Executive Officer (Principal Executive Officer)   84       Exhibit 13.2  CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  In connection with the annual report of Exeter Resource Corporation (the Company) on Form 20-F for the year ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Cecil Bond, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:  (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of theSecurities Exchange Act of 1934; and  (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.    Date:
        __April 2, 2007________
        _/s/ Cecil Bond___ Chief Financial Officer (Principal Financial Officer)   85