UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 20-F/A

Amendment #1



__

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:  0-31218



Candente Resource Corp.

(Exact name of Registrant as specified in its charter)



British Columbia

(Jurisdiction of incorporation or organization)



#200  905 West Pender Street Vancouver B.C. V6C 1L6

(Address of principal executive offices)



Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class                    Name of each exchange on which registered



N/A                                  N/A



Securities registered or to be registered pursuant to Section 12(g) of the Act.



Common Stock, No Par Value

(Title of Class)



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.



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:



53,256,444 (As of December 31, 2006) 53,403,944 (As of March 14, 2007)



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   (    )   Yes    ( X )   No



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.   _X_  Yes     ___  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.



Large accelerated filer  (    )

Accelerated filer   (    )

Non-accelerated filer  ( X  )



Indicate by check mark which financial statement item the registrant has elected to follow.

_X_ Item 17    ___ 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   ( X )   No





Page 2 of 108

Index to Exhibits on Page 134





CANDENTE RESOURCE CORP.

Form 20-F Annual Report



Table of Contents



|          | Part I                                                                       | Page
|--------- | ---------------------------------------------------------------------------- | ----
|          |                                                                              |     
|Item 1.   | Identity of Directors, Senior Management and Advisors                        | 6   
|Item 2.   | Offer Statistics and Expected Timetable                                      | 7   
|Item 3.   | Key Information                                                              | 7   
|Item 4.   | Information on the Company                                                   | 13  
|Item 5.   | Operating and Financial Review and Prospects                                 | 67  
|Item 6.   | Directors, Senior Management and Employees                                   | 73  
|Item 7.   | Major Shareholders and Related Party Transactions                            | 78  
|Item 8.   | Financial Information                                                        | 79  
|Item 9.   | The Offer and Listing                                                        | 80  
|Item 10.  | Additional Information                                                       | 82  
|Item 11.  | Quantitative and Qualitative Disclosures about Market Risk                   | 106 
|Item 12.  | Description of Other Securities Other Than Equity Securities                 | 106 
|          |                                                                              |     
|          | PART II                                                                      |     
|          |                                                                              |     
|Item 13.  | Defaults, Dividend Arrearages and Delinquencies                              | 106 
|Item 14.  | Material Modifications to the Rights of Security
Holders and Use of Proceeds | 106 
|Item 15.  | Controls and Procedures                                                      | 106 
|Item 16.  | Reserved                                                                     | 107 
|Item 16A. | Audit Committee Financial Expert                                             | 107 
|Item 16B. | Code of Ethics                                                               | 107 
|Item 16C. | Principal Accountant Fees and Services                                       | 107 
|Item 16D. | Exemptions from Listing Standards for Audit
Committees                       | 107 
|Item 16E. | Purchase of Equity Securities by the Issuer and
Affiliated Purchasers        | 107 
|          |                                                                              |     
|          | Part III                                                                     |     
|          |                                                                              |     
|Item 17.  | Financial Statements                                                         | 108 
|Item 18.  | Financial Statements                                                         | 108 
|Item 19.  | Exhibits                                                                     | 108 



2





Glossary of Terms



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.



Anomaly - Any difference from the normal background which may indicate the presence of mineralization in the underlying bedrock.



Argillic - Pertaining to clay or clay minerals; Argillic Alteration is when certain minerals of a rock are converted to minerals of the clay group.



Arsenopyrite - the most common arsenic mineral and principal ore of arsenic; occurs in many sulfide ore deposits, particularly those containing lead, silver, and gold.



Assaying- laboratory examination that determines the content or proportion of a specific metal (ie: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.



Caldera - A large, basin-shaped volcanic depression, more or less circular, the diameter of which is many times greater than that of the included vent or vents.



Chalcocite One of the most important ore minerals for copper; it is easily leachable.



Chalcopyrite - A sulphide mineral of copper and iron.



Clastic - Fragments of minerals and rocks that have been moved individually from their places of origin.



Dacite - A fine-grained extrusive rock with the same general composition as andesite, but having with more quartz.



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.



Diorite - An intrusive igneous rock.



Disseminated  where minerals occur as scattered particles in the rock.



Enrichment - A mineral deposition process in which near-surface oxidation produces acidic solutions that leach metals, carry them downward, and reprecipitate them, thus enriching sulfide minerals already present.



Epithermal  low temperature hydrothermal process or product.



Fault  a fracture or break in rock along which there has been movement.



Feldspar - A group of crystalline minerals consisting of aluminum silicates and other elements

that include microcline, orthoclase, plagioclase and others. Constituting 60% of the Earth's crust, feldspar occurs in all rock types and decomposes to form much of the clay in soil



Felsic an adjective describing an igneous rock having mostly light colored minerals and rich in silica, potassium and sodium.



Gabbro  a coarse-grained, crystalline, dark igneous rock.



Galena - Lead sulphide, the most common ore mineral of lead.



Geochemistry - The study of the chemical properties of rocks.



3



Geological Modeling  The study of the properties of the geology of a specific property or mineral deposit. The model may be descriptive, using known attributes, or theoretical, designed to explain a possible concept which can then be tested by exploration methods.



Geophysical Survey - A scientific method of prospecting that measures the physical properties of rock formations. Common properties investigated include magnetism, specific gravity, electrical conductivity and radioactivity.



Granite - any holocrystalline, quartz-bearing plutonic rock.



Granitic - Pertaining to or composed of granite.



Granodioritic - A group of coarse-grained plutonic rocks intermediate in composition between quartz diorite and quartz monzonite, containing quartz, plagioclase and potassium feldspar.



Grid - A network composed of two sets of uniformly spaced parallel lines, usually intersecting at right angles and forming squares, superimposed on a map, chart, or aerial photograph, to permit identification of ground locations by means of a system of coordinates and to facilitate computation of direction and distance.



Hydrothermal  the products or the actions of heated waters in a rock mass such as a mineral deposit precipitating from a hot solution.



Igneous a primary type of rock formed by the cooling of molten material.



Ignimbrite - The rock formed by the widespread deposition and consolidation of ash flows.



Induced Polarization (IP) - A method of ground geophysical surveying employing an electrical current to determine indications of mineralization.



Intrusion; Intrusive molten rock that is intruded (injected) into spaces that are created by a combination of melting and displacement.



Leaching - The extraction of soluble metals or salts from an ore by means of slowly percolating solutions, such as the separation of gold by treatment with a cyanide solution. If an ore is amenable to leaching, it is considered leachable



Line Cutting  Clearing straight lines through the bush to permit sightings for geophysical and other surveys.



Logging - The process of recording geological observations of drill core either on paper or into a computer.



Mafic - Igneous rocks composed mostly of dark, iron-and magnesium-rich minerals.



Magnetite - Black, magnetic iron ore; an iron oxide.



Manto - A flat-lying, bedded deposit; either a sedimentary bed or a replacement strata-bound orebody.



Mineralization  The later introduction of minerals, which may have an economic value.



Mesothermal a hydrothermal mineral deposit formed at considerable depth and in the temperature range of 200 to 300 degrees C (Celsius).



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.



Muscovite  A rock of the mica group that is a common rock-forming mineral in silicic plutonic rocks. It is also a hydrothermal and weathering product of feldspar.





4



Mylonite - A compact rock without cleavage, but with a streaky or banded structure, produced by the extreme granulation and shearing of rocks that have been pulverized and rolled during overthrusting or intense dynamic metamorphism.



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.



Outcrop - The part of a rock formation that appears at the surface of the ground.



Plagioclase: Any of a group of feldspars containing a mixture of sodium and calcium feldspars.



Porphyry - Any igneous rock in which relatively large crystals, are set in a fine-grained groundmass.



Porphyry copper-gold - A deposit of disseminated copper and/or gold minerals in or around a large body of intrusive rock.



Pyrite- an iron sulphide mineral (FeS2), the most common naturally occurring sulphide mineral.



Quartz  crystalline silica; often forming veins in fractures and faults within older rocks.



Replacement -Change in composition of a mineral or mineral aggregate, presumably accomplished by mineral solutions taking the place of some other, different substance



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.



Schist - A foliated metamorphic rock the grains of which have a roughly parallel arrangement; generally developed by shearing.



Scree  loose rocks or fragments of rock, usually piled against a hillside or slope.



Sedimentary rocks - Secondary rocks formed from material derived from other rocks and laid down under water. Examples are limestone, shale and sandstone.



Sediments -Solid fragmental material that originates from weathering of rocks and is transported or deposited by air, water, or ice, or that accumulates by other natural agents, such as chemical precipitation from solution or secretion by organisms, and that forms in layers on the Earth's surface at ordinary temperatures in a loose, unconsolidated form; e.g., sand, gravel, silt, mud, alluvium.



Shale - Sedimentary rock formed by the consolidation of mud or silt.



Showing - Surface occurrence of mineral.



Silicification  the in situ alteration of a rock, which involves an increase in the proportion of silica minerals.



Siltstone - An indurated silt having the texture and composition of shale but lacking its fine lamination or fissility; a massive mudstone in which the silt predominates over clay.



Staking The term for acquiring a previously unclaimed mining claim by going onto the land and driving metal stakes along the boundary of the proposed claim before registering the claim with governmental authorities.



Stibnite  a sulphide of antimony, the mineral may also contain gold and silver.



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.



Thrust - An overriding movement of one crustal unit over another. A Thrust Belt is a region where thrusting has occurred.



Trenching - the process of exploration by which till is removed from a trench cut from the earths surface.



Tuff -A general term for all consolidated pyroclastic rocks.



5



Universal Transverse Mercator (UTM)  A method of mapping the earths surface using 1000 meter grid lines that divide the earth into even grids.



Vein a thin, sheet-like, crosscutting body of hydrothermal mineralization, principally quartz.



Vigencia Fee - The annual fee levied by the Peruvian Government on mining claims. Currently, the Fee is US$3.00 per hectare.



Volcanics those originally molten rocks, generally fine grained, that have reached or nearly reached the Earths surface before solidifying.



Vug - A small cavity in a rock, usually lined with crystals of a different mineral composition than the enclosing rock.









Part I



Item 1.  Identity of Officers and Directors



Table No. 1

Company Directors and Officers



|Name                               | Position                                                       | Business Address                                               
|---------------------------------- | -------------------------------------------------------------- | ---------------------------------------------------------------
|                                   |                                                                |                                                                
|Joanne Constance Freeze            | President, Chief Executive Officer, Chairman and Director      | 200-905 West Pender Street
Vancouver, B.C.
Canada V6C 1L6      
|Fredy Jose Huanqui Guerra          | VP Business Development Exploration Latin America and Director | Calle Teruel 186
Miraflores
Lima 18, Peru                      
|Peter Johan Adrian de Visser, C.A. | Chief Financial Officer and Director                           | Suite 401-905 West Pender Street
Vancouver, B.C.
Canada V6C 1L6
|Larry Kornze                       | Independent Director                                           | 290 S. Cooksom Place
Eagle, Idaho
U.S.A. 83616                 
|Michael Casselman, P. Geo          | Director                                                       | 200-905 West Pender Street
Vancouver, B.C.
Canada V6C 1L6      
|James Alexander Currie             | Independent Director                                           | 2077 Essex Drive
Abbotsford, B.C.
Canada V2S 7R8               
|Peter Megaw                        | Independent Director                                           | 5800 N. Camino Escalante
Tucson, Arizona
U.S.A.  85718         
|Andrew Smith                       | Independent Director                                           | 500-602 West Hastings Street
Vancouver, B.C.
Canada  V6B 1P2   
|Thomas Rinaldi                     | VP Operations                                                  | Calle Teruel 186
Miraflores
Lima 18, Peru                      
|Maria Eugenia Montagne             | Corporate Secretary/Treasurer                                  | 200-905 West Pender Street
Vancouver, B.C.
Canada V6C 1L6      



6



The Companys auditor from inception to 2003 had been Beauchamp and Company, Chartered Accountants, #205  788 Beatty Street, Vancouver, British Columbia, V6B 2M1 until February 7, 2005.  Subsequently, effective February 7, 2005, the Companys auditor was Staley, Okada & Partners, Chartered Accountants, 3rd Floor, 10190 152 A St., Surrey, British Columbia, V3R 1J7 until September 16, 2006.  As of that day the Companys current auditors are D+H Group LLP,Chartered Accountants,10th Floor  1333 West Broadway, Vancouver, British Columbia, V6H 4C1.



The Companys legal advisor is Boughton Law Corporation, Suite 1000, 595 Burrard Street, Vancouver, British Columbia, V7X 1S8.



Item 2.  Offer Statistics and Expected Timetable



Not Applicable





Item 3.  Key Information



SELECTED FINANCIAL DATA



The selected financial data of the Company for Fiscal 2006 was derived from the financial statements of the Company which were audited by D+H Group LLP,Chartered Accountants. The data for the years 2005 and 2004 was derived from the financial statements of the Company which were audited by Staley, Okada & Partners, Chartered Accountants in 2005 and 2004. Both D+H and Staley, Okada are independent auditors as indicated in their reports which are included elsewhere in this Annual Report. The data for the years 2003 and 2002 were audited by Beauchamp & Company, Chartered Accountants. These financial statements are not included herein.



The information in Table No. 2 was extracted from the more detailed financial statements and related notes included herein and should be read in conjunction with such financial statements and with the information appearing under the heading ITEM 9, MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



Reference is made to Note 12 of the financial statements of the Company included herein for a discussion of the differences, in the case of the Company, between Canadian GAAP and US GAAP, and their effect on the Companys financial statements.



To date, the Company has not generated sufficient cash flow from operations to fund ongoing operational requirements and cash commitments.  The Company has financed its operations principally through the sale of its equity securities.  While the Company believes it has sufficient capital and liquidity to finance current operations, nevertheless, its ability to continue operations is dependent on the ability of the Company to obtain additional financing.  Refer to ITEM 1, PLAN OF OPERATIONS and see ITEM 9, MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



Table No. 2 is derived from the 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 footnotes to the financial statements.









7





Table No. 2

Selected Financial Data

(US$ in 000, except per share data)



|                                  | Year Ended 12/31/06 | Year Ended 12/31/05 | Year Ended
12/31/04 | Year Ended
12/31/03 | Year Ended
12/31/02
|--------------------------------- | ------------------- | ------------------- | ------------------- | ------------------- | -------------------
|                                  |                     |                     |                     |                     |                    
|Interest Income                   | $63                 | $31                 | $51                 | $26                 | $11                
|Net Income(Loss)Cdn. GAAP         | ($1,792)            | ($1,427)            | ($1,557)            | ($1,601)            | ($437)             
|Earnings(Loss) Per Share Cdn GAAP | ($0.04)             | ($0.04)             | ($0.04)             | ($0.06)             | ($0.02)            
|                                  |                     |                     |                     |                     |                    
|Net Income(Loss)US GAAP           | ($5,840)            | $3,165              | ($3,650)            | ($2,528)            | ($1,715)           
|Earnings (Loss) Per Share US GAAP | ($0.12)             | ($0.07)             | ($0.10)             | ($0.09)             | ($0.10)            
|                                  |                     |                     |                     |                     |                    
|Dividends Per Share Cdn GAAP      | $0                  | $0                  | $0                  | $0                  | $0                 
|Dividends Per Share US GAAP       | $0                  | $0                  | $0                  | $0                  | $0                 
|Wtd.Avg.No.Shares US GAAP         | 48,318              | 43,718              | 35,764              | 27,638              | 16,831             
|Wtd.Avg.No.Shares Cdn GAAP        | 48,318              | 43,718              | 35,764              | 28,013              | 17,581             
|                                  |                     |                     |                     |                     |                    
|Working Capital                   | $2,356              | $737                | $823                | $3,755              | $677               
|Mineral Properties  Cdn GAAP      | $10,702             | $6,717              | $4,978              | $3,108              | $2,180             
|Mineral Properties US GAAP        | $0                  | $0                  | $0                  | $0                  | $0                 
|Long Term Debt Cdn GAAP           | $0                  | $0                  | $0                  | $0                  | $0                 
|                                  |                     |                     |                     |                     |                    
|Shareholders Equity (Cdn GAAP)   | $14,277             | $7,924              | $6,202              | $7,033              | $2,891             
|Shareholders Equity US GAAP      | $3,276              | $972                | $987                | $3,925              | $710               
|Total Assets (Cdn GAAP)           | $15,142             | $8,199              | $6,622              | $7,094              | $2,984             
|Total Assets (US GAAP)            | $4,440              | $1,482              | $1,644              | $3,986              | $803               



In this Annual Report, unless otherwise specified, all dollar amounts are expressed in United States Dollars.  References in this document to $ and US$ refer to US dollars, unless otherwise specified; references to CDN$ refer to Canadian dollars.



The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the US Dollar (US$).



Table No. 3 sets forth the rate of exchange for the Canadian Dollar at the end of the six most recent fiscal periods ended December 31, 2006;the average rates for the periods; and the range of high and low rates for the periods.



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 US Dollar. The average rate means the average of the exchange rates on the last day of each month during the period.

















8



Table No. 3

Canadian Dollar/US Dollar



|                    | Average | High  | Low   | Close
|------------------- | ------- | ----- | ----- | -----
|                    |         |       |       |      
|Year Ended 12/31/06 | $1.13   | $1.17 | $1.10 | $1.16
|Year Ended 12/31/05 | $1.21   | $1.27 | $1.15 | $1.17
|Year Ended 12/31/04 | $1.30   | $1.40 | $1.18 | $1.20
|Year Ended 12/31/03 | $1.39   | $1.58 | $1.29 | $1.29
|Year Ended 12/31/02 | $1.57   | $1.61 | $1.51 | $1.52
|Year Ended 12/31/01 | $1.55   | $1.60 | $1.49 | $1.59



Forward-looking Statements



This Annual Report contains forward-looking statements.  Words such as "anticipate",  "believe",  "expect",  "future", "may", "will", "should", "plan", "will likely result",  "intend",  "are expected to",  "will continue",  " is anticipated",  "estimate",  "project or projected", and similar expressions identify forward-looking statements.  Accordingly, such statements are qualified in their entirety by reference to and are accompanied by the following discussion of certain important factors that could cause actual results to differ materially from such forward-looking statements. These statements are based on the Company's beliefs and the assurances made using information currently available to the Company. Because these statements reflect its current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual results could differ materially from the results discussed in the forward- looking statements. Some, but not all, of the factors that may cause these differences include those discussed in the risk factors. The Company has addressed all material risks, but a reader should not place undue reliance on these forward-looking statements. A reader should also remember that these statements are made only as of the date of this Annual Report and future events may cause them to be less likely to prove to be true.



The risks identified here are not inclusive. Furthermore, reference is also made to other sections of this Annual Report that include additional factors that could adversely impact the Company's business and financial performance. Also, the Company operates in a very competitive and rapidly changing environment.  New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, not can it access the impact of all such risk factors on the Company's business or the extent to which any factor or combination of factors may cause actual results to differ significantly   from those contained in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results.





Table No. 4

Statement of Capitalization and Indebtedness





|Designation of
Security     | Amount
Authorized           | Amount Outstanding
As of  March 14, 2007
|--------------------------- | --------------------------- | ----------------------------------------
|                            |                             |                                         
|Common Shares, no par value | Unlimited without par value | 53,403,944                              
|                            |                             |                                         
|Preferred Shares            | None                        | None                                    
|                            |                             |                                         
|Common Share Options        |                             | 7,148,500 Options                       



9



|Common Share Warrants |  | 4,455,608 Warrants
|--------------------- |  | ------------------
|                      |  |                   
|Long Term Debt        |  | None              



NOTES:

(1)

A total of 2,955,608 Warrants exercisable @ $1.25 will expire on March 29, 2007 and March 31, 2007.  1,794,121 Warrants on March 29, 2007 and 1,161,487 on March 31, 2007.

(2)

a total of 1,500,000 Warrants exercisable @$1.65 will expire on November 30, 2007, December 4, 2007 and December 6, 2007.  1,193,125 on November 30, 2007, 156,875 on December 4, 2007 and 150,000 on December 6, 2007.



Risk Factors



Cumulative Unsuccessful Exploration Efforts By Candente Personnel Could Result In the Company Having to Cease Operations:

The expenditures to be made by Candente in the exploration of its properties as described herein may not result in discoveries of mineralized material in commercial quantities.  Most exploration projects do not result in the discovery of commercially mineable ore deposits and this occurrence could ultimately result in Candente having to cease operations.



Candente Has No Reserves on the Properties in Which It Has an Interest and If Reserves Are Not Defined the Issuer Could Have to Cease Operations:

The properties in which Candente has an interest or the concessions in which it has the right to earn an interest are in the exploratory stage only and are without a known body of ore. If Candente does not ultimately find a body of ore, it would have to cease operations.



Mineral Prices May Not Support Corporate Profit for Candente:

The resource exploration industry is intensely competitive and even if commercial quantities of mineral resources are developed (which is not guaranteed), a profitable market may not exist for the sale of same. If a profitable market does not exist, Candente could have to cease operations.



Candente Has Minimal Positive Cash Flow and No Recent History of Significant Earnings and Is Dependent Upon Public and Private Distributions of Equity to Obtain Capital in Order to Sustain Operations. Public distributions of capital result in dilution to existing shareholders:



None of the Companys properties have advanced to the commercial production stage and the Company has no history of earnings or positive cash flow from operations. The cumulative loss since inception of the development stage to the end of the latest fiscal year, according to U.S. GAAP, is ($18,691,475) The Company does not know if it will ever generate material revenue from mining operations or if it will ever achieve self-sustaining commercial mining operations. 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.



Candente currently has 6,893,500 share purchase options outstanding and 4,455,608 share purchase warrants outstanding. If all of the share purchase warrants and share purchase options were exercised, the number of common shares issued and outstanding would increase from 53,403,944 (as of March 14, 2007) to 64,753,052.  This represents an increase of 21.25% in the number of shares issued and outstanding and would result in significant dilution to current shareholders.



The Amount of Capital Necessary to Meet All Environmental Regulations Associated with the Exploration Programs of the Issuer Could Be In An Amount Great Enough to Force Candente to Cease Operations:



10



The current and anticipated future operations of the Issuer, including further exploration activities require permits from various U.S. and Peruvian federal and state governmental authorities.   Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, mine safety and other matters. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Issuer and cause increases in capital expenditures which could result in a cessation of operations by the Issuer.



Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, 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. Parties engaged in resource exploration may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.



Large increases in capital expenditures resulting from any of the above factors could force Candente to cease operations.



Operating Hazards and Risks Associated with the Mining Industry Could Result in Candente Having to Cease Operations:



Resource exploration activities generally involve a high degree of risk.  Hazards such as unusual or unexpected formations and other conditions are involved.  Operations in which the Issuer has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of precious and base metals, any of which could result in work stoppages, damage to or destruction of exploration facilities, damage to life and property, environmental damage and legal liability for any or all damage.  Candente may become subject to liability for cave-ins and other hazards for which it cannot insure or against which it may elect not to insure where premium costs are disproportionate to the Issuers perception of the relevant risks.  The payment of such insurance premiums and of such liabilities would reduce the funds available for exploration activities and could force Candente to cease operations.



The Risks Associated with Penny Stock Classification Could Affect the Marketability of the Common Stock of Candente and Shareholders Could Find It Difficult to Sell Their Stock:



The Issuers stock is subject to penny stock rules as defined in 1934 Securities and Exchange Act rule 3a51-1.  The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.  The Issuers common shares are subject to these penny stock rules. Transaction costs associated with purchases and sales of penny stocks are likely to be higher than those for other securities.  Penny stocks generally are equity securities with a price of less than U.S. $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).



The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customers account.  The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customers confirmation.

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In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction.  These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the Companys common shares in the United States and shareholders may find it more difficult to sell their shares.



Political Instability in Peru:



Certain of the Companys current exploration properties are located in the country of Peru. Peru has a history of some political instability and may be considered a country with potential political risk. Future government actions concerning the economy or the operations and regulations of nationally important facilities such as mines could have a significant effect on the Corporation. The Company does not have, nor does it plan to purchase, any type of political risk insurance. Additionally, these factors could pose serious potential problems associated with the Companys ability to raise additional capital which will be required to continue exploration activities.



The Company Has a Dependence on Certain Key Personnel:



The Company strongly depends on the business and technical expertise of its management and key personnel, particularly that of its President, CEO, Chairman & Director, Joanne Freeze, its VP Business Development Exploration Latin America and Director, Fredy Jose Huanqui Guerra and its VP Operations, Thomas Rinaldi.  There is little possibility that this dependence will decrease in the near term. The Company maintains no management agreement with any of its personnel, nor does the Company carry Key Man life insurance.  The loss of any of its management would have a negative effect on the Companys operations.



Dilution Through Employee/Director/Consultant Options Could Adversely Affect Candentes Stockholders



Because the success of Candente is highly dependent upon its respective employees, the Issuer has granted to some or all of its key employees, Directors and consultants options to purchase common shares as non-cash incentives.  To the extent that significant numbers of such options may be granted and exercised, the interests of the other stockholders of the Company may be diluted. There are currently 6,893,500 as of March 14, 2007 share purchase options outstanding, which, if exercised, would result in an additional 6,893,500 common shares being issued and outstanding. (For a breakdown of dilution, refer to the risk factor entitled: Candente Has Minimal Positive Cash Flow and No Recent History of Significant Earnings and Is Dependent upon Public and Private Distributions of Equity to Obtain Capital in Order to Sustain Operations. Public distributions of capital result in dilution to existing



U.S. Investors May Not Be Able to Enforce Their Civil Liabilities Against Us or Our Directors, Controlling Persons and Officers



It may be difficult to bring and enforce suits against Candente.  The Issuer is a corporation incorporated in the province of British Columbia under the British ColumbiaCorporations Act.  A majority of the Company's directors must be residents of Canada, and all or substantial portions of their assets are located outside of the United States, predominately in Canada or Peru.  As a result, it may be difficult for U.S. holders of our common shares to affect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them.  In addition, a shareholder should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or other laws of the United States.



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However, U.S. laws would generally be enforced by a Canadian court provided that those laws are not contrary to Canadian public policy, are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided that they are in compliance with applicable Canadian legislation regarding the limitation of actions.  Also, a Canadian court would generally recognize a judgment obtained in a U.S. Court except, for example:

a)

Where the U.S. court where the judgment was rendered had no jurisdiction according to applicable Canadian law;

b)

The judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, conclusive or enforceable under the laws of the applicable state) or not final, conclusive or enforceable under the laws of the applicable state;

c)

The judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure;

d) a dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the judgment meets the necessary conditions for recognition in a Canadian court;

e)

The outcome of the judgment of the U.S. court was inconsistent with Canadian public policy;

f)

The judgment enforces obligations arising from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government; or

g)

There has not been compliance with applicable Canadian law dealing with the limitation of actions.



As a "foreign private issuer, Candente is exempt from the Section 14 proxy rules and Section 16 of the 1934 Securities Act May Result in Shareholders Having Less Complete and Timely Data

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 result in shareholders having less data.



Item 4.  Information on the Company



DESCRIPTION OF BUSINESS



Introduction



Candente Resource Corp. (hereinafter also referred to as the "Registrant", the Issuer or the "Company") is a Canadian mineral resources exploration company.  The Company currently has interests in mineral exploration properties in Peru, Mexico and Newfoundland, Canada.



Presently, the Company is in the exploration stage and there is no assurance that a commercially viable ore deposit (a reserve) exists in any of its properties until further exploration work is done and a comprehensive economic evaluation based upon that work is concluded.  An independent, preliminary inferred mineral resource estimate was completed on the Cañariaco Norte zone of the Cañariaco property.  The surface expression of the preliminary resource is approximately 14 hectares, or less than 15% of the surface expression of known copper mineralization in the Norte Zone.



The Companys head office is located at #200-905 West Pender Street, Vancouver, British Columbia, Canada V6C 1L6. Candentes registered and records office is located at 1000-595 Burrard Street, Vancouver, British Columbia V7X 1S8. The telephone number is (604) 687-6789 and the facsimile number is (604) 683-5317. The Company also maintains a website at www.candente.com.  The Companys contact person is Joanne Freeze, President, CEO, Chairman & Director.





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The Company has an unlimited number of shares without par value. All shares of the Company rank equally as to voting, and there are no special preference, conversion or redemption rights attached to any of the shares of the Company.  As of 12/31/06 the end of the Companys most recent fiscal year, there were 53,256,444 shares of common stock outstanding.



The Company's common stock trades on the Toronto Stock Exchange (TSX) and the Bolsa de Valores de Lima/Lima Stock Exchange (BVL) under the symbol "DNT" and the Frankfurt Stock Exchange under the symbol GW4 or code 529.911.



Corporate Background



Incorporation Data



The Company was incorporated under the laws of British Columbia, Canada on May 1, 1997. The Company conducted its Initial Public Offering in Canada only and shares of the Company began trading on the Canadian Venture Exchange (now the TSX Venture Exchange) on May 15, 2000.  On September 27, 2002, the Company continued into the federal jurisdiction of Canada under the Canada Business Corporations Act.  On November 18, 2004 the Company was listed on the Toronto Stock Exchange.  On November 2, 2005, the Company commenced trading the Frankfurt Stock Exchange.  On February 19, 2007, the Company was listed on the Bolsa de Valores de Lima (Lima Stock Exchange) and commenced trading on that exchange on February 21, 2007.  On March 9, 2007 the Company changed back its continuance to British Columbia under the British Columbia Business Corporation Act.



The Company has five wholly owned subsidiaries:



a.

Candente Resource (BVI) Corp., incorporated in the British Virgin Islands on July 18, 1997. All of the shares are beneficially owned by the Company.

b.

Compañía Minera Ono Candente S.A. (Peru), incorporated in the Republic of Peru on May 15, 1997. All of the shares are beneficially owned by the Company.

c.

Cañariaco Copper (BVI) Corp., incorporated in the British Virgin Island on August 9, 2001. All of the shares are beneficially owned by the Company through Candente Resource (BVI) Corp.

d.

Exploraciones Milenio S.A. (Peru), incorporated in the Republic of Peru on August 18, 1999 All of the shares are indirectly owned by the Company through Canariaco Copper (BVI) Corp.

e.

Candente Vinland Inc., incorporated in Newfoundland and Labrador, Canada, on July 12, 2002.

f.

Candente Mexico Resource Corp. incorporated in the Province of British Columbia, Canada under the Business Corporations act(British Columbia) on April 13, 2006.  All of the Shares are beneficially owned by the Company.

g.

Minera CCM, S.A. de C.V. (Mexico), incorporated in Mexico on May 10, 2006.  50% of the shares are indirectly owned by the Company through Candente Mexico Resource Corp. The remaining 50% of the shares are indirectly owned by Canaco Resources (BC).



Historical Corporate Development



Since incorporation, the Company has been involved in the exploration of natural resource properties.



The Corporation was incorporated under the laws of the Province of British Columbia on May 1, 1997 under the name of 542074 B.C. Ltd., pursuant to the Company Act of British Columbia. On June 5, 1997, the Corporation converted from a specially limited company and changed its name to Candente Resource Corp. On September 27, 2002, the Company continued under the Canadian Business Corporation Act.



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The Corporation commenced active exploration and acquisition of mineral resource properties in June 1997 through its wholly owned subsidiary, Compañía Minera Oro Candente S.A.  Between June of 1997 and June of 1999, the Company acquired by staking approximately 44,425 hectares of unclaimed mineral claims. During Fiscal Year 1997, the Company recorded acquisition costs of $45,905 and $183,151 in property exploration costs. In Fiscal Year 1998, the Company recorded acquisition costs of $44,018 and $315,128 in property exploration costs.



On December 15, 1998, the Company granted Westone Ventures, a public company listed on the Canadian Venture Exchange, an option to earn a 50% interest in the Companys Pamel Claims, hereby known as the Perlita Property. To earn their interest, Westone was required to incur $2,500,000 in exploration expenditures and make payments to the Company totaling $410,000 over a period of four years. In December 1999, Westone assigned the its interests in the December 1998 agreement to Merendon Canada Inc., a private company related to Westone. Concurrently with the assignment, the Company agreed to extend the dates under which Merendon was required to complete the annual exploration expenditures and make the annual option payments. As of July 1, 2000, Merendon had failed to complete the annual exploration expenditures and to make the annual option payments. Therefore, the option expired and the Company regained a 100% interest in the Perlita Property.



In Fiscal 1999 the Corporation entered into an agreement with Britannia Gold Corp. (now Nanotek Inc.), a public company listed on the Canadian Venture Exchange, and its wholly-owned subsidiary, Minera Britannia Gold S.A. (collectively Britannia Gold) whereby the Corporation acquired an option to acquire a 50% interest in 9,600 hectares of mineral properties in Peru. As of June 30, 2000 the Corporation had earned an additional one percent interest in the El Tigre and Columbia Properties and an additional four percent interest in the Sorpresa property, to bring the Corporations' total interest to 51%, 51% and 54% respectively. On January 31, 2001 the Corporation agreed to acquire Britannias remaining interests (to 100%) in all three of these properties for a payment of 500,000 common shares, subject to regulatory approval. Acquisition of the Britannia properties was completed on February 20, 2002. Also during the year, the Company acquired by staking a further 10,200 hectares of unclaimed mineral claims in Peru. The Company recorded mineral exploration costs of $15,458 and mineral property exploration costs of $139,352 for the year. After conducting a review of its initial exploration, the Company determined some of its properties did not warrant further expenditures and wrote-off mineral properties worth $152,389.



During Fiscal Year 2000, the Company staked a further 1000 hectares of mineral claims in Peru. During the year, the Company recorded mineral property acquisition costs of $29,122 and $199,547 of property exploration costs. After review of its properties, the Company wrote-off $27,355 of mineral properties. In May 2000, the Company completed its initial public offering through the Canadian Venture Exchange. The Company sold 2,068,000 units (consisting of one common share and two transferable share purchase warrants) at Cdn$0.45 per unit for net proceeds of Cdn$780,427.



During Fiscal 2001, the Company acquired a disseminated and potentially leachable copper target for US$75,880 from Minero Peru. The remaining claims underlying the Yanamay Property expired, and the Company wrote-off the remaining $90,707 in accumulated exploration costs related to the property. The Company also abandoned several other Peruvian claims it had staked and wrote-off accumulated acquisition and exploration expenses of $18,400 related to those claims. For the year, a total of $1,277,608 in property expenditures were made.



During Fiscal 2002, the Company made several agreements to acquire property interests in Newfoundland, Canada.  The Company agreed to a purchase option on the Linear Property in Newfoundland, Canada, where it may acquire a 100% interest in the property, subject to a 2.5% NSR, by making cash payments of Cdn$171,000, issuing 300,000 common shares and spending Cdn$1,000,000 in exploration expenditures, all over the next five years.



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The Company also acquired 10 additional exploration properties of 734 claims in Newfoundland. The properties were staked on behalf of the Company by A.S.K. Prospecting, which as consideration received 200,000 common shares and a 0.75% NSR on each property, as well as additional shares of the Company depending upon the achievement of certain exploration benchmarks by the Company. An additional 6 properties, comprising a total of 612 claims, were later acquired under the same agreement. In June the Company entered into an option to purchase a 100% interest in the Eastern Pond Property, where the Company could earn a 100% interest, subject to a 2.5% NSR, by making cash payments totaling Cdn$139,240, issuing a total of 228,000 common shares and making Cdn$756,600 in exploration expenditures, all over a five year period.  In July the Company reached an agreement with Cornerstone Resources to acquire interests in two properties. The Company could earn an initial 51% interest in the Island Pond property by paying Cornerstone Cdn$115,000 in cash, issuing 115,000 shares and spending $1,500,000 on exploration, all over 4 years. The Company could increase its interest in the property to 61% by funding a bankable feasibility study and to 75% by arranging mine financing. For the Pauls Pond property, the Company could earn an initial 51% interest by paying Cornerstone $90,000, issuing 90,000 common shares and spending $1,000,000 on exploration, all over 4 years, and it could increase its interest to 61% by funding a bankable feasibility study and to 75% by arranging mine financing.  In September, the Company entered into an agreement to earn a 100% interest in the Jacksons Arm property, subject to a 2.5% NSR, by making cash payments of Cdn$97,360, issuing 232,000 common shares and spending $756,000 in exploration, all over 5.3 years. In December, the Company entered into an agreement to acquire a 100% interest in the Staghorn property (formerly known as the Flamingo and Woods Lake properties) by making cash payments of Cdn$100,920, issuing 120,000 common shares and spending Cdn$500,000 on exploration, all over 4 years. For the Weirs Pond and Radio Range properties, the Company could earn a 100% interest by making payments of Cdn$55,000, issuing 100,000 common shares and expending Cdn$200,000, for each property separately over 4.5 years. Both Weirs Pond and Radio Range were subject to a 2.5% NSR.



In Peru during 2002, the Company entered into an agreement with Hecla Mining regarding the Alto Dorado property in Peru. The Company earned a 100% interest in the property, subject to a 2.5% NSR, by applying for and funding all related exploration and development fees and issuing 100,000 common shares to Hecla.  The Transfer of Rights agreement was signed in July 2003. In October, the Company was declared the winning bidder by the Government of Peru in an auction for four claim blocks in Peru. The first two blocks are known as the Toril Zone, an area which is adjacent to, and was originally part of, the Alto Dorado property as explored by Hecla and which, under agreement, was been added to the Alto Dorado property agreement with Hecla. The Company paid the Peruvian Government US$50,227 for a 100% interest, subject to the agreement with Hecla, in the Toril Zone. The second two blocks (Areas C and E) are known as the Millo property in Southern Peru which the Company paid the Government of Peru $56,388 for a 100% interest. In November, the Company sold Area C to Geologix Explorations for US$28,333 and retains a 1% NSR. The claims underlying the Companys Huaypian property expired and the Company wrote off the $77,288 in property acquisition and capitalized exploration costs. The Company also allowed the claims underlying the Paracas property to lapse and wrote-off the remaining $50,000 in accumulated costs.



During 2002, the Company expended $927,464 on its mineral exploration properties.



In Fiscal 2003, the Company signed a Right of First Refusal (RFR) with Anglogold covering 10 of the Companys gold exploration properties in Peru. Under the agreement, Anglogold paid Candente US$10,000 in order to conduct exploration on each of the 10 properties over the following six-month period. Within the six-month period, if Candente wished to sell all or part of its interest in any of the properties, Anglogold has 30 days to match the offer and acquire an interest. In July 2003, the RFR expired without the transfer of any properties and Candente retained its original interests.



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In May, the Company reached an agreement with Apex Silver to transfer its interest in the El Alamo property in Peru to ADC Peru LDC for a 2% NSR on all copper, lead, zinc, silver and gold produced. During the year, the Company wrote-off certain of its property interests totaling ($1,251,054), and expended $3,121,998 on its mineral property interests.



In Fiscal 2004, the Company entered into a partnership agreement with Goldcorp regarding the Companys properties in Newfoundland. Under the agreement, Goldcorp could earn up to a 70% interest in either (or both) the Linear and Staghorn properties by assuming all of Candentes expenditure obligations and completing bankable feasibility studies by January 2010. The agreement also granted Goldcorp a right of first offer on other properties currently held by Candente, as well as those that may be acquired in the future, in Newfoundland. Candente also entered into an option agreement to acquire the Duder Lake property in Newfoundland. In Peru during 2004, the Company entered into two option agreements with Orex Ventures, an arms-length public company traded on the TSX Venture Exchange, where Orex can earn a 51% interest in two of the Companys properties El Tigre and Las Sorpresas in Peru by incurring exploration expenditures totaling US$2.5 million over 3.5 years on each property as well as paying Candente US$15,000 cash and issuing 250,000 common shares with respect to each property by January 31, 2008. Exploration work began on the Las Sorpresas property in October, with this work initially consisting of ground magnetics and Induced Polarization (IP) geophysical surveys. The geophysical surveys were part of a Phase I exploration program, which Orex funded as part of their option to earn a 51% interest in the property from Candente. Candente conducted exploration on the Alto Dorado and Canariaco properties. On Alto Dorado, drilling returned gold and copper mineralization in a porphyry body in the Ana-Olla zone. On Canariaco, leach testing of bulk reported excellent copper recovery and twelve holes were drilled at Canariaco Norte, all of which indicated copper mineralization and prompted the Company to begin preparing a preliminary resource estimate for this property. Certain mineral property interests were written off during the year and totaled ($419,470), while the Company expended $2,157,744 on its mineral exploration property interests.



On November 18, 2004 the common shares of Candente began trading on the Toronto Stock Exchange.



In Fiscal 2005, the Company entered an option agreement with Orex Ventures Inc. whereby Orex has the right to earn a 51% interest in the Pamel gold Property by incurring exploration expenditures of US$2.5 million over 3.5 years.  Candente has the right to operate all exploration over the 3.5 years.  In addition to the exploration expenditure commitments, Candente received 60,000 shares in Orex upon approval of the Agreement by the TSX Venture Exchange on April 4, 2006 and additional staged share issuances totaling 250,000 shares in Orex by May 31st, 2010. On the Alto Dorado property, the Company entered an agreement with Gallipoli Mining of Australia (Gallipoli) whereby Gallipoli can earn a 50% interest in the property by incurring exploration expenditures of US$5.4 million over 3.5 years on the property, Stages I and II.  Gallipoli could also increase their interest to 65% by funding and completing a bankable feasibility study on the property within an additional 3 years. In March, 2006, Gallipoli advised the Company of their decision to withdraw from their option agreement at which point the property reverted back to 100% ownership by Candente. In Newfoundland, Goldcorp terminated its option agreements on the Staghorn and Linear Properties, but advised that they would maintain their investment in Candente as they wished to maximize value and believe in Candentes Peruvian gold exploration projects may have excellent potential. Candente terminated its option on the Linear property from the Kriask Syndicate, but maintained its interest in the Staghorn Property.



For Fiscal 2005, the Company completed an independent inferred mineral resource estimate on Canariaco Norte Zone of the Canariaco project. During the year, the Company spent a total of $2,157,744 on its mineral exploration interests, while ($419,470) was written-off.





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On November 2, 2005, Candente commenced trading its common shares on the Frankfurt Stock Exchange.



In Fiscal 2006, the Company optioned the El As de Zinc property to Compañia Minera Santa Luisa S.A. (Santa Luisa), a subsidiary of Mitsui Mining and Smelting Co., Ltd. of Japan (Mitsui).  Santa Luisa has the option to earn an 80% interest in the El As de Zinc project by making payments of US$200,000 and drilling 10,000 metres (spending approximately US$1,500,000) within three years.  Candente will have the option to convert their retained 20% interest into a sliding scale NSR based on the price of zinc.  If Candente chooses to convert their interest to an NSR then Santa Luisa must have the project into production at a minimum rate of 100 t/day within two years or return the property 100% to Candente.    The NSR will be scaled to the price of zinc and vary from 1% to 3%.  At current zinc prices (US$1.05/pound (lb) or US$2,300/tonne) the NSR would equal 2%. Drilling is planned to commence on the property by the end of March 2007.   Santa Luisa will fund and operate the exploration program. Candente acquired the property by staking in 2003 when Huanqui and Freeze recognized the distinctive similarities of the mineralization to the major zinc deposits.   At that time zinc prices were as low as US$0.45/lb (US$1,000/tonne), they are now at US$1.05/lb (US$2,300/tonne).  Oro Candente also has other zinc prospects in Peru.



On May 12, 2006, the Company and Canaco Resources Inc. (Canaco) entered into an option agreement to jointly acquire up to a 70% interest in the 67 square kilometres El Oro Gold Property located in Central Mexico. The option agreement entered into jointly (50/50) by Canaco and Candente gives the combined companies the right to earn up to a 70% interest in all of the 24 El Oro exploration and mining concessions (14,950 hectares), held by Luismin, owned by Goldcorp.  The terms of the agreement are as follows:



1.

Earn a 50% interest by expending US$5,000,000 on exploration and issuing 250,000 common shares in each of Canaco and Candente over a three year period and;

2.

Earn an additional 20% interest by expending an additional US$5,000,000 (US$10,000,000 total for 70% total interest) on exploration and development over an additional two (2) years.

3.

Goldcorp retains the right to earn-back in to a 70% interest by spending US $25,000,000 within four years on additional exploration and development.

4.

Goldcorp has the right to participate in future equity financings by each company, up to the greater of: their current percentage interest held in each company or 10% of the financing.



During Fiscal 2006, the Company conducted additional exploration at Canariaco and completed an updated independent mineral resource estimate in March 2007. On February 12, 2007, the Company announced the appointment of Standard Bank Plc (Standard) as its Financial Advisor to assist in evaluating all project finance opportunities for advancing the Cañariaco Project through feasibility and into production. Standard will also assist the Company with technical input into the Cañariaco feasibility and other project studies.



On September 7, 2006, the Company adopted a Shareholder Rights Plan.  The Rights Plan is designed to ensure the fair and equal treatment of shareholders in connection with any take-over bid for outstanding common shares of Candente. The Rights Plan seeks to provide shareholders with adequate time to properly assess a take-over bid without undue pressure. It also provides the Board with adequate time to fully assess an unsolicited take-over bid, to allow competing bids to emerge, and, if applicable, to explore other alternatives to the take-over bid to maximize shareholder value. The Rights Plan is not intended to prevent or deter take-over bids that offer fair treatment and value to shareholders, but is designed to encourage offers that represent fair value to all shareholders.











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Under the terms of the Rights Plan, one right will be issued by Candente for each outstanding Candente common share at the close of business today and for each Candente common share issued in future (subject to the terms of the Rights Plan). The rights issued under the Rights Plan become exercisable only if a person acquires or announces its intention to acquire 20% or more of the common shares of the Company without complying with the "Permitted Bid" provisions of the Rights Plan or without the approval of Candente's Board of Directors. Permitted Bids must be made to all holders of Candente's common shares by way of a take-over bid circular prepared in compliance with applicable securities laws and, among other things, must be open for acceptance for a minimum of 60 days. If at the end of 60 days at least 50% of the outstanding common shares other than those owned by the offeror and certain related parties have been tendered and not withdrawn, the bidder may take-up and pay for the shares but must extend the bid for a further 10 days to allow other shareholders to tender to the bid. If a take-over bid does not meet the Permitted Bid requirements of the Rights Plan, the rights will entitle shareholders, excluding the shareholder or shareholders making the take-over bid, to purchase additional common shares of the Company at a substantial discount to the market price of the common shares at that time.



Candente is not adopting a Rights Plan in response to any proposal to acquire control of the Company.  The Rights Plan is similar to plans adopted by other Canadian companies and ratified by their shareholders. The Rights Plan was subject to approval by the Toronto Stock Exchange and was presented for ratification by the shareholders at a Special General Meeting. When ratified by the shareholders, the Rights Plan will have an initial term of 3 years.



On February 19, 2007, the Company was listed on the Bolsa de Valores de Lima/Lima Stock Exchange (BVL) and commenced trading its common shares on March 21, 2007.



On March 9, 2007, the following resolutions were passed by the shareholders at the Special General Meeting held on March 9, 2007.



•

An ordinary resolution to approve the Shareholder Rights Plan Agreement (the "Rights Plan") adopted on September 7th, 2006; and

•

A special resolution to continue the Company from the federal jurisdiction of Canada (CBCA) to the provincial jurisdiction of British Columbia (BCBCA).



The Rights Plan is similar to plans adopted by other Canadian companies and ratified by their shareholders and is designed to ensure the fair and equal treatment of shareholders in connection with any take-over bid for outstanding common shares of Candente.  The Company is not aware of any specific or pending proposal to acquire control of the Company. The Rights Plan is not intended to prevent or deter take-over bids that offer fair treatment and value to shareholders, and is designed to encourage offers that represent fair value to all shareholders.  The Rights Plan was approved by the Toronto Stock Exchange on March 6, 2007.  A copy of the Rights Plan will be posted on SEDAR (www.sedar.com) once it has been signed by the Company's transfer agent Pacific Corporate Trust Company.  The Rights Plan Agreement between the Company and Pacific Corporate Trust Company effective day is May 15, 2007.



The change of the Companys corporate jurisdiction to British Columbia (BCBCA) is to make day-to-day operations of the Company more expedient and to allow a larger number of non-Canadian residents to join the board.  The BCBCA is a more modern and streamlined company law than the CBCA and provides greater flexibility and reduces the regulatory burden to companies by, for example, permitting directors to pass consent resolutions by e-mail and by implementing an electronic filing system.











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DESCRIPTION OF PROPERTY



Corporate Offices



The Company's executive offices are located in rented premises of approximately 3,600 square feet located at 200 and 210 - 905 West Pender Street, Vancouver B.C. V6C 1L6. The lease on both offices is through to June 2007. Monthly rent and taxes for the main suite of offices isCDN$3180.58per month, while the additional office is CDN$2631.58 per month. The space is considered adequate for the Companys current and anticipated future needs.



In Lima Peru, the Company maintains an office in rental space of approximately 2594 square feet (241 square meters) located at Calle Teruel 186, Miraflores, Lima 18, Peru.  Rental costs, including taxes, are approximately US$1,800 per month.



The Company is currently exploring mineral properties in Peru, Mexico and Newfoundland, Canada.



A General Discussion of the Political, Economic and Regulatory Climate in Peru



Peru is located in Western South America and is bordered by the Pacific Ocean on the west, Ecuador and Colombia on the north, Brazil and Bolivia on the east and Chile on the south. Land area totals 496,200 square miles, an area slightly smaller than the State of Alaska. Perus unit of currency is the Nuevo (New) Sol, which at current rates stands at approximately 3.30 per US$. Mining is one of the largest industries in Peru, with copper, gold and silver being particularly important.



Peru is a Republican Constitutional Democracy with three branches of government: Legislative, Executive and Judicial. The Legislature is a Constitutional Congress; the Senate having been abolished by an act of Congress on December 31, 1993. Elections for Presidency and Congress are held every five years with the next election scheduled for 2006. Members of the Supreme Court are appointed by the National Council of the Magistracy. Peru has 24 Regions and one Constitutional Province. The Regions are administered by a Regional President who are elected by the population.



During the 1990s, President Alberto Fujimori applied strict measures aimed at eliminating hyperinflation, restoring fiscal order, eliminating terrorism, privatizing the economy and reestablishing Perus international credit standing. During the Fujimori Presidency, inflation was reduced to single digits, the active elements of the terrorist groups were imprisoned and privatization of the economy was undertaken.  A program of legal reforms and incentives instituted by the Fujimori Government has removed many of the obstacles to foreign investment in Peru. Laws to promote and protect foreign capital were enacted by Congress. In July 2001, Dr. Alejandro Toledo Manrique became Perus new President. Dr. Toledo is a US trained economist whose polices has remained very similar to Mr. Fujimoris.



Peru signed a Constitutive Agreement of the World Bank's Multilateral Investment Guaranty Agency, which was ratified by the Peruvian Congress on April 2, 1991. Peru has also signed the World Bank's International Covenant on the Settlement of Investment Disputes between States and Nationals of Other States. Furthermore, Peru has signed a Covenant with the United States Overseas Private Investment Corporation, which was ratified by the Peruvian Congress on May 14, 1993.













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Under the terms of the Foreign Investment Promotion Law, foreign investors have the same rights as Peruvian Nationals and enjoy equal status with these and the state, except in one situation. The one limitation is that, for reasons of national security, foreign investors (natural or legal persons) are restricted from acquiring properties within 50 kilometers from Perus borders, unless they have express authorization from the council of Ministers (Executive Power - Ministers and President of the Republic). Foreign investors may acquire shares or property rights from Nationals. Investors of more than US $2 million are guaranteed a fixed tax regime for 10 years. Legislative Decree 708, which applies to mining companies, provides for tax, administrative and free exchange stability. Foreign companies have the right to export concentrates or refined products. There are no taxes on exportation of these products. Capital, dividends and profits are also freely exportable.



Under Peruvian Law, up to 20% of the employees of a corporation may be Foreign Nationals. Peruvian law provides for a minimum monthly wage of 500 Peruvian Nuevo Soles per month (US$151.52). Other employee benefits are also payable by law. Income tax is payable by persons or companies domiciled in Peru, regardless of the source of this income. Non-domiciled persons or companies are also liable for income taxes on their Peruvian-based income. Personal income over US $55,000 per year is taxed at a rate of 30%. Personal income tax under this amount is taxable at a rate of 15%. Businesses are taxed at a rate of 30%. A separate corporate tax does not exist in Peru.



Dividends are considered income in Peru and are subject to tax. Capital gains from the trading of stock, as well as interest from deposit accounts and bonds are also not taxable.



Companies that do not realize profits are subject to a minimum income tax amounting to 0.6 % on the value of their net assets.



In Peru, the General Tax on Sales ("I.G.V.") is a levy paid on all sales of goods and services and importation at the rate of 19% of the value of the sale and is paid by the recipient of the goods and services at the time of each transaction. This tax may be refunded as a fiscal credit against taxes payable on sales or provisions of services. Acquisitions and investments incurred by a mining company prior to the sale of minerals or properties, in the exploration stage may be accumulated as pre-operative expenses and deducted from taxes due once income is generated by operations. A company may only receive this fiscal credit in advance if it can be established with the government, a commitment of future sales and a minimum investment over US$2,000,000. The credit is personal and non-transferable other than in the case of a company's reorganization.



No exchange controls exist in Peru. No government authorization is required to carry out exchange operations. There is no fee charged for possession and receipt of foreign currency. Individuals or corporations may remit foreign currency abroad, or retain it in the country. Exporters are no longer required to exchange foreign currency they receive for local currency.



Mineral deposits are considered to be owned by the government but made available to the private sector. The initial claim request is called a Petitorio (Petition) and once granted is called a Concesion (Concession). The application is carried out by a paper procedure that specifies the UTM co-ordinates of the claim corners. Individual claims can be as small as 100 hectares and as large as 1,000 hectares. Claim boundaries must now be oriented north-south and east-west. Before 1992, claims were described by direction and distance from various geographical points and could be oriented in any direction. The Oficina de Catastro Minero (claim registration office) is in the process of tying all the old-style claims to UTM co-ordinates and claims that cannot be properly located are being cancelled. At the time of applying for a Petitorio a payment of US$3.00 per hectare and a set fee of 340Nuevo Soles (3.30 Nuevos Soles/$US) per Petitorio must be made.







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The granting process can take up to six months, depending on the volume of claim applications at the time. The process involves several stages which include acceptance of the application by the claim registration office; verification that the area is free to be claimed; notification to the various parties involved if there is any superposition of pre-existing claims; an announcement in local and national newspapers (at a cost of approximately US$250.00 per claim); a technical review; awarding of title; and finally granting of the concession. The first application submitted has priority over subsequent applications. However if the application relates to an area which has become open for staking due to an older concession lapsing, all parties staking on the first day are considered equal. Should two or more applicants apply for identical ground on the same day, the conflict can be resolved privately by those applicants, or failing that, the contested ground will be auctioned (Remate) and will be awarded to the highest bidder among the applicants.



Concessions are available to foreign companies on an equal basis provided that they have formed a Peruvian mining company. A fee must be paid annually to keep claims in good standing. Until 1999 the annual maintenance fee (Derecho de Vigencia) was US$2.00 per hectare per year. In the year 2000, the fee was increased to US$5.00 per hectare per year. Subsequently, on April 9 2001, Legislative Decree No. 913 reduced the annual fee to US$4.00 for the year 2001 and to US$3.00 per hectare for payments from the year 2002.



The fee is based on the January to December calendar year but title holders have until June 30 of the current year to pay the fee.  For the first 6 years the fee is of $3.00 per hectare. At the 7th year if the property is not producing a minimum of US$100 per year and per hectare or the title holder has not invested a minimum of US$60 per year and per hectare, the title holder has to pay an additional fee as a penalty (Penalidad) of $6.00 per hectare. The additional fee (penalty) is based on the previous year and paid on June 30 of the current year.  If the property continues to be a non productive property after a period of 12 years (minimum production of US$100 per year and per hectare or investment of US$200 per year and per hectare from the 12th year) the additional fee (penalty) increases to $20.00 per hectare. At this time there are no annual claim-related exploration requirements in Peru; however, the government is presently reviewing this policy. Lack of payment of the annual maintenance fees for two consecutive years shall be a cause for cancellation of the mining concession rights.



Within a Concession, there is an obligation to compensate landowners for the destruction or disturbance of their land. Mining Concession title gives one the right to exploit minerals within the Concession boundaries, although Exploration Concessions do not have to be converted to Mining Concessions before exploitation. To date, the Company has not caused any destruction of land.  Minor crop disturbances have not been compensated as the majority of the Companys mineral exploration projects in Peru are not currently owned by individual landowners.  However, the Company has agreements with landowners regarding exploration at the Alto Dorado and Cañariaco Projects. The agreements call for a fixed payment for the use of the properties over a one year period and additional payments are made for occasional crop disturbances.  All expected costs are a component of the total estimated cost of the exploration program on the project.



The approval of an environmental evaluation of an exploration program by the Ministry of Energy and Mines of Peru is required if the disturbed area covers more than 10 hectares or when drilling will be conducted at more than 20 drill sites. Each environmental proposal shall include:



1.

Description of the area before commencing operations

2.

Details of the work to be carried out

3.

Measures to be taken during and after exploration work to mitigate environmental contamination and/or changes.



Mineral Exploration Projects





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The following is a description of the Companys mineral properties in Peru, Mexico and Canada and its interest in such properties. Currently, the Company considers the Cañariaco and El Oro properties as its highest priority projects.



Peruvian Properties



[candente200620famend001.jpg]







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Cañariaco Project



The Cañariaco property is a 16,560 hectare advanced stage porphyry copper exploration project located within the Western Cordillera of the Peruvian Andes in the Canares District, Province of Ferrenafe, Department of Lambayeque in Northern Peru.  The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.



The Company has had no revenue from mining operations on the Cañariaco Property to date. The Company has a 100% interest in the property.



How Acquired



The Company acquired the property through an auction process from Minero Peru in April, 2001. The government of Peru auctioned the right to explore the property under Public Auction (Bid) PRI-51-2000, Private Investment Promotion  Mining Prospects. The auction was held in Lima on February 14, 2001 and Candente was the sole bidder. Consideration was a one-time payment of $75,880.



To maintain the property in good standing, annual property payments of $17,500 commenced in June, 2002.



Location and Access



The property lies in the Cañaris District of Ferrenafe Province in Northern Peru about 100 km NE of the city of Chiclayo and 700 km NNW of Lima.



Access to the property is from Chiclayo with major port facilities and a major airport, and where mining supplies and services can be procured.  Access is along a paved road to Batan Grande and then via gravel road. Travel time to the property from Chiclayo averages 6 hours by four-wheel drive vehicle.  There is also a paved highway 12 km north of the property that could be connected to in future to provide better access the property.



The area is sparsely populated however; a local labour force is readily available and favourable to exploration and development.  Elevations range from 2500 to 3200m above sea level.







































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[candente200620famend002.jpg]







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Regional and Property Geology



The Cañariaco system lies within a belt of porphyry copper deposits which extend 350 km from Cajamarca North by Northwest to the Ecuadorian border. The mineralized systems known in this belt comprise two types, porphyry Copper-Molybdenum and porphyry Copper-Gold deposits. Although no economic deposit has yet to be developed, the mineralized systems tend to be of a large size. Recent deposits of lavas and ignimbrites of the Upper Tertiary Calipuy Formation are younger than the porphyry copper systems which could be covering yet to be discovered systems.



Cañariaco is located on the Western Cordillera at elevations that range from 2500-3500 meters. The topography features steep slopes cut by streams and rivers. Above 3000 meters the vegetation is mostly short grass and pastures while below 3000 meters lies dense native forest.



Mineralization at Cañariaco is associated with a quartz-feldspar porphyry stock with a well developed fine to medium grained quartz-sulphide stockwork. 3 separate porphyry systems have been identified on the property. At Cañariaco Norte, mineralization has been identified in an area of 1200 by 700 meters and to a depth of about 600 meters. Copper mineralization occurs mainly as primary (chalcopyrite, minor borite) and enriched (chalcocite, lesser couellite) copper mineralization.













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History and Previous Work



Copper mineralization was first discovered at Cañariaco by the British Geological Survey in 1970 through a stream sediment sampling program. In 1973, Ingemmet drilled 5 holes into the Cañariaco Norte area of the property. 4 of the 5 holes returned copper intersections. Placer Dome optioned the property in 1994. They conducted additional surface sampling and drilled 3 new diamond drill holes at Cañariaco Norte. All 3 holes returned copper intersections. Placer withdrew from their property option in January 1997.



In 1998, Minero Peru solicited for joint venture partners on the property. Billiton was selected and signed an option agreement in February 1999. Billiton conducted a detailed exploration of the property assisted by the construction of a new access road and camp site at the property. Billiton conducted detailed geological mapping of Cañariaco Norte, Cañariaco Sur and a third porphyry system they discovered and named Quebrada Verde. Billiton also conducted soil and rock chip sampling as well as IP and ground magnetic surveys over all 3 systems and re-logged all previous drill holes.



At the conclusion of the preliminary work, Billiton drilled 7 holes of 1128.20 meters in total. 3 of the new holes were drilled at Cañariaco Norte, 3 at Cañariaco Sur and 1 hole at Quebrada Verde. The Cañariaco North program extended the area of known mineralization 500m further south than previously defined. Although the new Cañariaco Norte holes returned near-economic grades of copper mineralization, Billiton did proceed with metallurgical test work, including diagnostic sequential leach analysis on 12 samples of core conducted by SGS in Santiago, Chile. The tests determined leachable copper (chalcocite, couellite) was 85-90% of material with a head grade of 0.78%. Billiton concluded the resource was potentially leachable.



At Cañariaco Sur, 2 of the 3 holes returned copper mineralization. The single drill hole at Quebrada Verde did not return significant copper assays.



Billiton dropped the property option during a period of low mineral prices where they decided to focus on larger and more advanced properties.



In March 2001, Candente engaged engineering consultants Knight Piesold Ltd. to evaluate the Cañariaco property for the necessary infrastructure for developing a SX-EW mine. Knight Piesold identified several suitable sites for heap leach pads and waste stockpiles within relative proximity to the Cañariaco Norte zone.



Due to the rise in copper prices, the Company resumed work on the project during the first quarter of 2004.  Initial exploration comprised geological mapping, rock chip and bulk sampling, and a magnetics (geophysical) survey.  This exploration helped to delineate drill targets and 36 holes were drilled in 2004 and 2005.



On March 4, 2007, an updated independent mineral resource estimate was completed on the Cañariaco Norte Zone.



CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF MEASURED AND INDICATED RESOURCES



This section uses the term "Measured Resources" and Indicated Resources. We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. The estimation of measured resources and indicated resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. US investors are cautioned not to assume that mineral resources in these categories will be converted into reserves.



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DECEMBER 2006 UPDATED RESOURCE  MEASURED AND INDICATED RESOURCE



|Cut-off
Grade | Measured
Tonnes
(million) | Copper
Grade of
Measured
(% Cu) | Indicated
Tonnes
(million) | Copper
Grade of
Indicated
(% Cu)
|------------- | ------------------------- | ------------------------------- | -------------------------- | --------------------------------
|0.5           | 92                        | 0.62                            | 94                         | 0.59                            
|0.40          | 170                       | 0.54                            | 222                        | 0.51                            
|0.30          | 255                       | 0.48                            | 388                        | 0.44                            
|0.20          | 320                       | 0.43                            | 540                        | 0.39                            



CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF INFERRED RESOURCES



This section uses the term "inferred resources". We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. US investors are cautioned not to assume that estimates of inferred mineral resources exist, are economically mineable, or will be upgraded into measured or indicated mineral resources.



DECEMBER 2006 UPDATED RESOURCE  INFERRED RESOURCE



|Cut-off
Grade | Inferred
Tonnes
(million) | Copper
Grade of
Inferrred
(% Cu)
|------------- | ------------------------- | --------------------------------
|0.5           | 33                        | 0.61                            
|0.40          | 81                        | 0.51                            
|0.30          | 177                       | 0.42                            
|0.20          | 317                       | 0.45                            



The updated resource is based on all drilling results as of December 2006, which includes 82 holes drilled by Candente. Mineral resources have been estimated using the Block Model. The Measured Resource was calculated based on holes spaced 75 meters or closer, while the Indicated Resource was calculated based on the holes spaced between 75 meters and 150 meters. Inferred Resources were calculated for holes spaced greater than 150 meters and within the 0.1% total copper grade shell.



The resource comprises approximately 45% soluble copper (in oxide and chalocite) and 55% refractory copper (in chalcopyrite). Resource estimates are based on a development model utilizing open pit mining, crushing and heap leaching of chalcocite, copper oxide and chalcopyrite mineralization. Ore and waste rock will require drilling and blasting; blasted material will be removed using loaders and diesel haul trucks. Copper cathode would be produced on site in an Solvent extraction/electrowinning (SX-EW) plant. Leach testing on project material showed recovery by heap leaching to be 75% to 80% of the copper oxide and chalcocite, and 40% of the chalcopyrite, after 220 days.



The report estimates a total resource (in all categories) of 820 million tonnes (MT) grading 0.45% copper at a cut-off grade of 0.30% copper.  Measured and Indicated resource categories make up 78% of the 820 MT. Within the 820 MT, a Starter Pit of 107 MT grading 0.60% Cu has been delineated with a strip ratio of 1.4 to 1.  A total of 97% of the 107 MT was in the Measured and Indicated categories.





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As of March 1, 2007 a total of 101 holes have been drilled by Candente on the deposit.  Drilling continues to both expand the size of the deposit laterally and vertically and move Inferred resources into the Indicated and Measured.



The NQ-size core was cut in half with a diamond saw and sampled at two metre intervals on the property.  One half of the split core was collected by Candente's Peruvian geologists in accordance with industry standards and submitted to Actlabs in Lima, Peru for copper. Copper was analyzed by a four acid leach process on a 50 g split to give values for total copper, acid soluble copper, cyanide soluble copper and residual sulphide copper.  Pulps from some of the same samples were sent to Actlabs laboratory in Ancaster, Ontario, Canada and analysed for an additional 36 elements (including silver) using Inductively Coupled Plasma (ICP).  Gold analyses on all the holes were carried out by Actlabs, Lima using Fire Assay Fusion and Atomic Absorption method on a 50g split.  Five percent of all core samples were also sent to a second laboratory for check assays of total copper and total gold.  Quality Assurance and Quality Control (QA/QC), including the use of sample standards, blanks and duplicates as well as chain of custody was monitored by Candente.



The core from the 1973 drill program was collected along 2 metre lengths and analysed for copper and molybdenum.  The core sizes were NCD to 50 m depth, NXWL to 170 m depth and BXWL for the remainder of the hole.  A total of 66 composite geological samples were analysed for total copper, molybdenum, silver and gold.  The frio de la dithizina-benceno assay method (colorimetric analysis) was used.  Analyses were carried out by Plenge Laboratory in Lima and the laboratory of INGEMMET.  Candente cannot comment on the reliability of the sampling and analyses carried out, however, the fact that this INGEMMET hole (73-001) was twinned by Candentes 04-008 hole and the results are very similar indicate that the data is reliable.



Planned Work Program



The Company will continue with drilling in 2007 and complete the feasibility study.





Alto Dorado Project



The Alto Dorado Project is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the Alto Dorado Project stemmed from earlier exploration work, as described below, that was done in the area.



Alto Dorado is a 9,400 hectare exploration stage gold project located in the Department of La Libertad in northern Peru. The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.



The Company has had no revenue from mining operations on the Alto Dorado Property to date. The Company has earned a 100% interest in the property.



On December 8, 2005, Candente announced entering into an option agreement with Gallipoli Mining of Australia whereby Gallipoli can earn a 50% interest in the Alto Dorado property by incurring exploration expenditures of US$5.4 million over 3.5 years on the property, Stages I and II.  Gallipoli can also increase their interest to 65% by funding and completing a bankable feasibility study on the property within an additional 3 years, Stage III.













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Stage I comprising a US$400,000 drilling program commenced in early January 2006.  Candente had the right to operate all exploration during Stages I and II.  In addition a total of 535,000 warrants were issued. 320,000 warrants were exercisable @ $0.90 per share only when Gallipoli elected to proceed from Stage I to Stage II exploration.  The warrants were exercisable for a period of 60 (sixty) days starting from the date that all results from the Stage I exploration program had been released to the public and had to be exercised prior to commencement of Stage II exploration.  215,000 warrants were exercisable @ $1.35 per share only when the Gallipoli elected to proceed from Stage II to Stage III exploration and development.  The 215,000 Warrants are exercisable for a period of 60 (sixty) days starting from the date that all results from the  Stage II exploration have been released to the public and must be exercised prior to commencement of Stage III exploration and development.  On March 8, 2006, Gallipoli advised the Company of their decision to withdraw from their option agreement on the Alto Dorado Gold-Copper project in Peru. Candente reverted back to 100% ownership of the property.























































































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[candente200620famend004.jpg]











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How Acquired



The property consists of 21 contiguous claim blocks totaling approximately 9,400 hectares. The details of each claim are as follows:



|Claim
Name     | Registration
Date | Date of
Grant | Claim Size
|-------------- | ----------------- | ------------- | ----------
|               |                   |               |           
|Ana de Chuco   | 07/23/04          | 02/27/98      | 1000      
|Ana de Chuco 3 | 07/23/04          | 04/17/00      | 400       
|Luis           | 07/23/04          | 02/23/98      | 100       
|Carlos II      | 07/23/04          | 12/30/97      | 1000      
|Toril I        | 01/16/06          | 04/29/03      | 800       
|Toril II       | 01/16/06          | 01/19/04      | 200       
|Toril III      | 01/16/06          | 03/11/04      | 300       
|Toril IV       | 01/16/06          | 04/21/03      | 200       
|Toril V        | 01/16/06          | 01/19/04      | 300       
|Toril VI       | 01/16/06          | 08/13/04      | 1000      
|Toril VII      | 01/16/06          | 10/27/03      | 600       
|Toril VIII     | 01/16/06          | 04/28/04      | 300       
|Toril IX       | 01/16/06          | 12/11/03      | 300       
|Toril X        | 01/16/06          | 12/11/03      | 200       
|Toril XI       | 01/16/06          | 08/13/04      | 200       
|Toril XVI      | 07/07/06          | 04/06/06      | 400       
|Toril XVII     | 07/07/06          | 04/11/06      | 800       
|Toril XVIII    | 07/06/06          | 04/18/06      | 300       
|Toril XIX      | 08/09/06          | 05/03/06      | 500       
|Toril XX       | 07/07/06          | 04/06/06      | 400       
|Toril XXI      | 07/07/06          | 04/27/06      | 100       



The Company entered into an option agreement with Hecla on June 1, 2002 under which the Company could earn a 100% interest in the original property, including the Ana de Chuco, Ana de Chuco 3, Luis and Carlos II claims, subject to a 2.5% NSR to Hecla, by making cash payments and issuing common shares to Hecla under the following formula:



|Date          | Number of Shares | Amount of Cash
|------------- | ---------------- | --------------
|              |                  |               
|Approval Date | 25,000           | $10,000       
|June 1, 2003  | 25,000           | None          
|June 1, 2004  | 25,000           | None          
|Closing       | 25,000           | None          



All shares have been issued and the property has been transferred to Candente.



Hecla retains a 2.5% NSR on the property. Candente may purchase 1.5% of the NSR (thus reducing Heclas NSR to 1.0%) by paying Hecla $1,500,000 at any time.



Candente must pay the annual vigencia fees of $10,000, and if the Company options the property to a 3rd party, it must share any option/joint venture payments received with Hecla on a sliding scale. Hecla would receive 25% in the first year, 20% in the second, 15% in the third, and 10% in the fourth. All payments would be applied to the NSR buyout referenced above.



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As part of the option agreement, the two companies agreed upon an Area of Mutual Interest (AMI) which extends 3 kilometers from the exterior boundaries of the claims. If either party acquires additional land within the AMI, it will become subject to the option agreement. In October, 2002, the Company was the successful bidder on the Toril zone under an auction conducted by the Government of Peru. For a one-time payment of $50,277, the Company acquired the 1,500 acres adjacent to the Alto Dorado property which was originally explored by Hecla as part of the original Alto Dorado property. In 2003, the Company staked a further 1,900 hectares adjacent to the property. Both groups of claims fall within the AMI and have been added to the Alto Dorado property.



Location and Access



The property is located in northern Peru approximately 40 kilometers south of the town of Santiago de Chuco. Access to the property is from Lima via air (1 hour). By road, access is on the Pan-American highway from Lima to the city of Trujillo for 565 kilometers, then via gravel road to the town of Santiago de Chuco for 152 kilometers. From Santiago de Chuco, a 33 kilometer gravel road leads to the edge of the property. Total travel time from Lima by road is approximately 16.5 hours.



Regional and Property Geology



The region is contained within a belt of Tertiary-age Calipuy Formation volcanic rock, with andesite to dacite tuffs overlying Mesozoic sedimentary rocks intruded by composite diorite-granodiorite stocks. Alteration and mineralization is hosted within the volcanic and intrusive rocks.



Alteration and mineralization on the property is controlled by northwesterly and northeasterly striking faults. Two types of depoasits occur on the property.  One type is high sulphidation gold deposits.  The gold and silver occur in vuggy and massive silica with hydrothermal breccias in Toril and Ana zones.  The second depposit type found on the property is copper-gold porphryries.  Copper and gold occurs in potassic and phyllic alteration in diorite-gronodiorite stocks and adjacent volcanic rocks in the Olla zone.



History and Previous Work



Hecla acquired the property in the late 1990s and conducted an exploration program which included geochemical sampling and geological mapping, followed by thirteen reverse circulation drill holes totaling 1,585.5 meters. Heclas program broadly defined the three mineralized zones (Toril, Ana and Olla) currently known on the property.



Current and Planned Exploration



Since its acquisition of the property, the Companys exploration program has focused on confirming Heclas data and identifying additional mineralization. This exploration has included mapping, rock sampling, pitting and trenching, magnetic, Time Domain Electromagnetic (TDEM) and Induced Polarization (IP) geophysical survey and drilling. To date, Candentes work has confirmed and extended the area of the three identified mineralized zones. The Toril Zone is a high sulphidation gold target and lies in the northeastern portion of the property covering an area of 3.0 kilometers by 1.8 kilometers. The Ana Zone is also a high sulphidation gold zone and lies 3 kilometers northwest of the Toril Zone. Trenching has to date defined the zone in an area of 2.7 kilometers by 1 kilometer. The Olla Zone is a porphyry copper-gold zone which lies approximately 700 meters south of the Ana Zone. Both the Ana and Olla Zones occur within an extensive alteration zone known as the Western Zone which measures approximately 8 kilometers by 2.5 kilometers and trends north-south. The Toril Zone trends northeasterly and may be connected to the Western Zone.



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During 2003, the Company engaged AK Drilling International to carry out a short hole overburden drill program in conjunction with additional sampling, geochemical and TDEM and IP geophysical testing. A series of short holes were drilled through the overburden to an average depth of 15 meters to the bedrock below. Assays from the program were similar to those obtained by previous operator Hecla and confirmed previously identified mineralized zones as well as further extending the mineralization.



During July and August 2004, the Company conducted magnetic, TDEM and IP geophysical survey over the Toril, Ana and Olla zones and completed a Phase I drill program on the property consisting of 9 holes totaling 1,050 meters. 8 holes were drilled in the Toril high-sulphidation zone and 1 hole in the Olla porphyry gold-copper zone.  In the Toril Zone, gold grades ranging from 0.1 to 2.3 gpt were intersected in zones from 4m to 18m wide in vuggy silica and quartz-alunite alteration.  In the Olla Zone, alteration and mineralization typical of gold-copper porphyry deposits was intersected in one hole drilled over a length of 160m.  Gold (Au) and copper (Cu) values intersected were 0.17% Cu and 0.22gpt Au over 160m, including 0.3%Cu and 0.60gpt over 30m.



In January and February 2006, a 2,083 metre drill program was carried out on the Alto Dorado Property to test the largest and most northern of three porphyry centres in Olla zone.  Results confirm the presence of a very extensive porphyry style copper system.  In addition, two zones of high sulphidation alteration and mineralization (native sulphur, enargite, massive to vuggy silica and alunite) were intersected in the two northern most holes.  Two of the holes are believed to have been drilled over the centre of the porphyry copper-gold system.  It is believed that a higher grade core of this system could lie beneath this area as the alteration and mineralization was getting stronger with depth.  The drilling was funded by Gallipoli Mining and future drilling is recommended for the two southern porphyry targets and deeper drilling on the northern porphyry target in the Olla zone as well as the high sulphidation gold targets in the north Olla zone ans Ana and Toril zones.



El Tigre Property



The El Tigre Property is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the El Tigre Property stemmed from earlier exploration work, as described below, that was done in the area.



El Tigre is located in Northern Peru. The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals..



The Company has had no revenue from mining operations on the El Tigre Property to date. The Company currently holds a 100% ownership interest in the project.

































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[candente200620famend007.jpg]





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How acquired



The Property was originally staked by Britannia Gold. It currently consists of 2 claim blocks totaling approximately 900 hectares. The details of each claim are below:



|Claim
Name | Registration
Date | Date of
Grant | Hectares
Staked | Final
Claim Size
|---------- | ----------------- | ------------- | --------------- | ----------------
|           |                   |               |                 |                 
|El Tigre 1 |                   | In Process    | 400             |                 
|El Tigre 2 | 04/19/02          | 09/23/94      | 500             | 500             
|El Tigre 4 | 06/01/94          | 09/30/94      | 1000            | 1000            
|El Tigre 5 | 06/01/94          | 09/21/94      | 1000            | 1000            



On June 29, 1999, the Company entered into an option agreement with Britannia to earn a 50% interest in the Las Sorpresas, Columbia and El Tigre properties in exchange for the Company paying the surface taxes due on the three properties in the amount of $19,200. The Company and Britannia would share exploration expenditures equally; if a partner failed to contribute its share in any specific property, that partner would suffer dilution of their interest by the amount of the exploration expenditures withheld. Due to Britannias non-contribution of some exploration expenditures, the Companys ownership interest in the El Tigre property increased to 51%. On January 31, 2001, the Company and Britannia signed a new agreement whereupon Britannia agreed to transfer their remaining interest in the three properties to the Company in exchange for the payment of 500,000 shares. The agreement with Britannia was completed on February 20, 2002.



In March 2004, the Company announced that it had entered into an option agreement with Orex Ventures Inc. for the property. Orex may earn a 51% interest in the project by incurring exploration expenditures of US$2.5 million over 3.5 years as well as paying Candente US$15,000 in cash and issuing 250,000 common shares to Candente by January 31, 2008. Orex is required to spend US$250,000 on the project by June 30, 2004, which will be used to delineate drill targets. Under the option agreement with Orex Ventures, Candente will conduct exploration on the project. The agreement has been approved by the TSX Venture Exchange.



The property was mapped and covered by a ground magnetic survey in 2004 and an Induced Polarization (IP) survey in 2006.  Orex withdrew from the option in 2006.



Location and Access



The property is located in Northern Peru approximately 30 km east of the city of Chiclayo. The property lies adjacent to a paved road. Travel time from Chiclayo is about 30 minutes.



Regional and Property Geology



El Tigre is located in Perus coastal zone above the valley of a large river. The mineralization of this area is often controlled by northwesterly trending regional faults and intersecting structures. Since the mid-1980s, disseminated epithermal low sulphidation gold mineralization and porphyry copper (Cu) - gold (Au) mineralizarion has been discovered in Early Tertiary Calipuy Formation volcaniclastic rocks. Both low sulphidation, epithermal gold and porphyry Cu-Au deposits have been documented in Peru.











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El Tigre contains both porphyry style copper occurrences and low-sulphidation epithermal gold veins in stockwork systems and breccias. Previous sampling defined a 2 km long gold anomaly defined as the Sorpresa zone and an area of copper mineralization called the Fortaleza zone. Samples from other areas of the property have also returned results which make them suitable for further exploration, but at this time the Company is focusing its exploration efforts on the gold mineralization at Sorpresa.



Three large gold anomalies have been defined at Sorpresa to date. Each is identified with their location as the Northwest, Northeast and Southeast anomalies. Sampling has determined that most gold occurs within several types of quartz veins. The weakly silicified wall rocks contain little to no gold.



History and Previous Work



Britannia Gold originally staked the property in 1994 and conducted limited early-stage exploration. In 1996 the property was optioned to Solitario Resources who completed geological mapping of the property and collected over 1500 rock chip and detrital material samples. Solitario conducted both diamond and reverse circulation drill programs on the property. In total, Solitario drilled 23 holes of which 16 (13 reverse circulation and 3 diamond) were conducted in the Sorpresa Zone. The drilling identified areas of anomalous gold which could be interpreted as possibly peripheral to a larger gold deposit. Most of the higher grade mineralization was determined to come fromquartz veins in brecciated fragments which are abundant and occur over several kilometers of strike length, suggesting the possibility of a larger hydrothermal system. Due to low gold prices, Solitario dropped the project and terminated its work commitments in 1998.



In late 2000, Candente conducted a limited exploration program intended to further understand the propertys geology. Work included a preliminary mapping of the Northwest anomaly of the Sorpresa zone and selective rock sampling of several of the rock types in all 3 of the identified Sorpresa anomalies designed to confirm the Solitario results. 45 rock samples were taken and all of the elevated, anomalous gold values obtained in the program are from samples rich in vein material.



In 2004, Candente conducted a ground magnetic survey over the Sopresas gold zone and in 2006 the Company conducted an Induced Polarization (IP) geophysical Survey over this zone.





The Pamel Property



The Pamel Property is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the Pamel Property stemmed from earlier exploration work, as described below, that was done in the area.



The Pamel property covers approximately 6,693 hectares in the Western Cordillera of the Peruvian Andes. Pamel is an epithermal high sulphidation gold/silver project. The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.



The Company has had no revenue from mining operations on the Pamel Property to date. The Company holds a 100% interest in the property except for the Pamel 2 claim in which the Company holds a 50% interest with Savage Exploration as explained below.











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On November 28, 2005, Candente announced it has entered into an option agreement with Orex Ventures Inc. whereby Orex has the right to earn a 51% interest in the Pamel Property by incurring exploration expenditures of US$2.5 million over 3.5 years on the Property.  Candente has the right to operate all exploration over the 3.5 years.  In addition to the exploration expenditure commitments, on April 4, 2006, the Company received 60,000 Orex shares upon approval of the Agreement by the TSX Venture Exchange.  The Company will receive additional staged share issuances totalling 250,000 shares in Orex by May 31st, 2010.



[candente200620famend008.jpg]







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[candente200620famend009.jpg]

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How acquired



The Pamel property consists of 11 claims of approximately 6,693 hectares which were acquired by staking. The details of each claim are listed below.



|Claim
Name | Registration
Date | Date of
Grant | Hectares
Staked | Final Claim
Size
|---------- | ----------------- | ------------- | --------------- | ----------------
|Suro       | 04/20/06          | 11/25/97      | 800             | 800             
|Pamel 1    | 04/20/06          | 08/20/99      | 1000            | 589             
|Pamel 2    | 04/20/06          | 04/09/99      | 1000            | 953             
|Pamel 3    | 04/20/06          | 07/23/99      | 525             | 524             
|Pamel 4    | 04/20/06          | 08/16/99      | 1000            | 999             
|Pamel 6    | 04/20/06          | 02/06/01      | 650             | 640             
|Pamel 7    | 04/20/06          | 12/03/04      | 100             | .13             
|Pamel 8    |                   | 06/15/06      | 500             | 306             
|Pamel 9    |                   | 11/17/06      | 450             | 449             
|Pamel 10   |                   | 03/12/07      | 800             | 433             
|Pamel 11   |                   | 11/20/06      | 1000            | 999             



The final claim size of certain claims has been reduced due to the overlap with prior existing claims. The Company originally staked several additional claims, but after preliminary exploration, certain claims were dropped.



The Company also entered into 2 agreements with arms-length parties regarding the staking of the Pamel Property. The first was signed with Ing. Diego Ruby Alcocer Rojas in June 1998. In exchange for transferring his interesting in a competing claim over a portion of the property and agreeing not to take any actions to interfere with Candentes property staking at both Pamel and at the Yanamay property, the Company paid Mr. Alcocer $2500 and issued him 30,000 common shares. The Company also agreed to issue Mr. Alcocer additional shares if certain milestones are met. These milestones and share issuances are: 30,000 common shares upon completion of an initial drilling program on the Pamel property and 50,000 common shares upon commencement of commercial production on the property.



In July 1998, the Company reached an agreement with Savage Exploration del Peru regarding an overlapping claim on the Pamel 2 portion of the property. In exchange for relinquishing its claim to that portion of the property, Candente agreed to share the disputed area through a joint-venture agreement with each company holding a 50-50 participating interest. Savage is at arms-length to the Company.



Location and Access



The property is located in the Western Cordillera of the Andes approximately 200 km north-northeast of Lima. Most of the property lies at an altitude of between 4000 and 4500 meters. There is little to no vegetation on the property.



The property is accessible by unpaved road from both the north through Cajatambo and Oyon and from the south through Churin.













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Regional and Property Geology



The property is situated within a regional northwest-trending belt of Tertiary epithermal gold deposits. Calipuy Formation volcanic rocks underlie most of the property. High-sulphidation style epithermal alteration occurs on the property within the Calipuy Formation in a 2 km by 4 km area. The property is divided into 2 structural blocks separated by the Ayarmachay Fault.



History and Previous Work



The Company acquired the property beginning in 1997 through staking. The Company is not aware of any systematic exploration conducted on the property before its staking. Since the acquisition, the Company and its previous joint venture partners have conducted only limited exploration. In 1999, the Company and several consultants conducted geological mapping of property which included rock chip sampling and the excavation and sampling of 3 trenches in the area of rock outcrops near the Ayarmachay fault. The samples returned anomalous levels of gold and other minerals consistent with a hydrothermal alteration zone.



Exploration commenced in December 2005 to delineate drill targets. The property was mapped and over 2,800 soil samples were collected covering 31.6 square km.  In addition, a Pole-Dipole IP and Resistivity survey was completed over a total of 26.4 line km.  A highly resistive body with features typical of massive silica and mixed silica, alunite has been delineated over a length of 2 km and a width of 500 m.  The resistivity body occurs from surface to a depth of 200 m and a high chargeability body occurs just below this.  Vuggy silica which can host gold mineralization in this type of geological enviromment typically occurs at the interface between resistive and chargeable zones. At Pamel, vuggy silica float has been found where the highest gold values occur in soil samples.  Anomalous levels of gold, silver, lead, arsenic, barium, mercury and antimony in soils occur with or near the resistive body and continue for approximately 1 km to the north-east.



Current and Planned Work



Drill holes were located by combining all the available data from Candentes work, but emphasis was put on the IP geophysics,chargeability and resistivity results.



Drilling was focused on testing an extensive high sulphidation style gold-silver target.



Approximately 2,500 to 3,000 meters (m) (8,200 to 9840 feet) are planned to be drilled in 10 to 12 holes.  Drilling is expected to take approximately 6 to 8 weeks to complete in the last quarter of 2006 and the first quarter of 2007.



Lunahuana (Columbia) Property



The Lunahuana (formerly known as the Columbia) Property is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the Lunahuana (Columbia) Property stemmed from earlier exploration work, as described below, that was done in the area.



Lunahuana is a 5,388 hectare disseminated copper/gold exploration project located in Central Peru. The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.



The Company has had no revenue from mining operations on the Lunahuana Property to date. The Company currently holds a 100% ownership interest in all claims which make up the property except the Viky claim, where the Company has an option to buy 100% of the claim by making cash payments over 5 years.



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[candente200620famend010.jpg]













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How acquired



The property currently consists of 12 claim blocks totaling 5,388 as follows:



|Claim
Name  | Registration
Date | Date of
Grant | Hectares
Staked | Final Claim
Size
|----------- | ----------------- | ------------- | --------------- | ----------------
|            |                   |               |                 |                 
|Columbia 5  | 02/17/02          | 09/26/96      | 1000            | 978             
|Columbia 6  | 02/17/02          | 10/25/96      | 400             | 263             
|Columbia 7  | 02/17/02          | 09/26/96      | 1000            | 1000            
|Columbia 8  | 02/17/02          | 10/30/96      | 1000            | 1000            
|Columbia 9  | 04/21/06          | 04/30/02      | 400             | 400             
|Columbia 10 | 04/21/06          | 04/30/02      | 100             | 100             
|Luna 3      | 04/21/06          | 03/11/02      | 390             | 390             
|Luna 4      | 04/21/06          | 11/21/02      | 300             | 300             
|Luna 5      | 04/21/06          | 08/18/04      | 500             | 256             
|Luna 6      | 04/21/06          | 07/25/03      | 200             | 200             
|Luna 7      | 04/21/06          | 07/12/05      | 300             | 300             
|Luna 8      | 05/04/06          | 11/10/05      | 200             | 200             



On June 29, 1999, the Company entered into an option agreement with Britannia Gold to earn a 50% interest in the Las Sorpresas, Lunahuana and El Tigre properties in exchange for the Company paying the surface taxes due on the three properties in the amount of $19,200. The Company and Britannia would share exploration expenditures equally. If a partner failed to contribute its share in any specific property, that partner would suffer dilution of their interest on a straight-line basis. Due to Britannias non-contribution of some exploration expenditures, the Companys ownership interest in the Lunahuana property increased to 51%. On January 31, 2001, the Company and Britannia signed a new agreement whereupon Britannia agreed to transfer their remaining interest in the three properties to the Company in exchange for the payment of 500,000 shares. The agreement was completed on February 20, 2002.



The original property as acquired from Britannia Gold consisted of 4 claims blocks of 3400 hectares staked by Britannia. In 2001/2002, the Company staked an additional 4 claim blocks totaling 1190 hectares. During 2002, the Company reached a joint-venture agreement with S.M.R.L. Viky, a private company, on the 200 hectare Viky claim. The Company can earn an initial 51% interest in the Viky claim by making equal payments to S.M.R.L. totaling $52,000 over 5 years. At the end of the 5 years, the Company can earn the remaining 49% interest in the claim by paying an additional $97,000 to S.M.R.L. To date, the Company has made 2 payments to S.M.R.L and is current under the option agreement.



Location and Access



The property is located in the Coastal Plutonic Belt of Central Peru in the Lunahuana area approximately 120 km south-southeast of Lima. Elevation of the claims is up to 2700 meters above sea level and the climate is hot and dry with little precipitation throughout the year. Access to the property from Lima is via the paved Pan-American Highway and a series of unpaved roads.



Regional and Property Geology



The Lunahuana area occurs within the Pacific Drainage Basin, which hosts vein, pipe and replacement manto style mineralization as well as typical porphyry copper disseminated mineralization. These deposits occur in sedimentary, volcanic and plutonic rocks.

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Several types of mineralization have been found on the property. These include structurally controlled sheeted quartz-magnetite copper and gold veins, stockworks and breccias, in volcanic-sedimentary units. Exploration on the property has defined several high priority targets.



The Western target was defined by gold values in soil samples and coincides with an intense Induced Polarization anomaly. Sampling has defined an area of about 1 square km which is interpreted to be a sulphide-mineralized volcanic-sedimentary unit. The Company considers the Western target to be the highest priority for a future drill program.



The Santa Rosa Zone lies about 500 east of the Western target. Previous exploration including trenching and rock chip sampling shows copper and gold mineralization with widths varying from 10 to 300 meters along a 1 km strike length.



The Central IP anomaly lies 500 meters east of Santa Rosa. Limited geochemical sampling has found some anomalous copper and gold values.



The Eastern IP anomaly lies 1 km north-east of Santa Rosa. Samples taken from the overlying scree-soils show anomalous copper and gold values.



Soil sampling has also found numerous gold anomalies in an area of 2.5 km by 3 km approximately 1 km east of the Santa Rosa zone. This area lies beyond most of the IP coverage on the property and has not yet been subjected to trenching or other intrusive exploration methods.



History and Previous Work



Britannia Gold staked the first claim on the property in 1996. Britannia carried out approximately $500,000 of exploration on the property, including stream sediment sampling, geological mapping, soil and rock chip sampling, IP and magnetometer surveys, and about 2.5 km of trenching. Britannias exploration defined the targets discussed above.



Since acquiring the property, Candente has conducted limited work on the property. Company consultants visited the property in 1999 and reviewed the work conducted by Britannia in order to formulate future exploration plans. This work included data compilation, re-interpretation of the geophysical data, mapping, and limited sampling, trenching and road construction. In May 2002, the Company collected samples from known mineralized zones from outcrop as well as newly dug pits and trenches. The results returned anomalous metal values, including gold, silver, copper, zinc, and lead.



Planned Work Program



There is currently no work planned for this property as the Company has decided to concentrate its efforts on its other properties. A decision will be made as to any future work in the 2007 fiscal year.





Las Brujas Property



The Brujas Property is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the Brujas Property stemmed from earlier exploration work, as described below, that was done in the area.



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The Las Brujas Property is an epithermal gold exploration project located in the Yanacocha area of the Western Andes Mountains. The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.



The Company has had no revenue from mining operations on the Las Brujas Property to date. The Company has a 100% interest in the property.



How acquired



The Property currently consists of a single claim of 1000 hectares, staked by the Company. The claim was registered on July 6, 2000 and final approval was granted on December 4, 2000.



Location and Access



The property is located approximately 70 km to the northwest of the town of Cajamarca in northern Peru. The town of Tongod lies just northwest of the property boundary.



Access to the property is by a series of paved and unpaved roads from Cajamarca, approximately 3 hours away. The Companys Picota exploration project adjoins the property to the northwest.



Regional and Property Geology



Las Brujas lies along the western flank of the Andes Mountains in northern Peru. Calipuy Formation volcanics underlies much of the area which is within the volcanic region known as the Yanacocha External Caldera System.



The property is underlain by volcanic and intrusive rocks with the dominant type being plagioclase porphyry. There are at least 4 types of mineralized breccias present, including stockwork veins and several types of volcanic breccias.



The property lies at an elevation of 2600 to 3000 meters above sea level. The terrain is gently to moderately rolling with vegetation varying from open grassland to small patches of forest around watercourses. Due to the cover of the vegetation, the level of rock exposure on the property varies from light to moderate.





































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[candente200620famend012.jpg]



History and Previous Work



The property was staked by the Company in 2000. Management believes there has never been any systematic exploration of the property prior to Candentes acquisition.





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Since acquiring the property, the Company has conducted a limited amount of exploration including general geologic mapping and geochemical sampling. Assays of the samples returned anomalous levels of gold, including an area of 1.3 km by 1 km which includes quartz stockwork, veining and some brecciation. The results of the work conducted to date are consistent with an epithermal precious metals system.



Planned Work Program



Due to its current focus on other properties in its portfolio, the Company had no plans to conduct additional exploration at Las Brujas during the current fiscal year. A decision will be made as to any future work in the 2007 fiscal year.



Las Sorpresas Property



The Las Sorpresas Property is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the Las Sorpresas Property stemmed from earlier exploration work, as described below, that was done in the area.



Las Sorpresas is an exploration stage epithermal high sulphidation gold/silver project located southeast of the Yanacocha district in Northern Peru.  The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.



The Company has had no revenue from mining operations on the Las Sorpresas Property to date. The Company has 100% interest in the property, although it has recently entered into an option agreement with Orex Ventures Inc. whereupon Orex may earn a 51% interest in the property.























































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How acquired



The Property was originally staked by Britannia Gold. It currently consists of 5 claim blocks totaling approximately 2825 hectares. The details of those claims are below:



|Claim
Name      | Registration
Date | Date of
Grant | Hectares
Staked | Final Claim
Size
|--------------- | ----------------- | ------------- | --------------- | ----------------
|                |                   |               |                 |                 
|Las Sorpresas 1 | 04/19/02          | 10/27/97      | 1000            | 973             
|Las Sorpresas 3 | 04/19/02          | 08/26/94      | 900             | 900             
|Las Sorpresas 4 | 04/19/02          | 08/31/94      | 300             | 300             
|Las Sorpresas 5 | 04/19/02          | 12/30/94      | 300             | 189             
|Las Sorpresas 6 | 04/19/02          | 10/29/96      | 500             | 462             



On June 29, 1999, the Company entered into an option agreement with Britannia to earn a 50% interest in the Las Sorpresas, Columbia and El Tigre properties in exchange for the Company paying the surface taxes due on the three properties in the amount of $19,200. The Company and Britannia would share exploration expenditures equally; If a partner failed to contribute its share in any specific property, that partner would suffer dilution of their interest on a straight-line basis. Due to Britannias non-contribution of some exploration expenditures, the Companys ownership interest in the Las Sorpresas property increased to 54%. On January 31, 2001, the Company and Britannia signed a new agreement whereupon Britannia agreed to transfer their remaining interest in the three properties to the Company in exchange for the payment of 500,000 shares. The agreement was completed on February 20, 2002.



In March 2004, the Company announced that it had entered into an option agreement with Orex Ventures Inc. for the property. Orex may earn a 51% interest in the project by incurring exploration expenditures of US$2.5 million over 3.5 years as well as paying Candente US$15,000 in cash and issuing 250,000 common shares to Candente by January 31, 2008. Orex is required to spend US$250,000 on the project by June 30, 2004 which will be used to delineate drill targets. The agreement has been approved by the TSX Venture Exchange.









































52



[candente200620famend014.jpg]



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Location and Access



The property is located in the Andes of Northern Peru. It lies about 600 km north of Lima and about 40 km north of the city of Cajamarca. Access is by road through Cajamarca. Due to the mining operations elsewhere in the district, the area features well developed infrastructure and access.



Regional and Property Geology



Las Sorpresas lies along the western flank of the Andes Mountains in northern Peru within the volcanic region known as the Yanacocha External Caldera System.



The claims are underlain by the Calipuy Formation volcanics. Northeasterly structures crosscut the property. Several circular and semi-circular features have been identified on the property. Argillic alteration at the northwestern end of the property may be an extension of the system that hosts the Cerro Quilich gold deposit at Yanachocha. Brecciated feldspar porphyry on the property is consistent with epithermal systems.



History and Previous Work



After originally staking the claims, Britannia Gold conducted limited amounts of field work on the property. This included reconnaissance geological mapping and a preliminary stream sediment sampling survey as well as limited rock sampling. Assay results from the rock samples taken from the argillic alteration in the northwestern end returned strongly anomalous values of mercury and weakly anomalous values of copper.



Current and Planned Work



The property remains largely unexplored and the Company has a very limited understanding of the propertys geology. Additional field work, including mapping and sampling, will be necessary in order to more fully understand the geology and its potential to host high sulphidation epithermal gold deposits.  In 2004 several lines of Induced Polarization (IP) geophysical surveying were completed on the north end of the property.  Results were not definitive.    Candente is currently attempting to negotiate surface agreement with local landowners in order to conduct a deeper penetrating IP survey.



Picota Property



The Picota Property is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the Picota Property stemmed from earlier exploration work, as described below, that was done in the area.



The Picota Property is located in the western Andes Mountains of Peru. It is a disseminated copper/gold exploration target. The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.



The Company has had no revenue from mining operations on the Picota Property to date. The Company holds a 100% interest in the Property, but it is subject to a 0.75 Net Smelter Royalty (NSR) and Memorandum of Understanding with Cominco (now TeckCominco).



How Acquired



It consists of five claims currently totaling 3,783 hectares, which were acquired by the Company through staking. The details of each claim are given below:



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|Claim
Name | Registration
Date | Date of
Grant | Hectares
Staked | Final Claim Size
|---------- | ----------------- | ------------- | --------------- | ----------------
|           |                   |               |                 |                 
|Picota 1   |                   | 03/12/99      | 1000            | 1000            
|Picota 2   |                   | 11/26/99      | 1000            | 1000            
|Picota 4   |                   | 09/29/00      | 800             | 750             
|Picota 5   |                   | 08/10/04      | 1000            | 955             
|Picota 6   |                   | 08/13/04      | 200             | 77              



In September 1999, the Company paid a finders fee of 20,000 common shares in consideration for recommending the property and introducing the Company to Cominco.



Cominco Agreement



Prior to staking the property, the Company reviewed Comincos (now TeckCominco) information on the Picota property, including their proprietary data and exploration results. In consideration, Candente and Cominco entered into a Memorandum of Understanding covering the Picota property and an Area of Interest which covers any surrounding properties which may be staked or acquired by Candente prior to December 31, 2000.



Under the agreement, Candente granted Cominco a 0.75% NSR on any minerals produced from the properties covered by the Agreement. Candente also granted Cominco a right of first refusal for all the properties. If Candente decides to dispose of all or a portion of its interest in a property, Cominco has 30 days to accept the offer upon the terms established by Candente. If Cominco does not accept those terms, Candente has 180 days to dispose of that interest for an equal or greater price and on terms no more favorable to the third party.



If Cominco decides to acquire an interest in any of the properties covered by the agreement, Candente and Cominco will form a joint-venture to explore and/or develop that property. The JV will be bound by certain terms which include a right of first offer.



Candente is in full possession of the properties and the right to work and explore the properties. However, Cominco will have reasonable access to the properties and Candente will provide Cominco with regular progress reports summarizing exploration results.



Location and Access



The Property is located approximately 70 km northwest of the city of Cajamarca in northern Peru. Access to the property is via paved and unpaved roads from Cajamarca. Travel to the property from Cajamarca takes approximately 3 hours by vehicle. The Companys Las Brujas exploration project adjoins the property to the southeast.



Regional and Property Geology



The Picota property lies along the western flank of the Andes in northern Peru. Regional structures are dominated by thin-skinned fold and thrust belts. Steeply dipping regional faults occur with various strike orientations. The Hualgayoc Fault strikes northeasterly just to the north of the property. The area lies within a volcanic regime known as the Yanacocha External Caldera System.





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The property is underlain by several distinct volcanic and intrusive rock units of the Calipuy Formation. Due to vegetative and soil cover, surface exposure of these units is poor, and strong alteration makes effective geological surface mapping and interpretation difficult. However, trenching has exposed distinguishable units, including several types of porphyry units. Several areas of mineralization have been identified by prior exploration work.



The property lies at an elevation of 2200 to 3250 meters. Terrain is gently rolling open grassland with small forested patches around watercourses and in drainages.



History and Previous Work



Cominco originally staked an area which includes the Picota property in 1994. Cominco obtained interest in the area from Landsat images which identified color anomalies. From 1994 to 1996, Cominco conducted drainage sampling and reconnaissance geological mapping. This program identified several zones of mineralization but Cominco only tested 3 zones via trenching. These zones are known as Gloria, Madeleine and Consuelo. In total, 1.5 km of trenches were completed over the 3 zones and 349 channel samples were taken. The highest grades were found in the Madeleine and Consuelo zones. In total, Cominco analyzed 1,181 samples from the property, including the channel samples referenced above. Besides gold, many of the samples recorded highly anomalous copper, molybdenum, lead, zinc and arsenic values which is consistent with an epithermal system.



Candente staked the property beginning in 1999. Company geologists have conducted only limited exploration work consisting of mapping and additional sampling, including rock chip samples. This additional work, including a review of stream sediment results, has uncovered two new mineralized zones and increases the known extent of the mineralized zone to approximately 5 kilometers.



Planned Work Program



Only a small portion of the Picota property has been explored to date. Several mineralized zones and anomalies have been identified but have seen little to no follow up work. Recent work suggests that the area between the Madeleine and Consuelo zones is prospective for hidden mineralized structures which would require additional sampling and/or trenching. The Madeleine zone sampling program should be resumed in order to define the limits of mineralization and obtain possible drill targets.



The Company planned no exploration at Picota during the current year.  A decision will be made as to any future work in the 2007 fiscal year.



Other Peruvian Properties



The Company holds several additional properties in Peru.  All of them arewithout known reserves and the work being done by the Company is exploratory in nature. The Companys interest in these properties stemmed from earlier exploration work, as described below, that was done in the specific areas.



Nine of the properties were subject (along with Pamel) to the Right of First Refusal (RFR) Agreement with Anglogold. The RFR expired unexercised in July 2003, and Candente retains its interests in all of the properties.  Details of those properties are given below:















56



|                             |                    | Title Grant | Hectares | Actual Area | Registration
|---------------------------- | ------------------ | ----------- | -------- | ----------- | ------------
|Project                      | Claim Name         | Date        | Staked   | Hectares    | Date        
|Cañariaco                    | Cañariaco A        | 07/30/92    | 1000.00  | 1000.00     | 04/05/01    
|                             | Cañariaco B        | 07/30/92    | 1000.00  | 1000.00     | 04/05/01    
|                             | Cañariaco C        | 07/30/92    | 1000.00  | 1000.00     | 04/05/01    
|                             | Cañariaco D        | 07/30/92    | 500.00   | 500.00      | 04/05/01    
|                             | Cañariaco E        | 05/05/04    | 1000.00  | 660.50      | 05/24/06    
|                             | Cañariaco F1       | 07/23/04    | 1000.00  | 789.50      | 05/24/06    
|                             | Cañariaco G        | 08/19/05    | 1000.00  | 940.00      | 05/24/06    
|                             | Cañariaco H        | 10/16/06    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Cañariaco I        | 09/28/06    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Cañariaco J        | 10/16/06    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Cañariaco K        | 11/30/06    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Cañariaco L        | 10/25/06    | 700.00   | 700.00      | IN PROCESS  
|                             | Cañariaco M        | 10/31/06    | 400.00   | 370.00      | IN PROCESS  
|                             | Cañariaco N        | 10/23/06    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Cañariaco P        | 10/12/06    | 600.00   | 600.00      | IN PROCESS  
|                             | Cañariaco Q        | 10/16/06    | 400.00   | 400.00      | IN PROCESS  
|                             | Cañariaco R        | 10/26/06    | 800.00   | 800.00      | IN PROCESS  
|                             | Cañariaco S        | 10/25/06    | 700.00   | 700.00      | IN PROCESS  
|                             | Cañariaco T        | 11/30/06    | 800.00   | 800.00      | IN PROCESS  
|                             | Cañariaco U        | 10/25/06    | 400.00   | 400.00      | IN PROCESS  
|                             | Cañariaco V        | 11/30/06    | 900.00   | 900.00      | IN PROCESS  
|                             |                    |             |          |             |             
|Jehuamarca                   | Jehuamarca 1       | 11/07/05    | 900.00   | 900.00      | 04/18/06    
|                             | Jehuamarca 2       | 11/09/05    | 900.00   | 900.00      | 04/18/06    
|                             | Jehuamarca 3       | 11/07/05    | 900.00   | 900.00      | 04/18/06    
|                             | Jehuamarca 4       | 11/16/05    | 900.00   | 900.00      | 04/18/06    
|                             |                    |             |          |             |             
|Acos                         | Acos               | 03/16/06    | 400.00   | 400.00      | IN PROCESS  
|                             |                    |             |          |             |             
|Alto Dorado                  | Ana de Chuco       | 02/27/98    | 1000.00  | 1000.00     | 07/23/04    
|                             | Ana de Chuco 3     | 04/17/00    | 400.00   | 400.00      | 07/23/04    
|                             | Luis               | 02/23/98    | 100.00   | 100.00      | 07/23/04    
|                             | Carlos II          | 12/30/97    | 1000.00  | 1000.00     | 07/23/04    
|                             | Toril I            | 04/29/03    | 1000.00  | 800.00      | 01/16/06    
|                             | Toril II           | 01/19/04    | 1000.00  | 200.00      | 01/16/06    
|                             | Toril III          | 03/11/04    | 300.00   | 300.00      | 01/16/06    
|                             | Toril IV           | 04/21/03    | 200.00   | 200.00      | 01/16/06    
|                             | Toril V            | 01/19/04    | 300.00   | 300.00      | 01/16/06    
|                             | Toril VI           | 08/13/04    | 1000.00  | 1000.00     | 01/16/06    
|                             | Toril VII          | 10/27/03    | 600.00   | 600.00      | 01/16/06    
|                             | Toril VIII         | 04/28/04    | 300.00   | 300.00      | 01/16/06    
|                             | Toril IX           | 12/11/03    | 300.00   | 300.00      | 01/16/06    
|                             | Toril X            | 12/11/03    | 200.00   | 200.00      | 01/16/06    
|                             | Toril XI           | 08/13/04    | 200.00   | 200.00      | 01/16/06    
|                             | Toril XVI          | 04/06/06    | 400.00   | 400.00      | 07/07/06    
|                             | Toril XVII         | 04/11/06    | 800.00   | 800.00      | 07/07/06    
|                             | Toril XVIII        | 04/18/06    | 300.00   | 300.00      | 07/06/06    
|                             | Toril  XIX         | 05/03/06    | 500.00   | 500.00      | 08/09/06    
|                             | Toril XX           | 04/06/06    | 400.00   | 400.00      | 07/07/06    
|                             | Toril XXI          | 04/27/06    | 100.00   | 100.00      | 07/07/06    
|                             |                    |             | 57       |             |             
|As de Zinc                   | El As de Zinc I    | 05/06/04    | 1000.00  | 1000.00     | 05/02/06    
|                             | El As de Zinc II   | 03/29/04    | 500.00   | 500.00      | 05/02/06    
|                             | El As de Zinc III  | 06/07/04    | 400.00   | 400.00      | 05/22/06    
|                             | El As de Zinc IV   | 02/27/06    | 900.00   | 900.00      | IN PROCESS  
|                             | El As de Zinc V    | 02/20/06    | 400.00   | 400.00      | IN PROCESS  
|                             | El As de Zinc VI   | 02/23/06    | 1000.00  | 1000.00     | IN PROCESS  
|                             | As de Zinc VII     | 02/20/06    | 800.00   | 800.00      | IN PROCESS  
|                             | El As de Zinc VIII | 04/06/06    | 1000.00  | 1000.00     | IN PROCESS  
|                             |                    |             |          |             |             
|Arikepay                     | Arikepay           | 10/31/06    | 1000.00  | 1000.00     | IN PROCESS  
|                             |                    |             |          |             |             
|Cara Cara                    | Cara Cara          | 05/05/04    | 400.00   | 398.28      | IN PROCESS  
|                             | Cara Cara I        | 04/20/04    | 200.00   | 200.00      | IN PROCESS  
|                             | Cara Cara II       | 11/15/04    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Cara Cara III      | 10/02/06    | 200.00   | 200.00      | IN PROCESS  
|                             |                    |             |          |             |             
|El Tigre                     | Tigre No2          | 09/23/94    | 500.00   | 500.00      | 04/19/02    
|                             | Tigre No 1         | IN PROCESS  | 400.00   | IN PROCESS  | IN PROCESS  
|                             |                    |             |          |             |             
|El Naranjo                   | El Naranjo No1     | IN PROCESS  | 1000.00  | IN PROCESS  | IN PROCESS  
|                             | El Naranjo No2     | IN PROCESS  | 1000.00  | IN PROCESS  | IN PROCESS  
|                             |                    |             |          |             |             
|Fredito                      | Fredito IV         | 03/17/03    | 1000.00  | 1000.00     | 02/03/06    
|                             | Fredito V          | 12/12/02    | 1000.00  | 1000.00     | 02/03/06    
|                             | Fredito VI         | 08/13/04    | 200.00   | 200.00      | 02/03/06    
|                             | Fredito VII        | 03/30/05    | 100.00   | 100.00      | 02/03/06    
|                             | Fredito VIII       | 03/30/05    | 200.00   | 200.00      | 02/03/06    
|                             |                    |             |          |             |             
|La Cuesta                    | La Cuesta I        | 02/10/06    | 800.00   | 800.00      | IN PROCESS  
|La Cuesta II                 | 02/27/06           | 400.00      | 400.00   | IN PROCESS 
|                             | La Cuesta III      | 12/20/06    | 200.00   | 200.00      | IN PROCESS  
|                             | La Cuesta IV       | 12/15/06    | 200.00   | 200.00      | IN PROCESS  
|                             |                    |             |          |             |             
|La Grama                     | La Grama           | 11/30/05    | 900.00   | 900.00      | IN PROCESS  
|                             |                    |             |          |             |             
|Las Brujas                   | Las Brujas         | 12/04/00    | 1000.00  | 1000.00     | IN PROCESS  
|                             |                    |             |          |             |             
|Las Brujitas                 | Las Brujitas       | 06/23/03    | 1000.00  | 1000.00     | IN PROCESS  
|                             |                    |             |          |             |             
|Las Pavas                    | Las Pavas          | 03/15/06    | 1000.00  | 887.8940    | IN PROCESS  
|                             |                    |             |          |             |             
|Las Sorpresas                | Sorpresa No1       | 10/27/97    | 1000.00  | 973.3090    | 04/19/02    
|                             | Sorpresa No3       | 08/26/94    | 900.00   | 900.00      | 04/19/02    
|                             | Sorpresa No4       | 08/31/94    | 300.00   | 300.00      | 04/19/02    
|                             | Sorpresa No5       | 12/30/94    | 300.00   | 189.1433    | 04/19/02    
|                             | Sorpresa No6       | 10/29/96    | 500.00   | 462.2007    | 04/19/02    
|                             |                    |             |          |             |             
|Linda Pata                   | Linda Pata         | 08/23/04    | 1000.00  | 998.1270    | IN PROCESS  
|                             | Linda Pata II      | 05/07/04    | 400.00   | 251.33      | IN PROCESS  
|                             |                    |             |          |             |             
|Vista Alegre                 | Los Cedros 1       | 03/21/06    | 1000.00  | 1000.00     | IN PROCESS  
|Los Cedros 2                 | 02/23/06           | 600.00      | 600.00   | IN PROCESS 
|Los Cedros 3                 | 05/10/06           | 400.00      | 400.00   | IN PROCESS 
|Los Cedros 4                 | 06/28/06           | 600.00      | 600.00   | IN PROCESS 
|                             |                    |             | 58       |             |             
|                             | Los Cedros 5       | 03/16/06    | 100.00   | 100.00      | IN PROCESS  
|                             | Los Cedros 6       | IN PROCESS  | 100.00   | IN PROCESS  | IN PROCESS  
|                             | Los Cedros 7       | 10/23/06    | 900.00   | 900.00      | IN PROCESS  
|                             | Los Cedros 8       | 12/15/06    | 400.00   | 400.00      | IN PROCESS  
|                             | Los Cedros 9       | 10/31/06    | 300.00   | 300.00      | IN PROCESS  
|                             | Los Cedros 10      | 11/30/06    | 600.00   | 600.00      | IN PROCESS  
|                             |                    |             |          |             |             
|Lunahuaná (Formely Columbia) | Columbia 5         | 09/26/96    | 1000.00  | 978.3952    | 02/17/02    
|                             | Columbia 6         | 10/25/96    | 400.00   | 263.4089    | 02/17/02    
|                             | Columbia 7         | 09/26/96    | 1000.00  | 1000.00     | 02/17/02    
|                             | Columbia 8         | 10/30/96    | 1000.00  | 1000.00     | 02/17/02    
|                             | Columbia 9         | 04/30/02    | 400.00   | 400.00      | 04/21/06    
|                             | Columbia 10        | 04/30/02    | 100.00   | 100.00      | 04/21/06    
|                             | Luna 3             | 03/11/02    | 390.00   | 389.9988    | 04/21/06    
|                             | Luna 4             | 11/21/02    | 300.00   | 300.00      | 04/21/06    
|                             | Luna 5             | 08/18/04    | 500.00   | 256.3355    | 04/21/06    
|                             | Luna 6             | 07/25/03    | 200.00   | 200.00      | 04/21/06    
|                             | Luna 7             | 07/12/05    | 300.00   | 300.00      | 04/21/06    
|                             | Luna 8             | 11/10/05    | 200.00   | 200.00      | 05/04/06    
|                             |                    |             |          |             |             
|Las Flores                   | Miraflores         | 10/16/06    | 800.00   | 796.3287    | IN PROCESS  
|                             |                    |             |          |             |             
|Oro Queropalca               | Oro Queropalca I   | 12/03/04    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Oro Queropalca II  | 07/17/03    | 700.00   | 700.00      | IN PROCESS  
|                             |                    |             |          |             |             
|Pamel                        | Suro               | 11/25/97    | 800.00   | 800.00      | 04/20/06    
|                             | Pamel 1            | 08/20/99    | 1000.00  | 588.6113    | 04/20/06    
|                             | Pamel 2            | 04/09/99    | 1000.00  | 952.5818    | 04/20/06    
|                             | Pamel 3            | 07/23/99    | 525.00   | 524.3928    | 04/20/06    
|                             | Pamel 4            | 08/16/99    | 1000.00  | 998.8453    | 04/20/06    
|                             | Pamel 6            | 02/06/01    | 650.00   | 640.1524    | 04/20/06    
|                             | Pamel 7            | 12/03/04    | 100.00   | 0.1339      | 04/20/06    
|                             | Pamel 8            | 06/15/06    | 500.00   | 306.2565    | IN PROCESS  
|                             | Pamel 9            | 11/17/06    | 450.00   | 449.4818    | IN PROCESS  
|                             | Pamel 10           | 03/12/07    | 800.00   | 433.6218    | IN PROCESS  
|                             | Pamel 11           | 11/20/06    | 1000.00  | 998.8558    | IN PROCESS  
|                             |                    |             |          |             |             
|Picota                       | Picota 1           | 03/12/99    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Picota 2           | 11/26/99    | 1000.00  | 1000.00     | IN PROCESS  
|                             | Picota 4           | 09/29/00    | 800.00   | 750.0278    | IN PROCESS  
|                             | Picota 5           | 08/10/04    | 1000.00  | 955.3591    | IN PROCESS  
|                             | Picota 6           | 08/13/04    | 200.00   | 77.1952     | IN PROCESS  
|                             |                    |             |          |             |             
|Quio                         | Quio               | 05/25/06    | 200.00   | 200.00      | IN PROCESS  
|                             |                    |             |          |             |             
|San Francisco                | Francisco OCSA     | 10/24/03    | 800.00   | 800.00      | IN PROCESS  
|                             | Los Francisco 1    | 11/29/06    | 300.00   | 300.00      | IN PROCESS  
|                             | Los Francisco 2    | 11/30/06    | 500.00   | 500.00      | IN PROCESS  
|                             |                    |             |          |             |             
|Totoras                      | Totoras I          | 08/04/04    | 500.00   | 500.00      | IN PROCESS  
|                             | Totoras II         | IN PROCESS  | 400.00   | IN PROCESS  | IN PROCESS  
|                             |                    |             |          |             |             
|Tres Marias                  | Tres Marias I      | 03/24/03    | 1000.00  | 1000.00     | 02/03/06    
|                             | Tres Marias II     | 11/26/02    | 300.00   | 300.00      | 02/03/06    
|                             |                    |             | 59       |             |             
|                             | Tres Marías III    | 12/12/02    | 100.00   | 100.00      | 02/03/06    
|                             | Tres Marías IV     | 02/21/05    | 500.00   | 500.00      | 02/03/06    
|                             | Tres Marías V      | 03/07/05    | 1000.00  | 1000.00     | 02/03/06    
|                             | Tres Marías VI     | 04/25/05    | 1000.00  | 1000.00     | 02/03/06    
|                             | Tres Marías VII    | 02/27/06    | 1000.00  | 1000.00     | 07/26/06    
|                             | Tres Marías VIII   | 02/03/06    | 100.00   | 100.00      | 07/26/06    
|                             | Tres Marías IX     | 02/07/06    | 700.00   | 700.00      | 07/26/06    
|                             | Tres Marias X      | 04/18/06    | 600.00   | 600.00      | 07/26/06    
|                             | Tres Marias XI     | IN PROCESS  | 600.00   | IN PROCESS  | IN PROCESS  
|                             | Tres Marias XII    | IN PROCESS  | 1000.00  | IN PROCESS  | IN PROCESS  
|                             | Tres Marias XIII   | IN PROCESS  | 100.00   | IN PROCESS  | IN PROCESS  
|                             |                    |             |          |             |             
|Uchumachay                   | Uchumachay I       | 08/26/04    | 300.00   | 300.00      | IN PROCESS  
|                             | Uchumachay 2       | 08/24/04    | 600.00   | 600.00      | IN PROCESS  





* This El Alamo property is separate from the property transferred to ADC Peru LDC under an agreement signed in May 2003.



The Company has conducted either limited or no exploration on its other Peruvian properties to date.



Mexican Properties



The El Oro Mines are located in Central Mexico and are past producers of gold and silver.  The El Oro mines hosted the largest known vein systems in the region with past production from nine main veins varying between 1 and 70 meters in width and, 1.0-3.5 km in length and were mined over vertical distances of up to 250m.

How Acquired

On May 12th, 2006, the Companyand Canaco Resources Inc.(Canaco)entered into an option agreement to jointly acquire up to a 70% interest in the 67 square kilometer El Oro gold property.  The property is being optioned from Minera Luismin SA de CV (Luismin), a 100 percent owned subsidiary of Goldcorp Inc.



The Option agreement, entered into jointly (50/50) by Canaco and Candente, gives the combined companies the right to earn up to a seventy percent (70%) interest in all of the 24 El Oro exploration and mining concessions (14,950 hectares), held by Luismin.

The terms of the Agreement are as follows:

1.

Earn a 50% interest by expending US$5,000,000 on exploration and issuing 250,000 common shares in each of Canaco Resources Inc and Candente Resource Corp over a three year period and;

2.

Earn an additional 20% interest by expending an additional US$5,000,000 (US$10,000,000 total for 70% total interest) on exploration and development over an additional two (2) years.

1.

Goldcorp retains the right to earn-back in to a 70% interest by spending US $25,000,000 within four years on additional exploration and development.

2.

Goldcorp has the right to participate in future equity financings by each company, up to the greater of: their current percentage interest held in each company or 10% of the financing.



Location & Access



The property has excellent road access and is located 110 km northwest of Mexico City in the States of Mexico and Michoacan.



60



Geological Information



The El Oro Mines have collectively been described as some of the most significant high-grade, gold-silver producers in the history of Mexican mining, with past production of approximately 20 million gold equivalent ounces.  El Oro hosts the largest known vein systems in the region with past production from veins varying between 1 and 70 metres in width.  One vein alone, Veta San Rafael, produced in excess of 5 million gold equivalent ounces during a mine-life of 45 years.  Veta San Rafaels average grade of production was 10.8 grams gold per tonne and 115 grams silver per tonne, over an average width of 10 meters, a vertical depth of up to 250 meters and a strike length approaching 3.5 kilometers.



Historic production at El Oro came from nine principal vein systems.  The veins generally strike north-northwest and dip 60 to 70 degrees to the southwest.  It is postulated, that the dip may change to easterly, with progression to the west. Host rocks to the vein systems are Cretaceous carbonaceous shales, which are basement rocks.  A 200 plus meter thick pile of younger, Tertiary andesitic volcanics generally overlies and obscures most of the major veins.



Previous Exploration



The veins on the El Oro property have been worked since the late 1700s.  The height of activity began in 1904 with the Gold Mining & Railway Company.  For 33 years four companies produced gold and silver, predominantly from two principal vein systems, the San Raphael and Verde veins.  Veta San Rafael has a thickness which locally exceeded 50 meters and averaged 10 meters.  The Veta Verde vein averaged 5-10 meters in thickness.  In 1938, all of the mines and properties were acquired by Las Dos Estrellas Mining Company.  Shortly thereafter, a tailings dam collapsed and compensation costs bankrupted the Las Dos Estrellas Mining Company so the properties were transferred to the workers.  Operating as individuals proved to be very costly resulting in closure of the mines in 1959.



Current & Planned Work Program



Diamond drilling is planned to commence during April of 2007. Prior to drilling, exploration focused on a thorough compilation of all historical data as well as conducting mapping and Natural Audio Magnetic, Telluric (NSAMT) geophysical surveys to delineate drill targets. Drilling will test two types of targets.  The first target type is the down-dip extensions of four of the most prolific veins in the El Oro camp including San Raphael, Verde, Borda and Corona, to look for new reserves below previous levels of mining. The second target type will be to find new veins in the Oriente area by testing NSAMT geophysical anomolies and newly discovered alteration and quartz-calcite vein targets.  The Oriente area is the eastern extension of the prolific El Oro mines ore shoot trend.  It has had no mining and little exploration and is covered by younger Tertiary volcanic rocks which mask favourable older Cretaceous host rocks and potential veins.  Five exposures of older favourable host rocks have been found in the Oriente area and all of these have extensive alteration and/or quartz-calcite veining typical of the El Oro gold-silver veins.  This area was covered by NSAMT geophysical survey in early 2007 which is anticipated to define additional drill targets.



Newfoundland Properties



During 2002, the Company began to acquire gold exploration properties located in the Botwood Basin area of central Newfoundland, Canada. These properties are located in an area where recent exploration results published by other exploration companies suggests that the basin has certain similarities to the Carlin gold trend in Nevada.





61



Originally, the Company had 1,919 claims totaling 47,975 hectares which the Company had grouped into several properties by location. The Companys interest in these claims had been acquired through several methods, including staking, purchase and option agreements.  Several claims have been dropped and the Company now has 159 claims.



The Company had originally entered into 6 Option to Purchase and Royalty Agreements, which provided for the Company to earn a 100% interest in 7 properties. This has been reduced to 1 Option to Purchase and Royalty Agreement.  The Company had also entered into a Purchase and Royalty Agreement with Kevin Keats of Newfoundland by which the Company had earned a 100% interest in 1,346 mining claims.  These mining claims have dropped.



All of the Companys Newfoundland property interests were acquired from Arms-length parties.



Acquisition details and descriptions of the Companys two remaining Newfoundland exploration projects are described below.



Staghorn (formerly Flamingo and Woods Lake) Property



The Staghorn Property is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the Staghorn Property stemmed from earlier exploration work, as described below, that was done in the area.



The Staghorn Property is a 67 claim gold exploration property located in western Newfoundland. The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.



The Company has had no revenue from mining operations on the Staghorn Property to date. The Company has an option to earn a 100% interest in the property, subject to a 2.5% NSR. In March 2004, the Company announced an agreement with Goldcorp whereupon Goldcorp can earn a 70% interest in the project by assuming all of Candentes expenditure obligations and completing a bankable feasibility study by January 2010. Goldcorp terminated this agreement in Fiscal 2005.



How Acquired



Under an agreement dated December 20, 2002 between the Company and Gilbert Lushman and Edwin Northcott (known collectively as the Lushcott Group), the Company could acquire a 100% interest in the property, subject to a 2.5% NSR, by making cash payments totaling$100,920, issuing 120,000 common shares and incurring aggregate exploration expenditures of $500,000 before November 30, 2006.



The Lushcott Group also retains a 2.5% NSR on the property. The Company may at any time purchase 1 percentage point (thus reducing the NSR to 1.5%) of the royalty by paying the Lushcott Group $1,000,000. If Candente exercises the royalty purchase right, and upon completion of a bankable feasibility study, the Lushcott Group has the right to require Candente to purchase a further 1 percentage point (thus reducing the NSR to 0.5%) for a price determined by a fixed dollar amount per ounce of gold multiplied by the number of ounces of gold in the mineable reserve as computed in the mineable feasibility study. The fixed dollar amount per ounce of gold shall be determined by the following table:









62



|Trading Price of Gold | Fixed Dollar Amount Per Ounce
|--------------------- | -----------------------------
|Up to US $349         | US$1.00                      
|US$350  US$449       | US$1.25                      
|US$450 - US$524       | US$1.50                      
|US$525  US$599       | US$1.75                      
|US$600 or above       | US$2.00                      



If Candente sells, assigns, options or otherwise disposes of any interest in the claims to a third party and receives consideration for the disposition, 10% of the total cash or shares received by Candente will be due to the Lushcott Group. The cash equivalent value of the consideration paid will be deemed to be part of the $1,000,000 required for the purchase of the first 1 percentage point of the NSR.



In March 2004, the Company announced an agreement with Goldcorp on the Staghorn property. Goldcorp could earn a 70% interest in the property by assuming all of Candentes expenditure obligations and completing a bankable feasibility study by January 2010. The option could be extended beyond the six-year period if expenditures have reached a minimum of $1 million per year by 2009.



On September 1, 2005 Candente announced Goldcorp Inc.s decision to terminate the option agreements on the Staghorn and Linear Properties in Newfoundland.  Goldcorp also advised that they would maintain their investment in Candente as they wished to maximize value and believe in Candentes Peruvian gold exploration projects may have excellent potential. Candente decided to maintain its interest in the Staghorn Property.



Location and Access



The property is located approximately 5 hours west of the city of Gander via paved highway and gravel road.



Geological Information



The property is located within the SW Dunnage Zone. The northern portion of the property is underlain by mafic volcanic and related intrusive rocks, while the southern portion is dominated by granodioritic rocks of the Bay Du Nord Group. These rocks are intruded by a mylonitized pink felsic sill-dyke that occurs as two separate northeast-trending bodies within a mylonite shear zone.



Previous Exploration



The area has seen only limited exploration with the majority of the exploration searching for base metal mineralization. From 1952-1960, Asarco explored the area for base metals. In 1981, Hudson Bay Oil and Gas conducted geological mapping, geophysical surveys and diamond drilling in the area in its search for base metals. In 1987-1988, BP-Selco conducted base metal and gold exploration and found anomalous gold in soils on the property and excavated 5 trenches.



Prior to optioning the property, the Companys geologists visited the property and sampled previously identified gold bearing mineralization from an area measuring 400 square meters. Those samples tested several types of rock, including quartz-cemented breccia, quartz veins, and felsic intrusive rocks and confirmed the previous exploration results.











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During 2003, the Company conducted an exploration program at Staghorn which included geological mapping and sampling of several trenches and previously identified mineralized areas as well as the review of a 1981 airborne magnetic/EM survey for structure, geology and magnetic anomalies. As a result of the work, gold mineralization was extended to 3 kilometers, and three magnetic features in close proximity to the known gold mineralization were identified.



During the first quarter of 2004, the Company carried out a lake sediment survey as well as an IP/Magnetic geophysical survey. This work identified several high-chargeability IP zones over a 3.2 kilometer strike length.



In April 2005 Candente conducted a 12 hole, 1868 meter drill program.  The program was funded by Goldcorp and was carried out by Petro Drilling Company Limited of Newfoundland. Drilling targeted combinations of Induced Polarization chargeability highs, gold bearing structures interpreted from ground magnetics and airphoto interpretation, and associated anomalous gold values from trenches, rock float and lake bottom sediments.  Several targets remain untested due to problems with weather and drilling.



Of the twelve holes drilled, nine tested for gold in a number of different target combinations along the main trend of gold mineralization.  Two holes tested the potential for Buchans and Messina style volcanogenic massive sulphide (VMS) stratigraphy.  The final hole was located to test a unit of felsic volcanic rocks that trend into the north end of Wood Lake where elevated base metals values occur in lake-bottom sediments.  This hole did not reach bedrock due to overburden drilling difficulties.



The following grades and widths of gold mineralization were intersected in two holes that tested a felsic sill/dyke along a major mylonite structure: 1.49 grams per tonne (gpt) over 1.5 m, 1.69 gpt over 1.5 m, 2.01 gpt over 0.9 m, 6.25 gpt over 1.0 m and 11.25 gpt over 1.5 m within two larger intervals of 1.47 gpt over 22.5 m and 0.23 gpt over 52.9 m from the respective holes.  While these results are considered to be anomalous, the possibility of encountering a large bulk tonnage gold deposit within the explored area has been reduced.



The two holes that tested for VMS style stratigraphy did not intersect any base metal mineralization within interbedded mafic volcanic and sedimentary rocks. IP chargeability highs were explained by the presence of thinly banded pyrite within sedimentary units. The more favourable felsic volcanic stratigraphy in the northern portion of the Staghorn property remains untested.



In light of the results obtained and the recent base and precious metal VMS discovery made by Messina Minerals Inc., 35 km to the northeast of the Staghorn property, the sequence of felsic volcanic and sedimentary rocks found in the northern portion of the Staghorn property is considered to have the best potential for further exploration on the property.



Current and Planned Work Program



The Company conducted no work in 2006.  A decision will be made as to the future work in the 2007 fiscal year.



Virgin Arm Property



The Virgin Arm Property is without known reserves and the work being done by the Company is exploratory in nature. The Companys interest in the Virgin Arm Property stemmed from earlier exploration work, as described below, that was done in the area.



The Virgin Arm property is a 2,300 hectare gold exploration project located in the Botwood Basin of central Newfoundland. The Property does not represent a producing property and the Companys current operations consist of an exploratory search for mineable deposits of minerals.

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The Company has had no revenue from mining operations on the Virgin Arm Property to date. The Company has a 100% interest in the property.



[candente200620famend015.jpg]



65



[candente200620famend016.jpg]



How Acquired



The Company originally staked 89 claims on April 5, 2002. On September 26, 2002, the Company staked an additional 3 claims along the northern part of the original property.



Location and Access



The property lies just north of the town of Summerford, approximately 80 kilometers north of the City of Gander. Access is by Provincial Highway from Gander to Summerford.



Regional and Property Geology



The area is within the Newfoundland Dunnage Zone, which is divided into the Notre Dame and Exploits Subzones. The Virgin Arm property lies in the Exploits Subzone at the boundary with the Notre Dame Subzone. The rocks in the area are dominantly oceanic sedimentary rocks with intercalated volcanic rocks overlain by black shales. Gold has been identified on the property within 5 separate showings, which are primarily associated with NNE and WNW trending faults.











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Previous Exploration History



During the 1980s, the Geological Survey of Canada conducted regional lake bottom sampling. Based upon these results, Noranda Exploration Company Limited staked a series of claims in the area which included the current boundaries of the Virgin Arm property. From 1989 to 1996, Noranda conducted an exploration program consisting of prospecting and reconnaissance geochemical sampling over portions of the property. In 2002, Candente followed up the Noranda results with prospecting, silt and rock sampling, coarse gold panning, linecutting, soil sampling and grid geological mapping. 5 new gold showings have been identified to date.



During 2003 and 2004 the Company conducted mapping, sampling and trenching on the property.



Current and Planned Exploration,



No work was done on the property in 2006.  A decision will be made in 2007 regarding future work on the property.



Item 5.  Operating and Financial Review and Prospects



Overview



The Company's financial statements are stated in United States Dollars (US$) 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 noted in footnotes to the financial statements.  The value of the U.S. Dollar in relationship to the Canadian Dollar was 1.16 as of December 31, 2005 and 1.17 as of March 24, 2006.



The Company has since inception financed its activities through the distribution of equity capital.  The timing of such distributions was dependent on the requirements of the Company and the economic climate.  The Company anticipates having to raise additional funds by equity issuance in the next several years, as the Company does not expect to generate material revenue from mining operations or to achieve self-sustaining commercial mining operations for several years.



Results of Operations



Year Ended December 31, 2006 vs. the Year Ended December 31, 2005



The Net Loss for the year totaled $1,792,115, or $0.04 per share, compared to a loss of $1,426,952, or $0.04 per share, in the prior year.  The most notable differences between the two years are as follows;



Candente Resource Corp discontinued all International Security expense compared to spending of only $2,063 in 2005 as the Company continues to use local security services in Peru as it feels they are more beneficial in protecting its personnel in the field.  The Companies legal, audit and accounting increased to $134,167 versus $106,912 in 2005 due to higher legal expenses related to being listed on the TSX and the Frankfurt stock exchange.  Management and Office salaries of $200,741 increased in comparison to $166,325 in 2005 as salaries increased and additional personnel were hired during the year.  Travel decreased to $5,499 from $125,782 in 2005 and Corporate Development increased to $438,310 from $180,297 in 2005 as the allocation of expenses related to corporate development was revised during 2006.  The revised costs include expenditures associated with raising funds on non-brokered private placements. The companies stock-based compensation expense increased to $574,889 from $195,848 in 2005, as the volatility increased for the options issued during the year, and the timing of the vesting of the grants caused a greater portion to be vested as compared to the prior year.



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The Company earned interest income of $63,374 in 2006 compared to $31,483 in 2005 due to higher average cash balances. The foreign exchange Gain of $63,181 in 2005 compared to a loss of $397 in 2005 was due to favourable exchange rates during the current year.



Year Ended December 31, 2005 vs. the Year Ended December 31, 2004



The Net Loss for the year totaled $1,426,952, or $0.03 per share, compared with a loss of $1,556,932, or $0.04 per share, in the prior year.  The largest difference between the two years was a smaller foreign exchange gain in 2005 compared to 2004 arising from the monetary assets held in Canadian dollars.  Other changes occurred in International Security expense with a decrease to $2,063 from $30,837 as the company decided that the use of local security would better protect its personnel while in the field.  Legal, Audit and Accounting costs of $106,912 versus $94,612 due to higher legal fees and auditing costs of being listed on the Toronto Stock Exchange.  Management and Office salaries of $166,325 versus $115,167 and Office, Rent and Miscellaneous of $114,712 compared to $109,995 due to additional personnel and increase in office related costs.  Travel decreased to $125,782 from $156,743 as management attended several industry conferences during the period and travel to Peru to review new exploration programs.  Write off of deferred costs on its mineral exploration properties of $419,470 compared to $728,751 as the company wrote off deferred exploration costs on its Linear and Micheals Harbour properties.  These expenses are in combination with a lower interest income of $31,483 versus $51,577 due to lower average cash balance and reduced Stock Based Compensation expense of $195,848 compared to $222,686 in 2004.  to the company had a Foreign Exchange loss of $397 versus a Foreign exchange gain of $222,216 in 2004 which was due to a large change in the exchange rate for the Canadian dollar against the US dollar during 2004.



Year Ended December 31, 2004 vs. the Year Ended December 31, 2003



The Net Loss for the year totaled $1,556,932, or $0.04 per share, compared to a loss of $1,601,498, or $0.06 per share, in the prior year. The main difference between the two years was a large foreign exchange gain in 2004 arising from the translation of monetary assets held in Canadian dollars. Other large changes occurred in International Security expense of $30,837 compared to $12,386 as the Company took extra protection measures for its personnel in Peru; Legal, audit and accounting of $94,612 versus $55,851 due to higher legal expenses related to potential joint-venture agreements; Management and Office salaries of $115,167 versus $71,226 and Office, rent and miscellaneous of $109,995 compared to $62,068 due to additional personnel and additional office space rented in Vancouver; Promotion, Travel, and Entertainment, which rose to $156,742) from $132,752 as management attended several additional industry conferences during the period as well as traveling to Peru to review new exploration programs; and Write off of deferred costs on its mineral exploration properties of $728,750 compared to $222,444 as the Company wrote-off all of its deferred exploration in Newfoundland, Canada except for the Staghorn, Linear, Micheals Harbour, and Virgin Arm Properties. . These expenses were partially offset by higher interest income of $51,577 compared to $26,500 due to higher average cash balances, reduced stock-based compensation expense of $222,686 compared to $911,014 in 2003, and the Foreign Exchange gain of $222,216 in 2004 compared to $25,141 in 2003, which was due to favorable exchange rates for the Canadian dollar against the US Dollar.



LIQUIDITY AND CAPITAL RESOURCES



The Company's primary source of funds since incorporation has been through the issue of its common stock and the proceeds from the exercise of common stock options and share purchase warrants.  The Company has no revenue from mining operations to date.



The Company has completed the following common share issuances since 1997. Amounts are less any share issuance costs.



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|Fiscal Year                      | Nature of Share Issuance                 | Number of Shares | Amount    
|-------------------------------- | ---------------------------------------- | ---------------- | ----------
|                                 |                                          |                  |           
|Balance, as at December 31, 1997 | 4,066,001                                | $  602,441      
|                                 |                                          |                  |           
|Fiscal 1998                      | Seed Share Subscriptions (1)             | 40,000           | 6.484     
|                                 |                                          |                  |           
|Fiscal 1999                      | Seed Share Subscriptions (1)             | 330,000          | $   55,099
|                                 | Seed Share Subscriptions (2)             | 383,333          | 77,087    
|                                 |                                          |                  |           
|Fiscal 2000                      | Initial Public Offering (3)              | 2,068,000        | $ 505,095 
|                                 | Mineral Property Interests (4)           | 30,000           | 9,027     
|                                 | Corporate Finance Fees (5)               | 40,000           | 12,036    
|                                 | Finders Fees (6)                        | 40,000           | 8,819     
|                                 |                                          |                  |           
|Fiscal 2001                      | Private Placement (7)                    | 600,000          | $  82,320 
|                                 | Private Placement (8)                    | 1,265,700        | 165,287   
|                                 | Exercise of share purchase options (9)   | 363,000          | 108,980   
|                                 | Debt Settlement (10)                     | 10,000           | 2,930     
|                                 |                                          |                  |           
|Fiscal 2002                      | Private Placement (11)                   | 4,869,002        | $441,700  
|                                 | Private Placement (12)                   | 2,893,000        | 636,490   
|                                 | Private Placement (13)                   | 650,000          | 187,650   
|                                 | Private Placement (14)                   | 2,000,000        | 769,820   
|                                 | Exercise of Stock Options (15)           | 796,250          | 75,981    
|                                 | Exercise of Stock Options (16)           | 25,000           | 3,650     
|                                 | Exercise of Stock Purchase Warrants (17) | 180,000          | 17,170    
|                                 | Mineral Property Interests (18)          | 500,000          | 75,300    
|                                 | Mineral Property Interests (19)          | 30,000           | 7,940     
|                                 | Mineral Property Interests (20)          | 25,000           | 5,780     
|                                 | Mineral Property Interests (21)          | 200,000          | 58,300    
|                                 | Mineral Property Interests (22)          | 60,000           | 18,640    
|                                 |                                          |                  |           
|Fiscal 2003                      | Private Placements                       | 5,908,333        | $3,638,105
|                                 | Exercise of Stock Options                | 976,566          | 166,286   
|                                 | Exercise of Stock Purchase Warrants      | 3,902,752        | 774,533   
|                                 | Mineral Property Interests               | 266,000          | 150,057   
|                                 |                                          |                  |           
|Fiscal 2004                      | Exercise of Stock Options                | 280,500          | $   51,721
|                                 | Exercise of Stock Purchase Warrants      | 1,434,750        | 402,403   
|                                 | Mineral Property Interests               | 110,000          | 48,790    
|                                 |                                          |                  |           
|Fiscal 2005                      | Private Placements                       | 7,450,000        | $2,931,455
|                                 | Mineral Property Interests               | 56,250           | 22,205    
|                                 |                                          |                  |           
|Fiscal 2006                      | Private Placements                       | 8,380,066        | $6,879,155
|                                 | Exercise of Stock Options                | 725,000          | 383,390   
|                                 | Exercise of Stock Purchase Warrants      | 300,000          | 182,134   
|                                 | Mineral Property Interests               | 132,424          | 99,683    



(1)

These Seed Shares were sold at $0.25 per share.

(2)

These Seed Shares were sold at $0.30 per share.

(3)

The Companys Initial Public Offering shares were sold at $0.45 per share.

(4)

Issued at $0.45 per share.

(5)

Issued at $0.45 per share.

(6)

Issued for finders fees for mineral property acquisitions at various prices per share.

(7)

Issued at $0.25 per share.

(8)

Issued at $0.20 per share.

(9)

Exercised at $0.45 per share.



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(10)

Debt Settlement for Corporate Finance Fees issued at $0.45 per share.

(11)

Issued at $0.15 per share.

(12)

Issued at $0.35 per share.

(13)

Issued at $0.45 per share.

(14)

Issued at $0.50 per share.

(15)

Exercised at $0.15 per share.

(16)

Exercised at $0.23 per share.

(17)

Exercised at various prices.

(18)

Issued at $0.24 per share.

(19)

Issued at $0.42 per share.

(20)

Issued at $0.36 per share.

(21)

Issued at $0.46 per share.

(22)

Issued at $0.49 per share.



During 2007 fiscal year the Company anticipates continuing to conduct exploration on several of its properties in Peru, including drilling programs on the Alto Dorado, Cañariaco and limited exploration on 2 of its properties in Newfoundland.  The Company believes that it has sufficient capital to cover corporate expenses for the remainder of 2007, however, additional funds will be necessary for future periods, and management anticipates funding ongoing operations with the additional placement of common stock, as well as the exercise of outstanding options and warrants. The timing and amount of such stock placements is largely dependent upon favourable market conditions. If the Company is unable to raise additional funds, exploration activities will be curtailed and available funds will be used on the most advanced properties. The priority ranking of each property for available funds is impossible to determine at this time as ongoing exploration results will determine which properties in the Companys portfolio should receive additional exploration.



The Company does not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, the Company's liquidity either materially increasing or decreasing at present or in the foreseeable future.  Material increases or decreases in the Company's liquidity are substantially determined by the success or failure of the Company's exploration programs or the future acquisition of projects.



Fiscal Year Ended December 31, 2006



The Companys working capital at the end of the year totaled $2,355,565 compared to working capital of $566,259 at the close of the prior year. The Company cash position increased to $3,089,422 from $681,667. Liabilities totaled $864,549 compared to $274,280, with all amounts classified as current.



The Net Loss for the year was $1,792,115. Operating Activities used cash of $1,234,432, with the Net Loss partially offset by non-cash charges of Stock-based compensation of $574,889 and the Write-off of deferred costs related to mineral properties of $3,777. Investing Activities used cash of $5,070,215, with deferred exploration costs on its mineral properties using cash of $4,142,748, Deferred acquisition costs of its mineral properties using cash of $284,053, and Acquisition of Capital Assets using cash of $45,079. Financing Activities provided cash of $8,712,402. The issuance of common shares provided cash of $7,809,335 and option payments and exploration funds received provided cash of $1,242,520.



Fiscal Year Ended December 31, 2005



The Companys working capital at the end of the year totaled $566,259compared to working capital of $823,488 at the close of the prior year. The Company cash position decreased to $681,667 from $1,045,641. Liabilities totaled $274,280 compared to $420,070, with all amounts classified as current.





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The Net Loss for the year was $1,426,952. Operating Activities used cash of $810,661, with the Net Loss partially offset by non-cash charges of Stock-based compensation of $195,848 and the Write-off of deferred costs related to mineral properties of $419,470. Investing Activities used cash of $2,784,947, with deferred exploration costs on its mineral properties using cash of $2,324,248, Deferred acquisition costs of its mineral properties using cash of $189,063, and Acquisition of Capital Assets using cash of $55,894. Financing Activities provided cash of $3,231,634. The issuance of common shares provided cash of $3,071,864 and option payments and exploration funds received provided cash of $300,000.



Fiscal Year Ended December 31, 2004



The Companys working capital at the end of the year totaled $823,488 compared to working capital of $3,754,748 at the close of the prior year. The Company cash position decreased to $1,045,641 from $3,672,704. Liabilities totaled $420,070 compared to $60,533, with all amounts classified as current.



The Net Loss for the year was $1,556,932. Operating Activities used cash of $560,127, with the Net Loss partially offset by non-cash charges of Stock-based compensation of $222,686 and the Write-off of deferred costs related to mineral properties of $728,751. Investing Activities used cash of $3,349,988, with deferred exploration costs on its mineral properties using cash of $2,784,293, deferred acquisition costs of its mineral properties using cash of $288,915, and Acquisition of Equipment using cash of $102,999. Financing Activities provided cash of $1,283,052. The issuance of common shares provided cash of $454,124 and option payments and exploration funds received provided cash of $769,896.



The Companys cash position at the close of the year was $1,045,641.



Variation in Operating Results



The Company is presently exploring its properties for sufficient reserves to justify production.  None of the properties are yet in production and consequently, do not produce any revenue.  As a result there is little variation expected in operating results from year to year and little is to be expected until such time, if any, as a production decision is made on one of its properties.



The Company derives interest income on its bank deposits, which depend on the Company's ability to raise funds.



Management periodically through the exploration process, reviews results both internally and externally through mining related professionals.  Decisions to abandon, reduce or expand exploration efforts is based upon many factors including general and specific assessments of mineral deposits, the likelihood of increasing or decreasing those deposits, 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.  There cannot be a pre-determined hold period for any property as geological or economic circumstances render each property unique.



The Company's financial statements are stated in United States Dollars (US$) 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 noted in Footnote 14 to the financial statements.













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US GAAP Reconciliation with Canadian GAAP



Under Canadian GAAP applicable to mining exploration companies, exploration expenditures may be deferred on prospective claims until such time as it is determined that further exploration is not warranted, at which time the claim costs are written-off. Under US GAAP, all exploration expenditures must be expensed until an independent feasibility study has determined that the property is capable of economic commercial production. Under US GAAP, exploration expenditures are disclosed in the statements of cash flows under Operating Activities while under Canadian GAAP they are disclosed as Investing Activities. Therefore, under US GAAP, the Company has expensed all of its deferred property costs which were $10,701,855 as of December 31, 2006.  The Companys net loss of $1,792,115 under Canadian GAAP was increased under US GAAP by ($3,988,414) for FY 2006s Deferred Property Expenditures. After deducting the Claim Costs written off under Canadian GAAP and the foreign exchange gain which is included in other comprehensive income under US GAAP, the FY 2006 Net Loss under US GAAP totaled $5,839,933.



Under Canadian GAAP, shares held in escrow are included in the calculation of loss per share. Under US GAAP, shares held in escrow are excluded from the weighted-average number of shares outstanding until such shares are released from trading or until all contingencies upon which the release of the shares relies have been met. At December 31, 2006, the contingency for release of escrowed shares had been met, therefore there is no difference.



Under Canadian GAAP, foreign exchange gains and losses involving integrated foreign operations are included in current operations. Under US GAAP, gains and losses arising from foreign currency transactions are included in current operations, while such items arising from the translations of non-US dollar-denominated balances are separately disclosed on a current basis and are included on a cumulative basis as a separate component of Stockholders Equity.



Under US GAAP, the investments held by the Company are considered to be available for sale securities and are required to be reported at fair value, with any unrealized holding gains and losses included in current other comprehensive income.



Under US GAAP, the Accumulated other comprehensive loss related to these two items as of December 31, 2006 is $5,761,377.



Due to these requirements under US GAAP, the Accumulated Deficit under US GAAP as of December 31, 2006 is ($18,691,475).



Variation in Operating Results



The Company derives interest income on its bank deposits, which depend on the Company's ability to raise funds.



Management periodically, through the exploration process, reviews results both internally and externally through mining related professionals.  Decisions to abandon, reduce or expand exploration efforts is based upon many factors including general and specific assessments of mineral deposits, the likelihood of increasing or decreasing those deposits, 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.  There cannot be a pre-determined hold period for any property as geological or economic circumstances render each property unique.



The Company's financial statements are stated in U.S. Dollars (USD$) and are prepared in accordance with Canadian GAAP, the application of which, in the case of the Company, conforms in all material respects for the years presented with US GAAP, except as noted in Note 12 to the financial statements.  The value of the Canadian Dollar in relationship to the US Dollar was 1.16 as of December 31, 2005.



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Research and Development



The Company conducts no Research and Development activities, nor is it dependent upon any patents or licenses.



Trend Information



The Company knows of no trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the Companys operations or financial condition.



Item 6.  Directors, Senior Management and Employees





Table No. 5 lists as of March 14, 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 Directors are residents and citizens of Canada, except Ing. Fredy Jose Huanqui Guerra, who is a resident and citizen of Peru and Larry Kornze and Peter Megaw who are residents of the United States.



Table No. 5

Directors



|Name                      | Age | Date First Elected/Appointed
|------------------------- | --- | ----------------------------
|Joanne C. Freeze          | 49  | July 1997                   
|Fredy Jose Huanqui Guerra | 55  | April 1999                  
|Peter de Visser           | 57  | July 1997                   
|Larry Kornze              | 59  | October 2002                
|Michael Casselman         | 61  | July 2004                   
|James Currie              | 52  | October 2004                
|Peter Megaw               | 54  | November 2004               
|Andrew Smith              | 50  | April 2006                  





Table No. 6 lists, as of March 14, 2007, the names of the Executive Officers of the Company.  The Executive Officers serve at the pleasure of the Board of Directors.  All Executive Officers are citizens and residents of Canada, except Fredy Jose Huanqui Guerra, who is a resident and citizen of Peru.



Table No. 6

Executive Officers



|Name                      | Age | Position                                              | Date of Appointment
|------------------------- | --- | ----------------------------------------------------- | -------------------
|Joanne C. Freeze          | 49  | President and CEO                                     | July 1997          
|Fredy Jose Huanqui Guerra | 55  | VP Business Development and Exploration Latin America | April 1999         
|Peter de Visser           | 57  | Chief Financial Officer                               | July 1997          
|Michael Casselman         | 61  | Director                                              | July 2004          
|Thomas Rinaldi            | 50  | VP Operations                                         | October 2006       
|Maria Eugenia Montagne    | 42  | Corporate Secretary/Treasurer                         | July 2002          







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Joanne Freeze is a Director and the President, Chief Executive Officer and Chairman of the Company. Ms. Freeze is a Professional Geoscientist having received a B.A. from the University of Western Ontario in 1978 and a B.Sc. from the University of British Columbia in 1981. Since 1985 she has been a principal of Stillwater Enterprises Ltd., a private British Columbia company providing geological consulting services. She devotes 100% of her time to the Company.



Fredy J. Huanqui Guerra is a Director and VP Business Development and Exploration Latin America of Candente. Mr. Huanqui is a Professional Geologist and Engineer and earned his Geologist-Engineer degree from the University of Arequipa in 1973. Since 1974, Mr. Huanqui has worked as a geologist in Peru, including as an Exploration Geologist with Arequipa Resources, a junior gold exploration company, from 1993 to 1996 and with American Barrick Corporation, a gold mining company, from 1996 to 1997. He devotes 100% of his time to the Company.



Peter de Visser is Candentes Chief Financial Officer and a Director. Mr. de Visser is a Chartered Accountant and has been a principal of De Visser Gray, a Chartered Accountant company located in Vancouver B.C. since 1987. He obtained his B.Comm. from the University of British Columbia in 1973 and has been a member of the Institute of Chartered Accountants of British Columbia since 1976. Mr. de Visser has extensive experience with public companies and is currently a director of Leisure Canada, a developer of vacation resorts, and Vinson Biotech, a Capital Pool Corporation without a current business, both public companies traded on the Canadian Venture Exchange. He devotes approximately 10% of his time to the Company.



Maria Eugenia (Lola) Montagne is the Corporate Secretary. Ms. Montagne joined the company on May 15, 2000 as an Executive Assistant and was appointed Corporate Secretary on July 2nd, 2002. From 1994 to 1998, Ms. Montagne was an executive assistant with Manhattan Minerals, a mineral exploration company.Ms. Montagne worked for Candente on a contract basis beginning in 1998 before joining the Company full-time.



Larry Kornze is an Independent Director and was named to the Companys Board of Directors in October, 2002. Mr. Kornze is a professional engineer who first joined Candente as an advisor in October 2001. Prior to joining Candente, he served in various positions with Barrick Gold, including as the general manager for exploration for Mexico and Central America and international evaluations as well as general manager for United States exploration, from 1985 until his retirement in 2001. Before joining Barrick, Mr. Kornze held various positions with mining companies Newmont and Getty Mining.



Mr. Casselman is a Director. He received a Bachelor of Science degree from the University of British Columbia in 1969 and a Masters of Science degree from Carleton University in 1977. He has over 35 years of Canadian and International mineral industry experience, including managerial, technical, logistical, operational, environmental and community relations knowledge. He started with Cominco in 1969, and his 30-year tenure with the Company included supervising exploration at the Highland Copper Mine in British Columbia as well as working on feasibility and production. In the mid-1990s Mr. Casselman relocated to Chile and led extensive copper exploration programs before relocating to Vancouver and becoming Comincos Administration Manager of International Exploration. He retired from Cominco in 1999, and since that time has been involved in mineral exploration for several Vancouver-based companies.



James Currie is an Independent Director and was named to the Companys Board of Directors in October 2004.  Mr. Currie brings to the Candente team more than 25 years of experience as a mining engineer. He is currently President of Luzon Minerals Ltd. and prior to that was responsible for Ivanhoe Mines Ltd.s (heap-leach SX-EW) copper operations in Myanmar including the 25,000 tonne per annum (tpa) S & K Mine, and the proposed 125,000 tpa Letpadaung Development Project.   Mr. Currie has also worked for senior mining companies such as Placer-Dome, Noranda and Fording Coal and has held senior level positions for a number of junior exploration and development companies including: All-North Resources Ltd., Queenstake Resources Ltd. and Cornucopia Resources Ltd.



74



Peter Megaw is an Independent Director and was named to the Board in October 2004.  Mr Megaw is a Certified Professional Geologist by the American Institute of Professional Geologists and Arizona Registered Geologists.  He is well-known professional in the mining industry and is one of four founding principals of IMDEX Inc./Minera Cascabel, S.A. de C.V., the largest geotechnical consulting firm operating in Mexico.  Dr. Megaw has been instrumental in the discovery of several million ounces of silver including new orebodies in existing mines, Excellon Resources Platosa Mine and MAG Silver's Fresnillo, Batopilas and Santa Eulalia Properties.  Peter is the author of numerous scientific publications on ore deposits and is a frequent speaker at international exploration conferences.



Andrew Smith is an Independent Director and was named to the Board on April 7, 2006. Mr. Smith, P.Geo., is an economic geologist with more than 20 years of experience successfully exploring, developing and operating gold, silver copper, lead, zinc and gemstone mining projects.  Between 1985 and 1998, Smith supervised the development of two very successful gold underground mining operations, Sleeping Giant and Beaufor Gold Projects for Aurizon Mines Ltd.  In 1994 Mr. Smith was the co-recipient of the "Mining Entrepreneur of the Year Award" presented by the Quebec Prospector's Association for his work overseeing the exploration and development of these two mines.  Since 1998, Mr. Smith has focused his activities on economic evaluation of advanced exploration and development projects for junior exploration and mining companies. Mr. Smith is the co-founder and currently the Chairman of True North Gems Inc., and is the President and CEO of Canaco Resources Inc., an emerging junior gold exploration company with project interests in Alaska , Tanzania.and Mexico



Thomas Rinaldi joined the Company on October 25, 2006 to oversee the development of the Cañariaco Norte Copper Project. Mr. Rinaldi has had 23 years of both open pit and underground mining experience since acquiring his B.Sc. in Mining Engineering in 1983 at the University of Arizona in Tucson, Arizona.  He has 11 years of experience in heap leaching of both gold and copper.  While his experience is predominantly in the U.S.A. it also includes South America.



Mr. Rinaldi has managed mining projects through all stages including: internal resource and reserve evaluation programs, optimization of Starter Pits, environmental impact assessment studies, feasibility studies, leach and metallurgical testing, permitting, detailed engineering including design of pits, leach pads, ponds, tailings impoundments, dumps and access roads as well as mine construction and mine management.  His positions have included: production foreman, senior mine engineer, chief mine engineer, technical superintendent and over 7 years as manager/general manager.



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 of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he/she 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 /she 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 other than that described in the next paragraph.



There are no family relationships between any two or more Directors or Executive Officers. There are no material arrangements or understandings between any two or more Directors or Executive Officers.



COMPENSATION



The Executive Officers and Directors of the Company received compensation in the amounts shown in the following table during the last 3 fiscal years:



75



Table Number 7

Compensation of Officers and Directors



Annual Compensation



|Name and                  | Fiscal |         |       | Other Annual     | Stock Options
|------------------------- | ------ | ------- | ----- | ---------------- | -------------
|Principal Position        | Year   | Salary  | Bonus | Compensation (1) | Granted      
|                          |        |         |       |                  |              
|Joanne Freeze             | 2006   | Nil     | Nil   | $135,384         | 100,000      
|President, Chairman       | 2005   | Nil     | Nil   | $76,800          | 150,000      
|and CEO, Director         | 2004   | Nil     | Nil   | $76,800          | Nil          
|                          |        |         |       |                  |              
|Fredy Jose Huanqui Guerra | 2006   | Nil     | Nil   | $79,900          | 100,000      
|VP Exploration Latin      | 2005   | Nil     | Nil   | $76,800          | 150,000      
|America, Director         | 2004   | Nil     | Nil   | $76,800          | Nil          
|                          |        |         |       |                  |              
|Peter de Visser           | 2006   | Nil     | Nil   | $5,773           | 43,750       
|CFO, Director             | 2005   | Nil     | Nil   | $14,827          | 50,000       
|                          | 2004   | Nil     | Nil   | $21,303          | Nil          
|                          |        |         |       |                  |              
|Larry Kornze              | 2006   | Nil     | Nil   |                  | Nil          
|Independent Director      | 2005   | Nil     | Nil   | Nil              | Nil          
|                          | 2004   | Nil     | Nil   | Nil              | 150,000      
|                          |        |         |       |                  |              
|Michael Casselman         | 2006   | Nil     | Nil   | $106,366         | 100,000      
|VP Exploration,           | 2005   | Nil     | Nil   | $118,617         | Nil          
|Director                  | 2004   | Nil     | Nil   | Nil              | 400,000      
|                          |        |         |       |                  |              
|James Currie              | 2006   | Nil     | Nil   | Nil              | Nil          
|Director                  | 2005   | Nil     | Nil   | Nil              | Nil          
|                          | 2004   | Nil     | Nil   | $15,670          | 250,000      
|                          |        |         |       |                  |              
|Maria Eugenia Montagne    | 2006   | $56,500 | Nil   | Nil              | 40,000       
|Corporate Secretary/      | 2005   | $55,200 | Nil   | Nil              | 40,000       
|Treasurer                 | 2004   | $55,200 | Nil   | Nil              | Nil          
|                          |        |         |       |                  |              
|Thomas Rinaldi            | 2006   | Nil     | Nil   | $21,742          | 400,000      
|VP Operations             |        |         |       |                  |              



(1)

For additional information regarding Other Compensation, See Item 7, Interest of Management in Certain Transactions.



•

The Company may grant stock options to Executive Officers and employees; refer to Item #10 "Options to Purchase Securities from Registrant or Subsidiaries".

•

During Fiscal 2006, ended 12/31/06 no Director and/or Executive Officer received and/or accrued compensation (cash or otherwise) in excess of US$60,000 except as listed above.

•

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.





76



•

The Company has no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company for Fiscal 2005 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds US$60,000 per Executive Officer.



Staffing



As of March 28, 2007 the Company had three full time employees and four full time Officers in Canada and 35 full time employees and one full time officer in Peru. None of the Companys employees are covered by a collective bargaining agreement.



Share Ownership



The Registrant is a publicly-owned Canadian corporation, the shares of which are owned by Canadian residents, US residents, and residents of other countries. The Registrant is not controlled directly or indirectly by another corporation or any foreign government, except as described below.



Table No. 8 lists, as of March 14, 2007, Directors and Executive Officers who beneficially own the Registrant's voting securities and the amount of the Registrant's voting securities owned by the Directors and Executive Officers as a group.



Table No. 8

Shareholdings of Directors and Executive Officers



|Title
Of
Class | Name of Beneficial Owner           | Amount and Nature
Of Beneficial
Ownership | Percent
Of
Class
|-------------- | ---------------------------------- | ----------------------------------------- | ----------------
|Common         | Joanne C. Freeze (1)               | 1,946,000                                 | 3.61%           
|Common         | Ing. Fredy Jose Huanqui Guerra (2) | 1,659,000                                 | 3.08%           
|Common         | Peter de Visser (3)                | 1,127,001                                 | 2.10%           
|Common         | Larry Kornze (4)                   | 445,000                                   | 0.84%           
|Common         | Maria Eugenia Montagne (5)         | 341,500                                   | 0,64%           
|Common         | Michael Casselman (6)              | 500,000                                   | 0.93%           
|Common         | James Currie (7)                   | 250,000                                   | 0.47%           
|Common         | Peter Megaw (8)                    | 272,000                                   | 0.51%           
|Common         | Andrew Smith (9)                   | 250,000                                   | 0.47%           
|Common         | Thomas Rinaldi (10)                | 400,000                                   | 0.75%           
|               | Total Directors/Officers           | 7,190,501                                 | 13.50%          



(1)

600,000 of these shares represent currently exercisable share purchase options (575,000 vested); 296,000 of these shares are held indirectly through Stillwater Enterprises, a private company owned 50% by Joanne Freeze and which she is deemed to have voting control,

(2)

600,000 of these shares represent currently exercisable share purchase options (575,000 vested),

(3)

300,000 of these shares represent currently exercisable share purchase options (289,063 vested); 197,001 of these shares are held indirectly in the name of Matkat Holdings, Ltd., a private company which is controlled by Peter de Visser,

(4)

365,000 of these shares represent currently exercisable share purchase options (365,000 vested),

(5)

300,000 of these shares represent currently exercisable share purchase options (290,000 vested),



77



(6)

500,000 of these shares represent currently exercisable share purchase options (475,000 vested),

(7)

250,000 of these shares represent currently exercisable share purchase options (250,000 vested),

(8)

250,000 of these shares represent currently exercisable share purchase options (250,000 vested),

(9)

250,000 of these shares represent currently exercisable share purchase options (187,500 vested); and

(10)

400,000 of these shares represent currently exercisable share purchase options (100,000 vested)



# Based on 53,266,444 shares of common stock outstanding as of March 14, 2007 and currently exercisable stock options and escrow shares held by each beneficial holder.



Item 7.  Major Shareholders and Related Party Transactions



The Registrant is a publicly-owned corporation, the shares of which are owned by Canadian residents, US residents, and residents of other countries.  The Registrant is not controlled directly or indirectly by another corporation or any foreign government, except as described below.



Table No. 9 lists persons and/or companies holding 5% or more beneficial interest in the Registrant's outstanding common stock.



Table No. 9

5% or Greater Shareholders



|Title
of
Class | Name and Address
Of Owner                                                                                           | Amount and Nature
of Beneficial
Ownership
As of March 16/07 | Percent
Of
Class
As of March 16/07
|-------------- | ------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ----------------------------------
|               | To the Companys knowledge, no current shareholders hold 5% or greater holdings in the Company as of March 16, 2007 |                                                             |                                   



•

Based on 53,403,944 shares issued and outstanding as of March 16, 2007.



The Companys major shareholders have no different voting rights than any other shareholders.



INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS



The Company regularly engages members of management and/or outside companies in which officers and directors have an interest for purposes of management, geological consulting and accounting services.



The Company pays Joanne Freeze, President, Management Fees through Stillwater Enterprises Ltd., a company owned by Joanne Freeze and husband Arthur Freeze. In FY 2006, the Company paid her $29,095(2005 $20,976, 2004 - $13,860) for management services.



The Company has engaged Fredy J. Huanqui, Director, and Stillwater Enterprises Ltd., a company owned by Joanne Freeze and her husband Arthur Freeze, to conduct geological work on its mineral exploration properties. In FY 2006, the Company paid Fredy Huanqui $79,900(2005 - $76,800 2004 - $76,800) and Stillwater Enterprises $103,669(2005  $55,823, 2003 - $49,740) for Geological Consulting Services.





78



The Company has engaged De Visser Gray for accounting services. Peter de Visser, CFO and Director, is a principal of De Visser Gray. In FY 2006, the Company paid $5,773 (2005  $14,692, $2004 - $21,303) in Accounting Fees.



From time to time, the members of Management and Directors listed above have elected to defer the fees incurred into future periods. The debt is non-interest bearing and non-secured. As of December 31, 2006 the date of the most recent audited financial statements the Company owed $Nil (2005 - $Nil, 2004 - $Nil) in fees which have been incurred but not yet paid.



On June 25 1999, Fredy J. Huanqui, Director, loaned the Company $25,000. Terms of the loan was interest at the prime rate of the Hong Kong Bank of Canada plus 1%, calculated monthly. On November 16 1999, Mr. Huanqui loaned the Company a further $77,283.40. In FY 2000, the Company repaid $103,943 and extinguished the loan in full.



On June 7, 1998, the Company entered into an agreement with Diego Ruby Alcocer Rojas, an arms-length party, regarding the staking of the Pamel (Perlita) and Yanamay prospects. The Company paid Mr. Alcocer $2500 and issued him 30,000 common shares with agreements to issue up to 80,000 additional shares for Pamel and 90,000 for Yanamay if certain exploration and production milestones are met. These milestones are: 30,000 common shares for each of the Pamel and Yanamay properties upon completion of an initial drill program on each property; 50,000 common shares upon commencement of commercial production from the Pamel property; and 60,000 common shares upon commencement of commercial production from the Yanamay property. The common shares issued by Candente under the above agreement are subject to a separate personal and private agreement between Mr. Rojas and Arthur Freeze, husband of Candente President and Director Joanne Freeze. Mr. Freeze agreed to purchase from Mr. Rojas all of the shares issued to Mr. Rojas by Candente at Cdn$0.12 per share. The Company agreed to issue any shares due to Mr. Rojas directly to Mr. Freeze once he has made the payments to Mr. Rojas as outlined in the agreement. Under the agreement between Candente and Mr. Rojas, the Company has issued 30,000 which were issued to Mr. Freeze subsequent to his payment of Cdn$3600 to Mr. Rojas. Candente has dropped the Yanamay prospect which has nullified that segment of the agreements. However, the original agreement covering the Pamel (Perlita) property remains in effect. Candente will issue to Mr. Rojas 30,000 shares of common stock upon the completion of a drill program at Pamel and 50,000 shares of common stock upon commencement of commercial production of minerals from the property. Mr. Freeze has an agreement to purchase those additional shares from Mr. Rojas if and when they are issued at Cdn$0.12 per share.



During 2004, Fredy J. Huanqui, Director, was loaned $40,000. This loan is secured, non-interest bearing, and payable on demand.



On May 12th, 2006.the Companyand Canaco Resources Inc.(Canaco)entered into an option agreement to jointly acquire up to a 70% interest in the 67 square kilometre El Oro gold property from Minera Luismin SA de CV (Luismin), a 100 percent owned subsidiary of Goldcorp Inc. Andrew Smith, Director of the Company, is President and CEO of Canaco.



Item 8.  Financial Information



The financial statements as required under ITEM 17 are attached hereto and found immediately following the text of this Annual Report. The Auditors Report of D+H Group LLP,Chartered Accountants for fiscal 2006, and Staley Okada & Partners, Chartered Accountants, for fiscal 2005 and 2004, for the audited financial statements are included herein immediately preceding the audited financial statements.





79



Item 9.  Offer and Listing of Securities





NATURE OF TRADING MARKET



The Company's common shares trade on the Toronto Stock Exchange ("TSX") in Toronto, Ontario, Canada under the trading symbol "DNT" and CUSIP #92293110C.  The Company's common shares commenced trading on the TSX Venture on May 15, 2000, and were listed on the TSX on November 18, 2004.. The closing price of the Companys common stock on the TSX was $0.60 on December 31, 2006.  The Company was listed on the Frankfurt Stock Exchange on November 2, 2005.  The Company listed on the Lima Stock Exchange/Bolsa de Valores de Lima (BVL) on February 19, 2007 and commenced trading its common shares on that Exchange on February 21, 2007.



Table No. 10 lists the volume of trading and high, low and closing sales prices on the TSX and TSX-V for shares of the Company's common stock for the last twelve months, the most recent 12 fiscal quarters, and the last five fiscal years.



Table No. 10

Canadian Venture Exchange Stock and Toronto Stock Exchange Trading Activity

(in Canadian dollars)



|Period
Ended            | Average Daily
Volume | High | Low  | Close
|----------------------- | -------------------- | ---- | ---- | -----
|                        |                      |      |      |      
|December 2006           | 131,452              | 1.31 | 1.23 | 1.29 
|November 2006           | 311,452              | 1.16 | 1.11 | 1.14 
|October 2006            | 129,085              | 0.96 | 0.92 | 0.94 
|September 2006          | 110,205              | 0.93 | 0.89 | 0.92 
|August 2006             | 123,466              | 1.04 | 1.00 | 1.02 
|July 2006               | 70,953               | 1.07 | 1.00 | 1.04 
|June 2006               | 91,967               | 0.97 | 0.91 | 0.94 
|May 2006                | 247,962              | 1.06 | 1.00 | 1.02 
|April 2006              | 201,111              | 1.08 | 1.00 | 1.06 
|March 2006              | 307,941              | 0.93 | 0.87 | 0.89 
|February 2006           | 70,174               | 0.76 | 0.72 | 0.72 
|January 2006            | 144,825              | 0.78 | 0.74 | 0.76 
|                        |                      |      |      |      
|Quarter ended 12/31/06  | 190,680              | 1.31 | 0.92 | 1.29 
|Quarter ended 09/30/06  | 101,541              | 1.07 | 0.89 | 0.92 
|Quarter ended 06/30/06  | 180,346              | 1.08 | 0.91 | 0.94 
|Quarter ended 03/31/06  | 174,313              | 0.93 | 0.72 | 0.89 
|                        |                      |      |      |      
|Quarter ended 12/31/05  | 101,499              | 0.72 | 0.72 | 0.67 
|Quarter ended 09/30/05  | 112,606              | 0.79 | 0.5  | 0.53 
|Quarter ended 06/30/05  | 48,461               | 0.69 | 0.31 | 0.63 
|Quarter ended 03/31/05  | 86,541               | 0.65 | 0.32 | 0.45 
|                        |                      |      |      |      
|Quarter ended 12/31/04  | 60,729               | 0.80 | 0.48 | 0.60 
|Quarter ended 09/30/04  | 49,013               | 0.67 | 0.42 | 0.55 
|Quarter ended  06/30/04 | 62,014               | 1.02 | 0.55 | 0.63 
|Quarter ended  03/31/04 | 75,216               | 1.17 | 0.83 | 0.92 



80



|Year ended 12/31/06 | 161,720 | 1.16 | 1.10 | 1.16
|------------------- | ------- | ---- | ---- | ----
|Year ended 12/31/05 | 87,267  | 0.79 | 0.31 | 0.67
|Year ended 12/31/04 | 60,290  | 1.17 | 0.42 | 0.60
|Year ended 12/31/03 | 79,623  | 1.39 | 0.45 | 1.02
|Year ended 12/31/02 | 38,425  | 0.65 | 0.15 | 0.61



Table No. 11 lists, as of March 14, 2007, share purchase warrants outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants.



Table 11

Share Purchase Warrants Outstanding



|Number of Share
Purchase Warrants
Remaining
Outstanding | Exercise
Price | Expiration Date of
Share Purchase
Warrants
|------------------------------------------------------- | -------------- | ------------------------------------------
|1,794,121                                               | $1.25          | March 29, 2007                            
|1,161,487                                               | $1.25          | March 31, 2007                            
|1,193,125                                               | $1.65          | November 30, 2007                         
|156,875                                                 | $1.65          | December 04, 2007                         
|150,000                                                 | $1.65          | December 06, 2007                         
|4,455,608                                               | Total          |                                           



On January 21, 2005, Candente received TSX approval to amend the exercise price of a total of 3,192,500 warrants for a limited period expiring February 21, 2005.  The price amendment was effective February 4th, 2005.  None of the warrants were held by insiders. The warrants were adjusted as follows:



|Warrant Certificate Date | Amount    | Expiry Date         | Price | Amended Price
|------------------------ | --------- | ------------------- | ----- | -------------
|                         |           |                     |       |              
|February 21st, 2003      | 850,000   | February 21st, 2005 | $1.10 | $0.55        
|October 21st, 2003       | 312,500   | October 21st, 2005  | $1.00 | $0.55        
|December 10th, 2003      | 1,905,000 | June 10th, 2005     | $1.50 | $0.55        
|December 31st, 2003      | 125,000   | July 01st, 2005     | $1.65 | $0.55        



Debt Securities to be Registered.  Not applicable.

American Depository Receipts.  Not applicable.

Other Securities to be Registered. Not applicable



Shareholder Information



The Registrant's common stock is issued in registered form and the following information is from the Registrant's registrar and transfer agent, Pacific Corporate Trust Company in Vancouver, British Columbia.



On March 16, 2007, the shareholders' list for the Company's common shares showed 61 registered shareholders and 53,266,444 shares issued and outstanding. Of this total, 12 registered common shareholders holding 6,901,450 shares, or 12.96% of the total shares outstanding, were resident in the United States.



On March 16, 2007, the Company was aware of 52 holders of its Share Purchase Warrants, 5 of which are located in the United States.  These warrants were issued in conjunction with private placements and are non-transferable.



81



The Registrant has not declared any dividends since inception and does not anticipate that it will do so in the foreseeable future.  The present policy of the Registrant is to retain future earnings for use in its operations and the expansion of its business.



The Registrant is unaware of any active market in the United States for its common shares.  The Registrant's common shares are not registered to trade in the United States in the form of American Depository Receipts (ADR's) or similar certificates.



LEGAL PROCEEDINGS



The Company knows of no material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.



The Company knows of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.



Item 10.  Additional Information



A. Share Capital



The Company has unlimited number of authorized common share capital. As of 12/31/06, the end of the Company's most recently available fiscal year, 53,256,444 common shares were outstanding.  At the Special General Meeting of Shareholders held on March 9, 2007, the shareholders approved the Companys Continuation to British Columbia and an increase in the authorized common shares to an unlimited number.



The Company has financed its activities through the sale of equity capital.  The timing of such sales was dependent on the requirements of the Company and the economic climate.  The Company anticipates having to raise additional funds by equity issuance in the next several years, as the Company does not expect to generate material revenue from mining operations or to achieve self-sustaining commercial mining operations for several years.



The most recent financings are described in the following paragraphs.



On December 7, 2006, the Company closed a non-brokered private placement of 3,000,000 units at $1.25 per unit.  Each unit consisted of one share and one-half of one share purchase warrant.  One whole warrant permits the holder to purchase one common share of the Company at a price of $1.65 until November 30, December 4, 2007 and December 6, 2007, however, this period will be shortened if the common shares of the Company trade above the exercise price for 30 consecutive trading days.  The common shares issued in this placement were subject to a four-month hold period expiring March 31, 2007, April 5, 2007 and April 7, 2007.  The Company paid finders fees in cash equal to 2.8% of the total value of the gross proceeds raised.  The net proceeds of the private placement are to be used for funding exploration and development activities on the Companys mineral properties and for general corporate purposes.



















82



On March 31, 2006, the Company completed the closings of a non-brokered private placement of a total of 5,380,066 units representing gross proceeds of $4,573,056.10 at $0.85 per unit.  Each unit consisted of one share and one-half share purchase warrant.  One whole non-transferable share purchase warrant permits the holder to purchase one share of the Company at a price of $1.25 per share for a period of twelve months following the closing dates of March 29, 2007 and March 31, 2006.  The shares issued in the placement were subject to a four month hold period, expiring July 30, 2006 and August 1, 2006 respectively.  The Company paid a finders fee of 7% in cash and 7% in warrants on proceeds received only on independent placees introduced to Candente by MaxCapital Markets Ltd. of Toronto and a finders fees of 6% in cash and 6% in warrants only on independent placees introduced to Candente by Brighton Capital Corp. of Los Angeles. Shares placed by Brighton Capital in the United States were sold under an exemption from registration for private offerings pursuant to Rule 506 of Regulation D under the Securities Act of 1933.

The net proceeds were to be used for funding exploration and development activities on the Companys mineral properties and for general corporate purposes.



In April 2005, the Company completed a non-brokered private placement of 7,450,000 shares at a price of Cdn$0.50 for gross proceeds of Cdn$3,725,000 to seven institutional placees.  In consideration of introductions made to two of the placees, Meridian Capital International Inc. received a commission in the amount of Cdn$173,250 and 300,000 share purchase warrants.  The commission was 7% of proceeds from the two placees and the warrants were equal to 6% of the numbers of shares sold to the two placees.  Each warrant is exercisable at a price of $0.70 for a period of eighteen months until October 22, 2006.  If the warrants were exercised within the first four-month hold period of the term, the shares issued upon exercise will be subject to a hold period, expiring August 23, 2005.  The warrants were not exercised.



In January 2004, the Company completed the private placement of 250,000 flow-through common units at a price of Cdn$1.20 for gross proceeds of Cdn$300,000. Each unit consisted of one flow-through common share and one-half of a warrant, with each full warrant exercisable for one flow-through common share at a price of Cdn$1.65 until June 30, 2005.



In December 2003, the Company completed a private placement of 3,333,333 units at a price of Cdn$1.05 for gross proceeds of Cdn$3,500,000. Each unit consisted of one common share and one-half of a share purchase warrant, with each full warrant exercisable for a common share at a price of Cdn$1.50 per share until June 10, 2005. As agent for the placement, Octagon Capital Corporation received a 7% cash commission and options to purchase 333,334 common shares at a price of Cdn$1.05 until June 10, 2005.



In October 2003, the Company completed the private placement of 625,000 units at a price of Cdn$0.80 per unit for gross proceeds of Cdn$500,000. Each unit consisted of one share and one-half of a share purchase warrant, with each full warrant exercisable at a price of Cdn$1.00 per share until October 21, 2005.



In February 2003, the Company completed a private placement with Goldcorp by issuing 1,700,000 units at Cdn$0.60 per unit. Each unit consisted of one common share and one-half of a common stock purchase warrant, with each full warrant exercisable into one common share at a price of Cdn$0.90 until February 21, 2004 and at a price of Cdn$1.10 from February 22, 2004 until February 21, 2005. Net proceeds to the Company from the placement was $687,330.











83



In August 2002, the Company completed two private placements of common shares. In the first, the Company issued 650,000 units at $0.45 per unit. Each unit consisted of one common shareand one-half of a common share warrant. Each full warrant is exercisable into a common share at a price of Cdn$0.55 until August 19, 2003 and at Cdn$0.60 from August 20, 2003 until August 19, 2004. 470,000 of the units were flow-through units. The second private placement consisted of 2,000,000 common shares at a price of Cdn$0.60 per share. The company received net proceeds of $187,650 from the first placement and net proceeds of $769,820 from the second.



In May 2002, the Company closed the private placement of 2,850,000 units at Cnd$0.35 per unit, with each unit consisting of one common share and one-half of a common share purchase warrant. Each full warrant is exercisable into a common share at a price of Cdn$0.44 until May 16, 2003 and at Cdn$0.49 from May 17, 2003 until May 16, 2004. 2,330,000 of the units were flow through units. The Company also issued 43,000 common shares at a deemed price of Cdn$0.34 as a finders fee. Total proceeds to the Company were $636,490.



In February 2002, the Company completed the private placement of 4,869,002 units consisting of one common share and one common share purchase warrant for Cdn$0.15 per unit. The Warrants are exercisable at Cdn$0.20 until January 31, 2003 and at Cdn$0.25 from February 1, 2003 until January 31, 2004. Net proceeds from the placement was Cdn$441,700.



In June 2001, the Company completed the sale of 1,265,700 Units at a price of Cdn$0.20 per Unit. Each Unit consisted of one common share and one-half of a Share Purchase Warrant. One full Warrant is exercisable for one common share at a price of Cdn$0.25 until October 22, 2002. Total proceeds to the Company totaled $253,140 after the payment of a Corporate Finance Fee of Cdn$21,657.



In February 2001, The Company sold 600,000 Units at a price of Cdn$0.25 per Unit. Each Unit consisted of one common share and one-half of a Share Purchase Warrant. One full Warrant is exercisable at a price of Cdn$0.35 until September 15, 2002. Proceeds to the Company totaled Cdn$150,000 as no finance fees were due.



The Company completed its Initial Public Offering in May 2000 by selling 2,068,000 Units at a price of Cdn$0.45 per Unit. Each Unit consisted of one common share and two Share Purchase Warrants. Two Warrants were exercisable into one common share at a price of Cdn$0.45 per share for the first nine months and at a price of Cdn$0.60 per share for an additional nine months. The warrants expired on November 15, 2001. Net proceeds to the Company after Finance Fees and costs of the offering totaled Cdn$505,095.



Stock Options



Incentive Stock Options to purchase securities from Registrant are granted to Directors and Employees of the Company on terms and conditions acceptable to the regulatory authorities in Canada, notably the Toronto Stock Exchange.



At the Annual General Meeting of the Company held on June 15, 2005, Shareholders approved an Amended Stock Option Plan for the Company. The details of the amended plan are as follows:



















84



1.

PURPOSE



The purpose of this Stock Option Plan (the Plan) is to encourage common stock ownership in Candente Resource Corp.(the Company) by directors, officers and employees of the Company or any subsidiary of the Company, by consultants of the Company or any affiliate of the Company, or by an employee of a company which provides management services to the Company at the time an option is granted hereunder (hereinafter referred to as Optionees) who are primarily responsible for the management and profitable growth of its business and to advance the interests of the Company by providing additional incentive for superior performance by such persons and to enable the Company to attract and retain valued directors, officers, employees and consultants by granting options (the Options or Option) to purchase unissued common shares (the Common Shares) of the Company on the terms and conditions set forth in this Plan and any stock option agreements (the Stock Option Agreements) entered into between the Company and the Optionees in accordance with the Plan.



2.

ADMINISTRATION



The Plan shall be administered by a committee (the Administrator) to be appointed by the board of directors (the Board of Directors) and whose members will consist initially of: Joanne C. Freeze, President and Chief Executive Officer; Michael Casselman, Director; and Lola Montagne, Corporate Secretary.  No member of the Administrator shall by virtue of such appointment be disentitled or ineligible to receive Options.  The Administrator shall have full authority to interpret the Plan and to make such rules and regulations and establish such procedures as it deems appropriate for the administration of the Plan, taking into consideration the recommendations of the Board of Directors and management, and the decision of the Administrator shall be binding and conclusive.  The decision of the Administrator shall be binding, subject to any express direction by resolution of the Board of Directors of the Company from time to time and further provided that a decision of the majority of persons comprising the Board of Directors in respect of any matter hereunder shall be binding and conclusive for all purposes and upon all persons.  The senior officers of the Company are authorized and directed to do all things and execute and deliver all instruments, undertakings and applications as they in their absolute discretion consider necessary for the implementation of the Plan.



3.

NUMBER OF SHARES SUBJECT TO OPTIONS



The Board of Directors of the Company will make available that number of Common Shares for the purpose of the Plan that has been approved by resolution of the shareholders of the Company, subject to the following limitations:



(a)

Subject to adjustment by resolution of the shareholders of the Company or by operation of section 6 or section 7 hereunder, the aggregate number of Common Shares issuable pursuant to the Plan shall not exceed 15% of the Companys issued Common Shares on the date on which an Option is granted under the Plan, including outstanding unexercised Options granted prior to June 15, 2005, being the date that this Plan was amended.  The number of Common Shares issued hereunder may be increased or changed by the Administrator, subject to the approval of the Toronto Stock Exchange or any other stock exchange having jurisdiction over the Company at the time (the Exchange) and the Companys shareholders.



(b)

Subject to section 3(a) hereunder, the number of Common Shares issuable to insiders of the Company, at any time, under the Plan and all other security based compensation arrangements shall not exceed ten percent of the issued and outstanding Common Shares.



(c)

Subject to section 3(a) hereunder, the number of Common Shares issued to insiders of the Company, within any one-year period, under the Plan and all other security based compensation arrangements, shall not exceed ten percent of the issued and outstanding Common Shares.



85



In the event that Options granted under the Plan are surrendered, terminate or expire without being exercised in whole or in part, new Options may be granted covering the Common Shares not purchased under such lapsed Options.  In the event that Options granted under the Plan are exercised in whole or in part, the Common Shares issued upon such exercise will be automatically reloaded into the Plan reserve and new Options may be granted covering the Common Shares purchased under such exercised Options.



4.

PARTICIPATION



Options shall be granted under the Plan only to Optionees as shall be designated from time to time by the Administrator and shall be subject to the approval of such regulatory authorities as the Administrator shall designate, which shall also determine the number of Common Shares subject to such Option.  For the purposes of the Plan, consultant means a person or company, other than a director, officer or employee of the Company, that is engaged to provide services to the Company or an affiliate, other than services in relation to a distribution, under a written contract for an initial, renewable or extended period of 12 months or more and otherwise meets the definition of consultant contained in Multilateral Instrument 45-105 and the definition of service provider in the policies of the Exchange, and includes, for an individual consultant, a company of which the individual consultant is an employee or shareholder, and a partnership of which the individual consultant is an employee or partner.



If the Optionee is an employee, consultant or employee of a company which provides management services to the Company, the Company must represent to the Exchange that the Optionee is a bona fide employee, consultant or employee of a company which provides management services to the Company.



In addition to the Optionees described above, Options may be granted under the Plan to a personal holding company wholly owned by a person eligible to be granted options under the Plan provided the Optionee executes an undertaking in a form as may be required by the Exchange or the Company.



5.

TERMS AND CONDITIONS OF OPTIONS



The terms and conditions of each Option granted under the Plan shall be set forth in written Stock Option Agreements between the Company and the Optionee.  Such terms and conditions shall include the following as well as such other provisions, not inconsistent with the Plan, as may be deemed advisable by the Administrator or as may be required pursuant to the rules or policies of any regulatory authority having jurisdiction over the Company:



(a)

Option Exercise Price:  The option exercise price (the Option Exercise Price) of any Option granted under the Plan shall be equal to or greater than the Market Price on the trading day immediately preceding the day on which the Option has been granted under this Plan; subject in either case to a minimum of $0.10 per Common Share.  For the purposes of the Plan, Market Price is defined as the closing price of the Common Shares as traded on the Exchange.



(b)

Term of Options:  Options may be granted under this Plan exercisable over a period to be determined by the Administrator having regard to such factors as the nature of the relationship of each Optionee to the Company, the length of service and the duties of the Optionee.  Each Option shall be subject to earlier termination as provided in subparagraph (e) below.









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(c)

Payment:  The full purchase price of Common Shares purchased under the Option shall be paid in cash, certified cheque or bank draft, upon the exercise thereof.  A holder of an Option shall have none of the rights of a shareholder until the Common Shares are issued to him or her.  All Common Shares issued pursuant to the exercise of Options granted under the Plan, will be so issued as fully paid and non-assessable Common Shares.  No Optionee or his or her legal representatives, legatees or distributes will be, or will be deemed to be, a holder of any Common Shares subject to an Option under this Plan, unless and until certificates for such Common Shares are issued to him or her under the terms of the Plan.



(d)

Exercise of Options:  The exercise of any Option will be contingent upon receipt by the Company at its head office of a written notice of exercise, addressed to the Secretary of the Company, specifying the number of Common Shares with respect to which the Option is being exercised, accompanied by cash payment, certified cheque or bank draft for the full purchase price of such Common Shares with respect to which the Option is exercised.  An Option may be exercised in full or in part at any time during the term of the Option.  This Plan shall not confer upon the Optionee any right with respect to continuance as a director, officer, employee or consultant of the Company or of any subsidiary or affiliate of the Company.



(e)

Termination of Options:  Any Option granted pursuant hereto, to the extent not validly exercised, and save as expressly otherwise provided herein, will terminate on an earlier date to be determined by the Administrator having regard to such factors as the nature of the relationship of each Optionee to the Company, the length of service and the duties of the Optionee.



(f)

Non-transferability of Options:  No Option shall be assignable or transferable by the Optionee other than by will or the laws of descent and distribution and shall be exercisable during his lifetime only by him.



(g)

Applicable Laws or Regulations:  The Companys obligation to sell and deliver Common Shares under each Option is subject to such compliance by the Company and any Optionee as the Company deems necessary or advisable with all laws, rules and regulations of Canada and the United States of America and any Provinces and/or States thereof applying to the authorization, issuance, listing or sale of securities and, if the Common Shares of the Company are listed on an Exchange, is also subject to the Exchange accepting for listing the Common Shares which may be issued in exercise thereof.



(h)

Amendment of Options Held by Insiders:  The approval of the disinterested shareholders of the Company shall be required for the following:



(i)

the reduction in the Option Exercise Price or the extension of the term of an Option if the Optionee is an insider of the Company at the time of the proposed amendment; and



(ii)

the grant of any new Option to an Optionee who is an insider of the Company where the new Option is granted within three months of the date of cancellation of a previous Option with different terms held by the same insider.



















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6.

ADJUSTMENT IN EVENT OF CHANGE IN STOCK



Each Option shall contain uniform provisions in such form as may be approved by the Administrator to appropriately adjust the number and kind of Common Shares covered by the Option and the exercise price of Common Shares subject to the Option in the event of a declaration of stock dividends, or stock subdivisions or consolidations or reconstruction or reorganization or recapitalization of the Company or other relevant changes in the Companys capitalization (the Change in Capitalization) (other than issuance of additional shares) to prevent substantial dilution or enlargement of the rights granted to the Optionee by such Option.  The number of Common Shares available for Options under the Plan shall be adjusted to reflect the Change of Capitalization, the number of Common Shares receivable on the exercise of an Option granted under the Plan shall be adjusted to include or reflect the Number of Common Shares which the Optionee would have received upon such Changes in Capitalization as if the Optionee had exercised his Option immediately prior to the record date applicable to such Change in Capitalization, and the Option Exercise Price shall be adjusted appropriately by the Administrator and such adjustment shall be effective and binding for all purposes of the Plan, provided, however, that no adjustment will obligate the Company to issue or sell fractional shares.



7.

AMALGAMATION, CONSOLIDATION OR MERGER



If the Company amalgamates, consolidates with or merges with or into another corporation, which it reserves the right to do, any Common Shares receivable on the exercise of an Option granted under the Plan shall be converted into the securities, property or cash which the Optionee would have received upon such amalgamation, consolidation or merger if the Optionee had exercised his Option immediately prior to the record date applicable to such amalgamation, consolidation or merger, and the Option Exercise Price shall be adjusted appropriately by the Administrator and such adjustment shall be binding for all purposes of the Plan.



8.

EFFECT OF TAKEOVER BID



If a person (an Offeror) makes a bona fide offer (the Offer) for Common Shares to a Optionee or to shareholders of the Company generally or to a class of shareholders that includes a Optionee, which Offer, if accepted in whole or in part, would result in the Offeror exercising control over the Company, then immediately on the Company receiving notice of the Offer:



(a)

all unvested Options will become vested and exercisable by the Optionee, despite any vesting schedule applicable to any unexercised Options; and



(b)

the Company will give each Optionee currently holding an Option written notice of:



(i)

the Offer, with full particulars thereof; and



(ii)

the number of Options eligible for exercise by the Optionee.



Following receipt of the Companys notice, a Optionee may exercise his or her Option in whole or in part so as to permit each Optionee to tender the Common Shares received on exercise (the Option Shares) pursuant to the Offer.



If an Optionee exercises his or her Option as a result of an Offer and if:



(a)

the Offer is not completed within the time specified in the Offer; or





88



(b)

the Optionee does not tender the Option Shares pursuant to the Offer; or



(c)

the Offeror does not take up and pay for all of the Option Shares tendered by the Optionee pursuant to the Offer,



then the Optionee will return to the Company the Option Shares or, in the case of clause (c) above, the Option Shares that are not taken up and paid for, and the Company will reinstate the Option Shares as authorized but unissued Common Shares and the terms of the Option, including any vesting schedule, as set forth in the Plan and the Stock Option Agreement will again apply to the Option.  If an Optionee returns any Option Shares to the Company under this section 8, the Company will refund the Option Exercise Price to the Optionee for those Option Shares.  The Optionee will not be entitled to sell the Option Shares except pursuant to the Offer.



Control means: (i) the right to exercise 20% or more of the voting rights attached to all of the Companys outstanding voting securities; or (ii) the right to elect or appoint, directly or indirectly, a majority of the Companys directors.



9.

SECURITIES REGULATION AND APPROVALS



The Companys obligation to authorize, issue, and deliver Common Shares upon exercise of any Option is subject to:



(A)

THE SATISFACTION OF ALL REQUIREMENTS UNDER APPLICABLE SECURITIES LAWS AND THE RECEIPT OF ALL REGULATORY APPROVALS THAT THE COMPANY OR ITS COUNSEL DETERMINES TO BE NECESSARY OR ADVISABLE IN CONNECTION WITH THE AUTHORIZATION, ISSUANCE, OR DELIVERY;



(B)

THE LISTING OF THOSE COMMON SHARES ON THE EXCHANGE; AND



(C)

THE RECEIPT FROM AN OPTIONEE OF ANY REPRESENTATIONS, WARRANTIES, AGREEMENTS, AND UNDERTAKINGS AS TO FUTURE DEALINGS IN COMMON SHARES PURCHASED UNDER ANY OPTION THAT THE COMPANY OR ITS COUNSEL DETERMINES TO BE NECESSARY OR ADVISABLE TO SAFEGUARD AGAINST THE VIOLATION OF THE SECURITIES LAWS OF ANY JURISDICTION.



The Company will take all reasonable steps to obtain any authorizations, approvals, and registrations that may be necessary for the issuance of Common Shares under any Option in compliance with applicable securities laws and for the listing of those Common Shares on the Exchange on which the Common Shares are then listed.



The inability of the Company to obtain any authorizations, approvals, or registrations necessary for the lawful issuance of any Common Shares upon exercise of any Option deemed reasonable by the Administrator will relieve the Company, the Administrator, and the Board of Directors of any liability in respect of the non-issuance of the Common Shares for which the required authorizations, approvals, or registrations were not obtained.  If any Common Shares cannot be issued to any Optionee for whatever reason, the obligation of the Company to issue such Common Shares shall terminate and any Option Exercise Price paid to the Company will be returned to the Optionee.











89



10.

STOCK EXCHANGE RULES



The rules of any Exchange upon which the Common Shares are listed shall be applicable relative to Options granted to Optionees and are deemed to be incorporated herein.  If, at any time, such rules differ from specific terms of this Plan (the Differing Terms), then the rules of the Exchange shall always apply and govern and the Differing Terms shall be of no force and effect.



11.

AMENDMENT AND DISCONTINUANCE OF PLAN



The Board of Directors may from time to time:



(a)

amend or revise the terms of the Plan, subject to Exchange and shareholder approval, if required; or;



(b)

discontinue the Plan at any time,



provided however that save and except by operation of section 10, no such amendment, revision or discontinuance may, without the consent of the Optionee, adversely affect the Optionees rights under any Option theretofore granted under the Plan.



The following types of amendments or revisions to the Plan shall not require approval of the Companys shareholders:



(a)

amendments of a housekeeping nature;



(b)

a change to the vesting provisions of the Plan or any Option;



(c)

a change to the termination provisions of the Plan or any Option which does not entail an extension beyond the original expiry date; and



(d)

the addition of a cashless exercise feature, payable in cash or securities, which provides for a full deduction of the number of the underlying Common Shares from the reserve under the Plan.



The following types of amendments or revisions to the Plan, and any other amendments or revisions determined by the Exchange, shall require approval of the Companys shareholders:



(a)

any amendment to the number of Common Shares issuable under the Plan, including an increase to a fixed maximum number of Common Shares or a change from a fixed maximum number of Common Shares to a fixed maximum percentage.  A change to a fixed maximum percentage which was previously approved by shareholders will not require an additional shareholder approval;



(b)

any change to the eligible Optionees that would have the potential of broadening or increasing insider participation;



(c)

the addition of any form of financial assistance to Optionees;



(d)

any amendment to a financial assistance provision that is more favourable to Optionees;



90



(e)

the addition of a cashless exercise feature, payable in cash or securities, that does not provide for a full deduction of the number of underlying Common Shares from the Plan reserve; and



(f)

the addition of a deferred or restricted share unit or any other provision that results in Optionees receiving Common Shares while no cash consideration is received by the Company.



The Company shall file with the Exchange for pre-clearance the materials to be provided to shareholders in advance of mailing them.



12.

EFFECTIVE DATE AND DURATION OF PLAN



Subject to regulatory compliance, the Plan shall remain in full force and effect from the date provided in the resolution of shareholders approving the Plan and from year to year thereafter until amended or terminated and for so long thereafter as Options remain outstanding in favour of any Optionee.



13.

VESTING



Any Options granted under the Plan shall vest in the Optionee, and may be exercisable by the Optionee in accordance with a vesting schedule to be determined by the Administrator having regard to such factors as the nature of the relationship of each Optionee to the Company, the length of service and the duties of the Optionee.



The Company has adopted a vesting schedule for its common share options.  The Options vest on the anniversary date of granting as follows;



|Anniversary Date           | Vesting
|-------------------------- | -------
|Grant Date                 | 25%    
|6 months after Grant Date  | 25%    
|12 months after Grant Date | 25%    
|18 months after Grant Date | 25%    
|Total Vested               | 100%   



14.

CASHLESS EXERCISE OF OPTIONS



The Administrator may, in its discretion, provide an Optionee with the right and option to exercise an Option (or of any portion thereof remaining unexercised) by electing to receive Common Shares equal in value to the difference between the Option Exercise Price and the Market Price on the date of exercise computing using the following formula, with either a partial or a full deduction of the number of underlying Common Shares from the Plan reserve:



X = Y (A-B)

A

Where

X

=

the number of Common Shares to be issued to the Optionee.

Y

=

the number of Common Shares purchasable under the Option (at the date of such calculation).

A

=

Market Price of one Common Share of the Company (at the date of such calculation).

B

=

Option Exercise Price (as adjusted to the date of such calculation).







91



The names and titles of the Directors and Executive Officers of the Registrant to whom outstanding stock options have been granted and the number of common shares subject to such options is set forth in Table No. 12 as of March 14, 2007, as well as the number of options granted to Directors and all employees as a group.  The exercise price of the options is stated in Canadian Dollars.



Table No. 12

Stock Options Outstanding



|                                  | Number of       | Number of     |          |           
|--------------------------------- | --------------- | ------------- | -------- | ----------
|                                  | Common
Stock    | Stock Options | Exercise | Expiration
|Name                              | Options Granted | Vested        | Price    | Date      
|Joanne Freeze                     | 100,000         | 75,000        | $0.70    | 3-Jan-11  
|CEO, President and Chairman,      | 100,000         | 100,000       | $0.33    | 6-Sep-07  
|Director                          | 100,000         | 100,000       | $0.48    | 17-Jan-08 
|                                  | 50,000          | 50,000        | $0.48    | 4-Feb-08  
|                                  | 100,000         | 100,000       | $0.80    | 31-Oct-08 
|                                  | 150,000         | 150,000       | $0.70    | 6-Jan-10  
|Fredy Jose Huanqui Guerra         | 100,000         | 75,000        | $0.70    | 3-Jan-11  
|VP Business Development and       | 100,000         | 100,000       | $0.33    | 6-Sep-07  
|Exploration Latin America,        | 100,000         | 100,000       | $0.48    | 17-Jan-08 
|Director                          | 50,000          | 50,000        | $0.48    | 4-Feb-08  
|                                  | 100,000         | 100,000       | $0.80    | 31-Oct-08 
|                                  | 150,000         | 150,000       | $0.70    | 6-Jan-10  
|Larry Kornze                      | 65,000          | 65,000        | $0.33    | 31-May-07 
|Independent Director              | 100,000         | 100,000       | $0.33    | 30-May-07 
|                                  | 50,000          | 50,000        | $0.48    | 17-Jan-08 
|                                  | 50,000          | 50,000        | $0.48    | 4-Feb-08  
|                                  | 100,000         | 100,000       | $0.80    | 31-Oct-08 
|Peter de Visser                   | 43,750          | 32,813        | $0.70    | 3-Jan-11  
|Chief Financial Officer, Director | 61,250          | 61,250        | $0.33    | 6-Sep-07  
|                                  | 75,000          | 75,000        | $0.48    | 17-Jan-08 
|                                  | 50,000          | 50,000        | $0.48    | 4-Feb-08  
|                                  | 20,000          | 20,000        | $0.80    | 31-Oct-08 
|                                  | 50,000          | 50,000        | $0.70    | 6-Jan-10  
|Maria Eugenia Montagne,           | 40,000          | 30,000        | $0.70    | 3-Jan-11  
|Corporate Secretary/Treasurer     | 16,250          | 16,250        | $0.23    | 4-Apr-07  
|                                  | 53,750          | 53,750        | $0.33    | 6-Sep-07  
|                                  | 50,000          | 50,000        | $0.48    | 17-Jan-08 
|                                  | 50,000          | 50,000        | $0.48    | 4-Feb-08  
|                                  | 50,000          | 50,000        | $0.80    | 31-Oct-08 
|                                  | 40,000          | 40,000        | $0.70    | 6-Jan-10  





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|                                         | Number of
Common Stock
Options
Granted | Number of
Stock
Options
Vested | Exercise
Price | Expiration
Date
|---------------------------------------- | -------------------------------------- | ------------------------------ | -------------- | ---------------
|Michael Casselman                        | 100,000                                | 75,000                         | $0.70          | 3-Jan-11       
|Director                                 | 326,500                                | 326,500                        | $0.80          | 3-Feb-09       
|                                         | 73,500                                 | 73,500                         | $0.70          | 6-Jul-09       
|James Currie Independent Director        | 250,000                                | 250,000                        | $0.70          | 7-Oct-09       
|Peter Megaw                              | 100,000                                | 100,000                        | $0.70          | 28-Oct-09      
|Independent Director                     | 150,000                                | 150,000                        | $0.70          | 6-Jan-10       
|                                         |                                        |                                |                |                
|Andrew Smith                             | 125,000                                | 93,750                         | $0.75          | 9-Feb-11       
|Independent Director                     | 125,000                                | 93,750                         | $0.75          | 9-Mar-11       
|Thomas Rinaldi                           | 400,000                                | 100,000                        | $0.85          | 3-Oct-11       
|VP Operations                            |                                       
|Total Officers/Directors (9 persons)     |                                        |                                |                |                
|Total Employees/Consultants (53 persons) |                                        |                                |                |                



Shareholders Rights Plan



At the Company Special General Meeting of Shareholders held on March 9, 2007, the shareholders approved a shareholder rights plan (the Rights Plan) which was adopted by the Board of Directors on September 9, 2006. The Rights Plan is currently effective by is subject to the pending approval from the TSX Exchange.



The purpose of the plan is to encourage the fair treatment of the Companys shareholders in connection with any take-over bid for the Company. The Rights Plan is not intended to deter or prevent take-over bids. The Rights Plan must be confirmed by the Companys Independent every three years. If the shareholders do not confirm the Rights Plan, it will terminate. The Rights Plan will also expire if the Rights are redeemed by the Company.



A person could probably secure control of the Company through the ownership of much less than 50% of the Companys shares. Without a shareholder rights plan, a bidder could acquire effective control of the Company over a relatively short period of time, through open market and private purchases and using various techniques permitted under Canadian securities legislation, all without making a bid available to all shareholders. This acquisition of control would probably be an effective deterrent to other potential offerors. The person acquiring control might also be able to consolidate and increase its control, over a period of time, without the price for control ever being tested through an open market auction. Shareholder rights plans are designed to prevent this occurrence by forcing all acquisitions of control into a public offer mode.



















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A public offer will not necessarily achieve all of the objectives of ensuring the maximum value to shareholders. Canadian securities legislation requires a take-over bid to remain open for only 35 days. The Board of Directors does not believe that 35 days would give it enough time to determine whether there are alternatives available to maximize shareholder value or whether there are other potential bidders prepared to pay more than the offeror for the Companys shares. The Rights Plan is intended to provide the Board with sufficient time to pursue alternatives and to provide shareholders with sufficient time to properly assess any take-over bid. The Securities Commissions have concluded in decisions relating to rights plans that a target companys directors will not be permitted to maintain a rights plan solely to prevent a successful take-over bid. The directors must actively seek alternatives to a take-over bid and there must be a real possibility that they will be able to increase shareholder choice and maximize shareholder value.



The Rights Plan:



(a)

provides the Companys directors and shareholders with more time to fully consider any unsolicited take-over bid for the Company without undue pressure;

(b)

allows the directors to explore and develop, if appropriate, other alternatives to maximize shareholder value; and

(c)

allows additional time for competing bids to emerge.



The Company did not propose the Rights Plan in response to or in anticipation of any acquisition or take-over bid. The Rights Plan is not intended to prevent a take-over of the Company, to secure continuance of current management or the directors in office, or to deter fair offers for the Companys common shares. The Rights Plan does not inhibit or prevent any shareholder from using the proxy mechanism set out in the British Columbia Business Corporations Actto promote a change in the management or direction of the Company. The Rights Plan may, however, increase the price to be paid by a potential offeror to obtain control of the Company and may discourage certain transactions.



The Rights Plan does not affect in any way the Companys financial condition. The initial issuance of the Rights will not dilute the Companys shares and will not affect reported earnings or cash flow per share until the Rights separate from the underlying common shares and become exercisable. The adoption of the Rights Plan will not lessen or affect the duty of the Companys directors to act honestly, in good faith, and in the Companys best interests. The Rights Plan is designed to provide the directors with the means to negotiate with an offeror and with sufficient time to seek out and identify alternative transactions on behalf of the Companys shareholders.



Terms of the Rights Plan



To implement the Rights Plan, the Company has issued one Right for each common share outstanding as at 4:00 p.m. (Pacific Standard Time) on September 7, 2006 (the Record Time). The Company will also issue one Right for each additional common share issued after the Record Time. Each Right will entitle the holder to purchase one common share of the Company at a price of five times the Market Price (as defined in the Rights Plan) per common share (the Exercise Price), subject to certain anti-dilution adjustments. The Rights cannot be exercised, however, until the Separation Time (defined below). If a Flip-in Event (defined below) occurs, each Right will entitle the holder to purchase that number of common shares having a total Market Price on the date of the Flip-in Event equal to twice the Exercise Price for an amount of cash equal to the Exercise Price.



Example of Flip-in Event

Market Price = $1.00

Exercise Price= $5.00

2 times Exercise Price = $10.00



94



If a qualified shareholder holds 100 shares, then on a Flip-in Event, he or she could purchase $1000 worth of new common shares for a total purchase price of $500 or $0.50 per share which is a 50% discount to the Market Price. His new position = 100 shares + 1,000 shares (for cost of $500) = 1,100 shares.



Trading of Rights

The issuance of Rights will not change the manner in which shareholders currently trade their common shares. Shareholders do not have to return their certificates to have the benefit of the Rights. Until the Separation Time, the Rights will be evidenced by the certificates for the Companys outstanding common shares and the Rights will be transferred with, and only with, the common shares. After the Separation Time, the Rights will become exercisable, will be evidenced by separate Rights certificates, and will be transferable separately from the common shares.



Separation Time

The Rights will separate and trade apart from the common shares and become exercisable after the Separation Time. The Separation Time generally means the close of business on the tenth trading day after the earlier of:

(a)

the date a person first publicly announces the intention to commence a Take-over Bid (other than a permitted bid or a competing permitted bid) or the date a Take-over Bid (other than a permitted bid or a competing permitted bid) is commenced; and

(b)

the date of the first public announcement that a person has become an Acquiring Person (defined below) by acquiring 20% or more of the Companys voting shares.



A Take-over Bid is an offer to acquire voting shares, or securities convertible into voting shares, that, when combined with the offerors current shareholdings, would result in the offeror holding 20% or more of the Companys outstanding voting shares.



Acquiring Person

An Acquiring Person is generally a person who becomes the beneficial owner of 20% or more of the outstanding voting shares of the Company. Under the Rights Plan, there are various exceptions to the definition of Acquiring Person, including:



(a)

a person who acquires 20% or more of the outstanding voting shares due to

(i)

acquisitions or redemptions of voting shares by the Company,

(ii)

an amalgamation, merger or other statutory procedure requiring shareholder approval,

(iii)

pro rata distributions of voting shares by the Company, or

(iv)

acquisitions of voting shares upon exercise of Convertible Securities (as defined in the Rights Plan) acquired under certain exempt transactions;

(b)

underwriters who obtain voting shares in connection with a distribution of securities under an underwriting agreement with the Company; and

(c)

a person who is the Beneficial Owner of 20% or more of the outstanding voting shares of the Company determined as at the Record Time, provided that this exception ceases to apply if the person increases his or her beneficial ownership of voting shares by more than 1% after the Record Time.



Beneficial Ownership

The thresholds for triggering the Rights Plan are based on the percentage of shares that are Beneficially Owned by a person or its Affiliates or Associates. This is defined in terms of legal or equitable ownership of shares. In addition, a person is deemed to be the Beneficial Owner of shares if that person or its Affiliates or Associates, and any other person acting jointly or in concert with such person, has a right to acquire the shares within 60 days. There are various exceptions to this definition set out in the Rights Plan.



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Flip-in Event



Under the Rights Plan, a Flip-in Event will occur when a person becomes an Acquiring Person. On the occurrence of a Flip-in Event:

(a)

each Right (other than Rights that are void) will entitle the holder to purchase, for the Exercise Price, that number of common shares having a Market Price equal to twice the Exercise Price; and

(b)

any Rights beneficially owned by the Acquiring Person and its affiliates, associates, and transferees, or any person acting jointly or in concert with the Acquiring Person, will become void.



Accordingly, if the Companys directors do not approve a Flip-in Event, an Acquiring Person will suffer significant dilution. The directors may redeem all of the outstanding Rights at a redemption price of $0.0001 per Right at any time before a Flip-in Event occurs or as long as shareholders have approved the redemption.



Permitted Bids

Permitted Bids are exempt from the operation of the Rights Plan. In summary, a Permitted Bid is a take-over bid made by way of a take -over bid circular and that also complies with the following requirements:



(a)

the bid is made to all holders of voting shares of the Company and for all outstanding voting shares;

(b)

the take-over bid must be open for a least 60 days and is subject to an irrevocable condition that more than 50% of the Companys outstanding voting shares (other than shares beneficially owned by the offeror on the date of the bid) are deposited under the bid and not withdrawn;

(c)

voting shares may be tendered at any time during the 60 day period and may be withdrawn until taken up and paid for; and

(d)

if more than 50% of the voting shares (other than shares beneficially owned by the offeror on the date of the bid) are deposited and not withdrawn, the offeror will publicly announce this fact and leave the bid open for another 10 business days.



If an offeror successfully completes a Permitted Bid, the Rights Plan provides that the Company will redeem the Rights at $0.0001 per Right.



A Permitted Bid, even if not approved by the Board, may be taken directly to the Companys shareholders. Shareholders will not be required to approve a Permitted Bid at a meeting. Instead, the Companys shareholders will initially have 60 days to deposit their shares. If more than 50% of the Companys outstanding common shares (other than common shares beneficially owned by the offeror on the date of the take-over bid) have been deposited and are not withdrawn by the end of the 60 day period, the Permitted Bid must be extended for another 10 days to allow initially disapproving shareholders to deposit their shares if they so choose.



Waiver

The directors may waive the application of the Rights Plan to any Flip-in Event if they determine that a person became an Acquiring Person by inadvertence, as long as this person has, within 10 days after the directors determination, reduced its beneficial ownership of shares so that it is no longer an Acquiring Person. The directors may also waive the application of the Rights Plan to any particular Flip -in Event before it has occurred; however, if that happens, the directors will be deemed to have waived the application of the Rights Plan to any other Flip-in Event that occurs after the initial waiver but before the expiry of the take-over bid that the initial waiver relates to.











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Amendments

The directors may supplement or amend the Shareholder Rights Plan Agreement to correct clerical or typographical errors or to maintain its validity as a result of a change in law. At any time before the Separation Time, the Company may amend, vary, or rescind any of the provisions of the Rights Plan and the Rights with the prior consent of the holders of the voting shares. At any time on or after the Separation Date, the Comp any may supplement or amend any of the provisions of the Rights Plan and the Rights with the prior consent of the holders of the Rights.



Memorandum and Articles of Association



The Company was incorporated under the laws of British Columbia, Canada on May 1, 1997. The Company conducted its Initial Public Offering in Canada only and shares of the Company began trading on the Canadian Venture Exchange (now the TSX Venture Exchange) on May 15, 2000.  On September 27, 2002, the Company continued into the federal jurisdiction of Canada under the Canada Business Corporations Act.  On November 18, 2004 the Company was listed on the Toronto Stock Exchange.  On November 2, 2005, the Company commenced trading the Frankfurt Stock Exchange.  On February 19, 2007, the Company was listed on the Bolsa de Valores de Lima (Lima Stock Exchange) and commenced trading its common shares on that exchange on February 21, 2007.  On March 9, 2007 at a Special General Meeting resolution for the Company, shareholders passed the resolution for the Company to change back its continuance to British Columbia under the British Columbia Business Corporation.



There are no restrictions on the business the company may carry on in the Articles of Incorporation.



Under the Companys articles of association and bylaws a director is not allowed to vote on a proposal, arrangement, contract or transaction in which the director is materially interested, unless all the directors have a disclosable interest, in which case any or all of those directors may vote on such resolution.



Articles 16 of the Companys articles address the duties of the directors. Directors must manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers which are not required to be exercised by the shareholders as governed by the New Act. Article 19 addresses Committees of the Board of Directors. Directors may, by resolution, create and appoint an executive committee consisting of the director or directors that they deem appropriate. This executive committee has, during the intervals between meetings of the Board, all of the directors powers, except the power to fill vacancies in the Board, the power to remove a Director, the power to change the membership of, or fill vacancies in, any committee of the Board and any such other powers as may be set out in the resolution or any subsequent directors resolution. Directors may also by resolution appoint one or more committees other than the executive committee. These committees may be delegated any of the directors powers except the power to fill vacancies on the board of directors, the power to remove a director, the power to change the membership or fill vacancies on any committee of the directors, and the power to appoint or remove officers appointed by the directors. Article 18 details the proceedings of directors. A director may, and the Secretary or Assistant Secretary, if any, on the request of a director must call a meeting of the directors at any time. The quorum necessary for the transaction of the business of the directors may be fixed by the directors and if not so fixed shall be deemed to be a majority of directors then in office. If the number of directors is set at one, it quorum is deemed to be one director.



Articles 8 of the Companys bylaws address the borrowing powers of the directors. The borrowing powers are summarized as follows:









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The Directors may, from time to time on behalf of the Company:



a.

borrow money in such manner and amount, on such security from such sources and upon such terms and conditions as they think fit;

b.

issue bonds or other debt instruments outright or as security for any liability or obligation for either the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;

c.

guarantee the repayment of money by any other person or the performance of any obligation or any other person; and

d.

mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part or the present and future assets and undertaking of the Company;



There are no age limit requirements pertaining to the retirement or non-retirement of directors, and a director need not be a shareholder of the Company. The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of directors, if any, will be determined by the shareholders. The remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such who is also a director. The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Companys business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive. Unless other determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependents and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.



Article 21 provides for the mandatory indemnification of directors, former directors, or alternate directors, as well as his or hers heirs and legal personal representatives, or any person subject to any restrictions in the Business Corporations Act, against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. The failure of a director, alternate director, or officer of the Company to comply with the Business Corporations Act or the Companys Articles does not invalidate any indemnity to which he or she is entitled. The directors may cause the Company to purchase and maintain insurance for the benefit of eligible parties who:



a)

is or was a director, alternate director, officer, employee or agent of the Company;



b)

is or was a director, alternate director, officer employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;



c)

at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;



d)

at the request of the Company, holds or held a position equivalent to that of a director, alternate director or officer of a partnership, trust, joint venture or other unincorporated entity;





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against any liability incurred by him or her as such director, alternate director, officer, employee or agent or person who holds or held such equivalent position



The rights, preferences and restrictions attaching to each class of the Companys shares are as follows:



Common Shares



All of the authorized shares of common stock of the Company are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets.  Holders of common stock are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders.  Holders of common stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefore.



Upon liquidation, dissolution or winding up of the Company, holders of common stock are entitled to receive pro rata the assets of Company, if any, remaining after payments of all debts and liabilities.  No shares have been issued subject to call or assessment.  There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds.



The Company may by directors resolution or by ordinary resolution:



(a)

Create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;

(b)

Increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the company is authorized to issue out of any class or series of shares for which no maximum is established;



(c)

Subdivide or consolidate all or any of its unissued, or fully paid issued, shares;



(4)

If the Company is authorized to issue shares of a class or shares with par value;



(A)

Decrease the par value of those shares; or



(B)

If none of the shares of that class of shares are allotted or issued, increase the par value of those shares;



(5)

Change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value;



(6)

Alter the identifying name of any of its shares; or



(7)

Otherwise alter its share or authorized share structure when required or permitted to do so by the New Act.



Subject to Article 9.2 and the New Act, the Company may by special resolution:



(1)

By directors resolution or by ordinary resolution, in each case as determined by the directors, create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, if none of those shares have been issued or vary or delete any special rights or restrictions attached to the shares of any class or series of shares, if none of those shares have been issued.



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(2)

By special resolution of the shareholders of the class or series affected, do any of the acts in (1) above, if any of the shares of the class or series of shares have been issued.



The Company may by directors resolution or by ordinary resolution, in each case determined by directors, authorize an alteration of its Notice of Articles in order to change its name.



The Company, save as otherwise provided by these Articles and subject to the Business Corporporations Act, may:



(1)

By directors resolution or by ordinary resolution, in each case as determined by the directors, authorize alterations to the Articles that are procedural or administrative in nature or are matters that pursuant to the Articles are solely within the directors powers, control or authority; and

(2)

If the Business Corporations Act does not specify the type of resolution and the Articles do not specify another type of resolution, the Company my by ordinary resolution alter the Articles.



The directors may, whenever they think fit, call a meeting of shareholders. An annual general meeting shall be held once every calendar year at such time (not being more than 15 months after holding the last preceding annual meeting) and place as may be determined by the Directors.



There are no limitations upon the rights to own securities.



There are no provisions that would have the effect of delaying, deferring, or preventing a change in control of the Company.



There is no special ownership threshold above which an ownership position must be disclosed. However, any ownership level above 10% must be disclosed to the TSX Venture Exchange and the British Columbia Securities Commission.



A copy of the Companys new articles is filed as an exhibit to this Form 20-F Annual Report.



Taxation

The following summary of the material Canadian federal income tax consequences are stated in general terms and are not intended to be advice to any particular shareholder. Each prospective investor is urged to consult his or her own tax advisor regarding the tax consequences of his or her purchase, ownership and disposition of shares of Common Stock. The tax consequences to any particular holder of common stock will vary according to the status of that holder as an individual, trust, corporation or member of a partnership, the jurisdiction in which that holder is subject to taxation, the place where that holder is resident and, generally, according to that holders particular circumstances.  This summary is applicable only to holders who are resident in the United States, have never been resident in Canada, deal at arms length with the Company, hold their common stock as capital property and who will not use or hold the common stock in carrying on business in Canada.  Special rules, which are not discussed in this summary, may apply to a United States holder that is an issuer that carries on business in Canada and elsewhere.



This summary is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (collectively, the "Tax Act" or ITA)and the Canada-United States Tax Convention (the Tax Convention) as at the date of the Annual Report and the current administrative practices of Canada Customs and Revenue Agency. This summary does not take into account provincial income tax consequences.



Management urges each holder to consult his own tax advisor with respect to the income tax consequences applicable to him in his own particular circumstances.



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CANADIAN INCOME TAX CONSEQUENCES



Disposition of Common Stock.

The summary below is restricted to the case of a holder (a Holder) of one or more common shares (Common Shares) who for the purposes of the Tax Act is a non-resident of Canada, holds his Common Shares as capital property and deals at arms length with the Company.



Dividends



A Holder will be subject to Canadian withholding tax (Part XIII Tax) equal to 25%, or such lower rates as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on his Common Shares. Under the Tax Convention, the rate of Part XIII Tax applicable to a dividend on Common Shares paid to a Holder who is a resident of the United States is, if the Holder is a company that beneficially owns at least 10% of the voting stock of the Company, 5% and, in any other case, 15% of the gross amount of the dividend. 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 for Canada for the account of the Holder.



Disposition of Common Shares



A Holder who disposes of Common Shares, including by deemed disposition on death, will not be subject to Canadian tax on any capital gain thereby realized unless the common Share constituted taxable Canadian property as defined by the Tax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder unless he held the common share as capital property used by him carrying on a business in Canada, or he or persons with whom he did not deal at arms length alone or together held or held options to acquire, at any time within the 60 months preceding the disposition, 25% or more of the issued shares of any class of the capital stock of the Company.



A Holder who is a resident of the United States and realizes a capital gain on disposition of Common Shares that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the Common Shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resources properties, (b) the Common Shares formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 months preceding disposition, or (c) the Holder (i) was a resident of Canada at any time within the ten years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the Common Shares when he ceased to be resident in Canada.



A Holder who is subject to Canadian tax in respect of a capital gain realized on disposition of Common Shares must include one half of the capital gain (taxable capital gain) in computing his taxable income earned in Canada. The Holder may, subject to certain limitations, deduct one half of any capital loss (allowable capital loss) arising on disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains of any of the three preceding years or any subsequent year.



UNITED STATES FEDERAL INCOME TAX CONSEQUENCES



The following is a discussion of material United States Federal income tax consequences, under the law, generally applicable to a U.S. Holder (as defined below) of common shares of the Company. This discussion does not cover any state, local or foreign tax consequences.



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The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the Code), Treasury Regulations, published Internal Revenue Service (IRS) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possible on a retroactive basis, at any time.  In addition, the discussion does not consider the potential effects, both adverse and beneficial, or recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. The discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company. Each holder and prospective holder of common shares of the Company is advised to consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company applicable to their own particular circumstances.



U.S. Holders



As used herein, a (U.S. Holder) includes a holder of common shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, an estate whose income is taxable in the United States irrespective of source or a trust subject to the primary supervision of a court within the United States and control of a United States fiduciary as described in Section 7701(a)(30) of the Code. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a functional currency other than the U.S. dollar, shareholders who hold common shares as part of a straddle, hedging or conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.



Distribution on Common Shares of the Company



U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions.  Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holders United States Federal Income tax liability or, alternatively, individuals may be deducted in computing the U.S. Holders United States Federal taxable income by those individuals who itemize deductions.  (See more detailed discussion at Foreign Tax Credit below).  To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holders adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Dividend income will be taxed at marginal tax rates applicable to ordinary income while preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust.  There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.



In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale of other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.



102



Dividends paid on the common shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.  A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a foreign personal holding company or a passive foreign investment company, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company.  The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.



Under current Treasury Regulations, dividends paid on the Companys common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends and the proceeds from a sale of the Companys common shares paid in the U.S. through a U.S. or U.S. related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to the 31% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holders U.S. federal income tax liability, provided the required information is furnished to the IRS.



Foreign Tax Credit



For individuals whose entire income from sources outside the United States consists of qualified passive income, the total amount of creditable foreign taxes paid or accrued during the taxable year does not exceed $300 ($600 in the case of a joint return) and an election is made under section 904(j), the limitation on credit does not apply.



A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld.  Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayers income subject to tax.  This election is made on a year-by-year basis and applies to all foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from) the U.S. Holder during the year.  There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holders United States income tax liability that the U.S. Holders foreign source income bears to his/her or its worldwide taxable income in the determination of the application of this limitation. The various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process.  In addition, this limitation is calculated separately with respect to specific classes of income such as passive income, high withholding tax interest, financial services income, shipping income, and certain other classifications of income. Dividends distributed by the Company will generally constitute passive income or, in the case of certain U.S. Holders, financial services income for these purposes.  The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and management urges holders and prospective holders of common shares of the Company to consult their own tax advisors regarding their individual circumstances.

















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Disposition of Common Shares of the Company



A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (I) the amount of cash plus the fair market value of any property received, and (ii) the shareholders tax basis in the common shares of the Company.  Preferential tax rates apply to long-term capital gains of U.S. Holders, which are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are capital assets in the hands of the U.S. Holder, which will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder.  Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year.  Deductions for net capital losses are subject to significant limitations.  For U.S. Holders, which are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted, but individuals may not carry back capital losses. For U.S. Holders, which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.



Other Considerations



In the following circumstances, the above sections of the discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Company.



Foreign Personal Holding Company



If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Companys outstanding shares is owned, actually or constructively, by five or fewer individuals who are citizens or residents of the United States and 60% (50% after the first tax year) or more of the Companys gross income for such year was derived from certain passive sources (e.g. from interest income received from its subsidiaries), the Company would be treated as a foreign personal holding company.  In that event, U.S. Holders that hold common shares of the Company would be required to include in gross income for such year their allocable portions of such passive income to the extent the Company does not actually distribute such income.



The Company does not believe that it currently has the status of a foreign personal holding company. However, there can be no assurance that the Company will not be considered a foreign personal holding company for the current or any future taxable year.



Foreign Investment Company



If 50% or more of the combined voting power or total value of the Companys outstanding shares are held, actually or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31), and the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Company might be treated as a foreign investment company as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gains.











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Passive Foreign Investment Company



As a foreign corporation with U.S. Holders, the Company could potentially be treated as a passive foreign investment company (PFIC), as defined in Section 1297 of the Code, depending upon the percentage of the Companys income which is passive, or the percentage of the Companys assets which is held for the purpose of producing passive income.



Certain United States income tax legislation contains rules governing PFICs, which can have significant tax effects on U.S. shareholders of foreign corporations.  These rules do not apply to non-U.S. shareholders.  Section 1297 (a) of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (I) 75% or more of its gross income is passive income, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the company is a controlled foreign corporation or makes an election, by adjusted tax basis), of its assets that produce or are held for the production of passive income is 50% or more.  The taxation of a US shareholder who owns stock in a PFIC is extremely complex and is therefore beyond the scope of this discussion.  Management urges US persons to consult with their own tax advisors with regards to the impact of these rules.



Controlled Foreign Corporation



A Controlled Foreign Corporation (CFC) is a foreign corporation more than 50% of whose stock by vote or value is, on any day in the corporations tax year, owned (directly or indirectly) by U.S. Shareholders. If more than 50% of the voting power of all classes of stock entitled to vote is owned, actually or constructively, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own actually or constructively 10% or more of the total combined voting power of all classes of stock of the Company could be treated as a controlled foreign corporation under Subpart F of the Code.  This classification would affect many complex results, one of which is the inclusion of certain income of a CFC, which is subject to current U.S. tax. The United States generally taxes United States Shareholders of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such United States Shareholders are generally treated as having received a current distribution out of the CFCs Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFCs earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Corporation which is or was a United States Shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Company (accumulated in corporate tax years beginning after 1962, but only while the shares were held and while the Company was controlled) attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to the United States Shareholders of the CFC. This rule generally will be effective for taxable years of United States Shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States Shareholders. The PFIC provisions continue to apply in the case of PFIC that is also a CFC with respect to the U.S. Holders that are less than 10% shareholders. Because of the complexity of Subpart F, a more detailed review of these rules is outside of the scope of this discussion.



The amount of any backup withholding will not constitute additional tax and will be allowed as a credit against the U.S. Holders federal income tax liability.









105



Filing of Information Returns.  Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply, and management urges United States Investors to consult their own tax advisors concerning these requirements.



Item 11.  Disclosures about Market Risk



The majority of the Companys mineral exploration properties are located outside of Canada. As a Canadian Company, Candentes cash balances are kept primarily in Canadian funds, while many exploration and property expenses are denominated in United States dollars, or the local currency. 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.



Item 12.  Description of Other Securities



Not Applicable





Part II



Item 13.  Defaults, Dividend Arrearages and Delinquencies



Not Applicable



Item 14.  Modifications of Rights of Securities Holders and Use of Proceeds



Not Applicable



Item 15.  Controls and Procedures



The Companys chief executive officer, Joanne Freeze, and chief financial officer, Peter de Visser, have evaluated and reviewed our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based upon this evaluation and review, the officers have concluded that the Companys disclosure controls and procedures are effective in timely alerting them to the information relating to the Company and the Companys consolidated subsidiaries required to be included in this Form 20-F Annual Report and sufficient to comply with Rules 13a-15(c) and 15d-15(c) of the Securities Exchange Act of 1934.



There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.



There were no changes in the Companys internal controls over financial reporting that occurred during the Companys most recently completed fiscal year that has affected, or is reasonably likely to affect, the Companys internal control over financial reporting.  Nor were there any significant deficiencies or material weaknesses in the Company's internal controls requiring corrective actions.





106



Item 16A.  Audit Committee Financial Experts



The Company considers Peter de Visser to be its Audit Committee Financial Expert, but is not considered to be independent as defined by the rules of the American Stock Exchange. Mr. de Visser is a Chartered Accountant and has been a principal of De Visser Gray, a Chartered Accountant company located in Vancouver B.C., since 1987. De Visser Gray is currently registered with both the Canadian Public Accountability Board and the Public Company Accounting Oversight Board of the United States. He has been a member of the Institute of Chartered Accountants of British Columbia since 1976.



Item 16B.  Code of Ethics



The Company does not currently have a Code of Ethics. Management is currently drafting a Code of Ethics which is intended to be in place for fiscal 2007.



Item 16C.  Principal Accountant Fees and Services



The following table details the fees paid by the Company to D&H Group LLP and Staley Okada & Partners for professional services provided to the Company for fiscal years, 2004, 2005 and 2006, ended December 31.

|                        | Fiscal Year Ended
December 31
|----------------------- | -----------------------------
|                        | 2006                         
|Audit Fees:             |                              
|Audit Fees: (1)         | 37,000­(3)­                  
|Audit Related Fees: (2) |                              
|Tax Fees                |                              
|Other Fees              |                              
|                        |                              
|Total Fees:             | 37,000(3)                    



(1)

Fees related to the audit of the Companys financial statements for the years ended December 31, 2004, 2005 and 2006 and review of the Companys responses to comments presented by securities regulators.



(2)

Includes fees related to the review of the Companys interim financial statements and review of filings for the British Columbia Securities Commission.



(3)

Management estimate as the Company has not been billed for services.



Item 16D.  Exemptions from the Listing Standards for Audit Committees



Not Applicable



Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers



Not Applicable









107



Part III



Item 17.  Financial Statements



The Company's financial statements are stated in Canadian Dollars (USD$) 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 discussed in footnotes to the financial statements.



The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report.  The audit reports of D&H Group LLP, independent Chartered Accountants, and Staley, Okada & Partners, Independent Chartered Accountants, are included herein immediately preceding the financial statements and schedules.



Audited Financial Statements for Fiscal 2006, Fiscal 2005 and Fiscal 2004



Item 18.  Financial Statements



The Company has elected to provide financial statements pursuant to ITEM #17.



Item 19.  Exhibits



(A1)  The financial statements thereto as required under ITEM 17 are attached hereto and found immediately following the text of this Annual Report.  The report of D&H Group LLP, independent Chartered Accountants, and Staley, Okada & Partners, independent Chartered Accountants, for the audited financial statements are included herein immediately preceding the audited financial statements.



Audited Financial Statements



Auditor's Report, dated March 23, 2007

Comments by Auditor for U.S. Readers on Canada-U.S. Reporting



Balance Sheets at December 31, 2006 and December 31, 2005



Consolidated Statements of Operations and Deficitfor the years ended December 31, 2006, 2005 and 2004 and Cumulative, inception to December 31, 2006.



Consolidated Statements of Cash Flowsfor the years ended December 31, 2006, 2005 and 2004 and Cumulative, inception to December 31, 2006.



Notes to Consolidated Financial Statements

















108



ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS (CONT.)



Exhibits:



|1. Certificate of Incorporation, Certificates of Name Change Articles of Incorporation and By-Laws . . . . .                                                                                                                                                                                           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|2. Instruments defining the rights of holders of the securities being registered                                                                                                                                                                                                                       | 
|***See Exhibit Number 1***                                                                                                                                                                                                                                                                             | 
|3. Voting Trust Agreements  N/A                                                                                                                                                                                                                                                                       | 
|A.
4. Material Contracts  Incorporated by reference to Form 20-F and Form 6-K                                                                                                                                                                                                                         | 
|5. List of Foreign Patents  N/A                                                                                                                                                                                                                                                                       | 
|6. Calculation of earnings per share  N/A                                                                                                                                                                                                                                                             | 
|7. Explanation of calculation of ratios  N/A                                                                                                                                                                                                                                                          | 
|8. List of subsidiaries                                                                                                                                                                                                                                                                                | 
|9. Statement pursuant to the instructions to Item 8.A.4, regarding the financial statements filed in registration statements for initial public offerings of securities  N/A
10. Other Documents: Incorporated by reference to Form 20-F and Form 6-K
Form 302 Certifications
Form 906 Certifications | 
|Signature Page                                                                                                                                                                                                                                                                                         | 































































109

#

































CANDENTE RESOURCE CORP.



Consolidated Financial Statements



December 31, 2006



(Stated in U.S. Dollars)













































































110





[candente200620famend017.jpg]









AUDITORS REPORT









To the Shareholders of

Candente Resource Corp.





We have audited the consolidated balance sheet of Candente Resource Corp. as at December 31, 2006 and the consolidated statement of operations, of accumulated unproven mineral rights, and deficit and cash flows for the year then ended.  These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.



We conducted our audit in accordance with Canadian generally accepted auditing standards and with 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 consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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.



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 the results of its operations and cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.



Canadian generally accepted accounting principles vary in certain significant respects from accounting principles generally accepted in the United States.  Application of accounting principles generally accepted in the United States would have affected assets and deficit as at December 31, 2006, 2005 and 2004 and results of operations and cash flows for the years then ended to the extent summarized in Note 12 to the consolidated financial statements.



The balance sheet as at December 31, 2005 and the statements of operations and deficit and cash flows for the December 31, 2005 and 2004 years then ended were audited by other auditors who expressed an opinion without reservation on those statements in their report dated March 22, 2006.





Vancouver, B.C.

D&H Group LLP

March 23, 2007

Chartered Accountants







[candente200620famend018.jpg]





111



[candente200620famend019.jpg]









COMMENTS BY AUDITORS FOR U.S. READERS

ON CANADA  U.S. REPORTING DIFFERENCE









In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the consolidated financial statements are affected by conditions and events that cast substantial doubt on the Companys ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements.  Our report to the shareholders dated March 23, 2007, is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors report when these are adequately disclosed in the consolidated financial statements.









Vancouver, B.C.

D&H Group LLP

March 23, 2007

Chartered Accountants















[candente200620famend020.jpg]



























112

#





Report of Independent Registered Public Accounting Firm

To the Shareholders of Candente Resource Corp.:



We have audited the accompanying consolidated balance sheets of Candente Resource Corp. (the Company) as at December 31, 2005 and 2004 and the related consolidated statements of operations and deficit and cash flows for each of the years in the three-year period ended December 31, 2005. 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 the Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2005, in accordance with Canadian generally accepted accounting principles.



The prior year figures, as at December 31, 2003 and for the year ended December 31, 2003 which are presented for comparative purposes, were audited by another firm of Chartered Accountants, who issued an unqualified opinion dated May 17, 2004.

Staley, Okada & Partners



Vancouver, B.C.

STALEY, OKADA & PARTNERS

March 22, 2006

CHARTERED ACCOUNTANTS

Comments By Auditors For U.S. Reader On Canada - U.S. Reporting Conflict

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when financial statements are affected by future events, the outcome of which is indeterminable. As discussed in Note 1, the Companys continued existence as a going concern is dependent upon the future economic success of its exploration and development activities, the Companys ability to continue to secure adequate financing and the Company achieving a positive cash flow and profitable operations. Our report to the shareholders dated March 22, 2006, is expressed in accordance with Canadian reporting standards, which do not require a reference to such going concern considerations in the auditors report when the situation is adequately disclosed in the financial statements.



Staley, Okada & Partners

#





Vancouver, B.C. March 22, 2006

STALEY, OKADA & PARTNERS CHARTERED ACCOUNTANTS





113





CANDENTE RESOURCE CORP.

Consolidated Statements of Operations and Deficit

For the years ended December 31,

(Stated in U.S. Dollars)





|                                            | 2006            | 2005           
|------------------------------------------- | --------------- | ---------------
|A S S E T S                                 |                
|Current assets                              |                 |                
|Cash and cash equivalents                   | $   3,089,422   | $    681,667   
|Amounts receivable                          | 76,766          | 32,882         
|Marketable securities (Note 6)              | 33,296          | 21,496         
|Due from related parties (Note 7)           | -               | 45,205         
|Prepaid expenses and deposits               | 20,630          | 59,289         
|                                            | 3,220,114       | 840,539        
|                                            |                 |                
|Value added tax receivable (Peru) (Note 11) | 1,068,433       | 470,068        
|Unproven mineral rights (Note 3)            | 10,701,855      | 6,717,218      
|Equipment (Note 4)                          | 151,188         | 171,127        
|                                            | $  15,141,590   | $    8,198,982 
|                                            |                 |                
|                                            |                 |                
|L I A B I L I T I E S                       |                
|Current liabilities                         |                 |                
|Accounts payable and accrued liabilities    | $       864,549 | $       271,121
|Due to related parties                      | -               | 3,159          
|                                            | 864,549         | 274,280        
|                                            |                 |                
|                                            |                 |                
|S H A R E H O L D E R S  E Q U I T Y       |                
|Share capital (Note 5a)                     | $  20,102,654   | $  12,409,512  
|Contributed surplus (Note 5b)               | 1,865,429       | 1,414,117      
|Deficit                                     | (7,691,042)     | (5,898,927)    
|                                            | 14,277,041      | 7,924,702      
|                                            | $  15,141,590   | $    8,198,982 





Continued operations (Note 1)



Approved on behalf of the Board of Directors:





|Joanne Freeze | Peter de Visser
|--------------- | -----------------
|Director        | Director         









114



#





CANDENTE RESOURCE CORP.

Consolidated Statements of Operations and Deficit

For the years ended December 31,

(Stated in U.S. Dollars)



|                                              | 2006                     |  | 2005                  |  | 2004               
|--------------------------------------------- | ------------------------ |  | --------------------- |  | -------------------
|Expenses                                      |                          |  |                       |  |                    
|Amortization of equipment                     | $              65,018    |  | $         32,236      |  | $         47,796   
|Bank charges and interest                     | 7,723                    |  | 10,746                |  | 8,479              
|Corporate development                         | 438,310                  |  | 180,297               |  | 139,297            
|Loss (Gain) on foreign exchange               | (63,181)                 |  | 397                   |  | (222,216)          
|Interest income                               | (63,374)                 |  | (31,483)              |  | (51,577)           
|International security                        | -                        |  | 2,063                 |  | 30,837             
|Investor relations                            | 176,925                  |  | 69,930                |  | 57,336             
|Legal, audit and accounting                   | 134,167                  |  | 106,912               |  | 94,612             
|Management and office salaries                | 200,741                  |  | 166,325               |  | 115,167            
|Office, rent and miscellaneous                | 151,173                  |  | 114,712               |  | 109,995            
|Travel                                        | 5,499                    |  | 125,782               |  | 156,743            
|Regulatory and filing fees                    | 45,714                   |  | 33,682                |  | 45,161             
|Shareholder communications                    | 114,734                  |  | 78,249                |  | 73,865             
|Stock-based compensation expense (Note 5c)    | 574,889                  |  | 195,848               |  | 222,686            
|Write-off of unproven mineral rights          | 3,777                    |  | 419,470               |  | 728,751            
|Recovery of exploration bonds                 | -                        |  | (78,214)              |  | -                  
|                                              |                          |  |                       |  |                    
|Loss for the year                             | (1,792,115)              |  | (1,426,952)           |  | (1,556,932)        
|Deficit, beginning of year                    | (5,898,927)              |  | (4,471,975)           |  | (2,915,043)        
|Deficit, end of year                          | $        (7,691,042)     |  | $     (5,898,927)     |  | $   (4,471,975)    
|                                              |                          |  |                       |  |                    
|Loss per share (Note 8)                       | $                 (0.04) |  | $              (0.04) |  | $            (0.04)
|                                              |                          |  |                       |  |                    
|Weighted average number of shares outstanding | 48,318,120               |  | 41,585,889            |  | 35,763,716         
|                                              |                          |  |                       |  |                    







See accompanying notes



























115



#







CANDENTE RESOURCE CORP.

Consolidated Statements of Cash Flows

For the years ended December 31,

(Stated in U.S. Dollars)



|                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                   | 2006             |  | 2005            |  | 2004            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- |  | --------------- |  | ----------------
|                                                                                                                                                                                                        | Cash provided by (used for):                                                                                                                                                                                                                                                      |                  |  |                 |  |                 
|                                                                                                                                                                                                        | Operating activities                                                                                                                                                                                                                                                              |                  |  |                 |  |                 
|                                                                                                                                                                                                        | Loss for the year                                                                                                                                                                                                                                                                 | $    (1,792,115) |  | $   (1,426,952) |  | $    (1,556,932)
|                                                                                                                                                                                                        | Adjustment for items not involving cash:                                                                                                                                                                                                                                          |                  |  |                 |  |                 
|                                                                                                                                                                                                        | Amortization of equipment                                                                                                                                                                                                                                                         | 65,018           |  | 32,236          |  | 47,796          
|                                                                                                                                                                                                        | Stock-based compensation                                                                                                                                                                                                                                                          | 574,889          |  | 195,848         |  | 222,686         
|                                                                                                                                                                                                        | Write-off of unproven mineral rights                                                                                                                                                                                                                                              | 3,777            |  | 419,470         |  | 728,751         
|                                                                                                                                                                                                        | Changes in non-cash working capital items:                                                                                                                                                                                                                                        |                  |  |                 |  |                 
|                                                                                                                                                                                                        | Amounts receivable                                                                                                                                                                                                                                                                | (43,884)         |  | 28,873          |  | (22,755)        
|                                                                                                                                                                                                        | Due from related parties                                                                                                                                                                                                                                                          | 45,205           |  | 611             |  | (7,316)         
|                                                                                                                                                                                                        | Promissory notes receivable                                                                                                                                                                                                                                                       | -                |  | -               |  | -               
|                                                                                                                                                                                                        | Prepaid expenses and deposits                                                                                                                                                                                                                                                     | 38,659           |  | 8,758           |  | (23,502)        
|                                                                                                                                                                                                        | Marketable securities                                                                                                                                                                                                                                                             | (11,800)         |  | (697)           |  | -               
|                                                                                                                                                                                                        | Accounts payable and accrued liabilities                                                                                                                                                                                                                                          | (111,022)        |  | (135,477)       |  | (17,085)        
|                                                                                                                                                                                                        | Due to related parties                                                                                                                                                                                                                                                            | (3,159)          |  | (26,379)        |  | 14,571          
|                                                                                                                                                                                                        | Cash used for operating activities                                                                                                                                                                                                                                                | (1,234,432)      |  | (903,709)       |  | (613,786)       
|                                                                                                                                                                                                        | Investing activities                                                                                                                                                                                                                                                              |                  |  |                 |  |                 
|                                                                                                                                                                                                        | Acquisition of equipment                                                                                                                                                                                                                                                          | (45,079)         |  | (55,894)        |  | (102,999)       
|                                                                                                                                                                                                        | Unproven mineral property exploration costs                                                                                                                                                                                                                                       | (4,142,748)      |  | (2,216,323)     |  | (2,690,634)     
|                                                                                                                                                                                                        | Unproven mineral property acquisition costs                                                                                                                                                                                                                                       | (284,053)        |  | (203,328)       |  | (288,915)       
|                                                                                                                                                                                                        | Due from related parties                                                                                                                                                                                                                                                          | -                |  | 1,500           |  | (40,000)        
|                                                                                                                                                                                                        | Value added tax receivable                                                                                                                                                                                                                                                        | (598,335)        |  | (217,853)       |  | (173,781)       
|                                                                                                                                                                                                        | Cash used for investing activities                                                                                                                                                                                                                                                | (5,070,215)      |  | (2,691,898)     |  | (3,296,329)     
|                                                                                                                                                                                                        | Financing activities                                                                                                                                                                                                                                                              |                  |  |                 |  |                 
|                                                                                                                                                                                                        | Option payments and exploration funds received                                                                                                                                                                                                                                    | 1,242,520        |  | 300,000         |  | 769,896         
|                                                                                                                                                                                                        | Common shares issued for cash                                                                                                                                                                                                                                                     | 7,809,335        |  | 3,071,863       |  | 454,124         
|                                                                                                                                                                                                        | Share issue costs                                                                                                                                                                                                                                                                 | (339,453)        |  | (140,230)       |  | -               
|                                                                                                                                                                                                        | Subscriptions receivable                                                                                                                                                                                                                                                          | -                |  | -               |  | 59,032          
|                                                                                                                                                                                                        | Cash provided by financing activities                                                                                                                                                                                                                                             | 8,712,402        |  | 3,231,633       |  | 1,283,052       
|                                                                                                                                                                                                        | Net increase(decrease) in cash and cash equivalents                                                                                                                                                                                                                               | 2,407,755        |  | (363,974)       |  | (2,627,063)     
|                                                                                                                                                                                                        | Cash and cash equivalents, beginning of year                                                                                                                                                                                                                                      | 681,667          |  | 1,045,641       |  | 3,672,704       
|                                                                                                                                                                                                        | Cash and cash equivalents, end of year                                                                                                                                                                                                                                            | $    3,089,422   |  | $      681,667  |  | $     1,045,641 
|                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                   |                  |  |                 |  |                 
|                                                                                                                                                                                                        | Supplemental Disclosure of Non-Cash Investing and Financing Activities:                                                                                                                                                                                                          
|                                                                                                                                                                                                        | During 2006, the company issued 132,424 common shares valued at $99,683 pursuant to property option agreements.
During 2006 the company accrued $704,450 of unproven mineral property exploration cost.                                                                          
|During 2005, the Company issued 56,250 common shares valued at $22,205 pursuant to property option agreements.
During 2005, the company accrued $77,593 of unproven mineral property exploration costs.
|                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                        | During 2004, the Company issued 110,000 common shares valued at $48,790, and received marketable securities valued at $20,799 in option payments pursuant to property option agreements.
During 2004, the Company accrued $93,659 of unproven mineral property exploration costs.
|                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                  



116



CANDENTE RESOURCE CORP.

Consolidated Statements of Accumulated Unproven Mineral Rights

For the years ended December 31,

(Stated in U.S. Dollars)



|                                 | Balance
December
31, 2004 |  | Net
Expenditures & Write offs |  | Balance
December
31, 2005 |  | Net
Expenditures (Recovery/Write off) |  |  | Balance
December
31, 2006
|-------------------------------- | ------------------------- |  | ----------------------------- |  | ------------------------- |  | ------------------------------------- |  |  | -------------------------
|                                 | (Note 13)                 |  | (Note 13)                     |  | (Note 13)                 |  |                                       |  |  |                          
|PERU                             | $                         |  | $                             |  | $                         |  | $                                     |  |  | $                        
|El Tigre Property                |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                | 48,965                    |  | 9,600                         |  | 58,565                    |  | 4,500                                 |  |  | 63,065                   
|Deferred exploration costs:      |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                           | 3,259                     |  | 67                            |  | 3,326                     |  | 114                                   |  |  | 3,440                    
|Equipment maintenance & rental   | 1,850                     |  | 536                           |  | 2,386                     |  | 2,902                                 |  |  | 5,288                    
|Field supplies & travel expenses | 29,400                    |  | 1,776                         |  | 31,076                    |  | 5,432                                 |  |  | 36,508                   
|Field office and personnel       | 86,004                    |  | (42)                          |  | 85,962                    |  | 12,343                                |  |  | 98,305                   
|Geological & geophysical         | 34,637                    |  | 3,952                         |  | 38,589                    |  | 51,281                                |  |  | 89,870                   
|Maps & publications              | 8,793                     |  | 53                            |  | 8,846                     |  | 405                                   |  |  | 9,251                    
|Exploration recovery             | (100,000)                 |  | (50,000)                      |  | (150,000)                 |  | (108,343)                             |  |  | (258,343)                
|                                 | 112,808                   |  | (34,058)                      |  | 78,750                    |  | (31,366)                              |  |  | 47,384                   
|Lunahuana Property               |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                | 88,182                    |  | 25,272                        |  | 113,454                   |  | 39,481                                |  |  | 152,935                  
|Deferred exploration costs:      |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                           | 9,081                     |  | 151                           |  | 9,232                     |  | 165                                   |  |  | 9,397                    
|Equipment maintenance & rental   | 2,910                     |  | 498                           |  | 3,408                     |  | 2,804                                 |  |  | 6,212                    
|Field supplies & travel expenses | 24,153                    |  | 1,288                         |  | 25,441                    |  | 2,170                                 |  |  | 27,611                   
|Field office & personnel         | 49,196                    |  | 6,648                         |  | 55,844                    |  | 7,595                                 |  |  | 63,439                   
|Geological & geophysical         | 105,901                   |  | 3,799                         |  | 109,700                   |  | 13,365                                |  |  | 123,065                  
|Maps & publications              | 5,586                     |  | 837                           |  | 6,423                     |  | 856                                   |  |  | 7,279                    
|                                 | 285,009                   |  | 38,493                        |  | 323,502                   |  | 66,436                                |  |  | 389,938                  
|Las Sorpresas Property           |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                | 43,366                    |  | 8,474                         |  | 51,840                    |  | 25,422                                |  |  | 77,262                   
|Deferred exploration costs:      |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                           | 5,258                     |  | 133                           |  | 5,391                     |  | 58                                    |  |  | 5,449                    
|Equipment maintenance & rental   | 2,365                     |  | 458                           |  | 2,823                     |  | 5,167                                 |  |  | 7,990                    
|Field supplies & travel expenses | 16,108                    |  | 2,981                         |  | 19,089                    |  | 1,339                                 |  |  | 20,428                   
|Field office & personnel         | 87,771                    |  | 8,007                         |  | 95,778                    |  | 3,745                                 |  |  | 99,523                   
|Geological & geophysical         | 75,524                    |  | 16,988                        |  | 92,512                    |  | 2,918                                 |  |  | 95,430                   
|Maps & publications              | 389                       |  | 275                           |  | 664                       |  | 22                                    |  |  | 686                      
|Exploration recovery             | (100,000)                 |  | (50,000)                      |  | (150,000)                 |  | (19,285)                              |  |  | (169,285)                
|                                 | 130,781                   |  | (12,684)                      |  | 118,097                   |  | 19,386                                |  |  | 137,483                  





117

#







CANDENTE RESOURCE CORP.

Consolidated Statements of Accumulated Unproven Mineral Rights

For the years ended December 31,

(Stated in U.S. Dollars)



|                                 | Balance
December
31, 2004 |  | Net
Expenditures & Write offs |  | Balance
December
31, 2005 |  | Net
Expenditures (Recovery/Write off) |  |  | Balance December
31, 2006
|-------------------------------- | ------------------------- |  | ----------------------------- |  | ------------------------- |  | ------------------------------------- |  |  | -------------------------
|                                 | (Note 13)                 |  | (Note 13)                     |  | (Note 13)                 |  |                                       |  |  |                          
|                                 | $                         |  | $                             |  | $                         |  | $                                     |  |  | $                        
|Picota Property                  |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                | 53,190                    |  | 8,250                         |  | 61,440                    |  | -                                     |  |  | 61,440                   
|Deferred exploration costs:      |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                           | 4,767                     |  | 29                            |  | 4,796                     |  | 5                                     |  |  | 4,801                    
|Equipment maintenance & rental   | 6,423                     |  | 77                            |  | 6,500                     |  | 980                                   |  |  | 7,480                    
|Field supplies & travel expenses | 11,884                    |  | 214                           |  | 12,098                    |  | 517                                   |  |  | 12,615                   
|Field office & personnel         | 20,935                    |  | 2,018                         |  | 22,953                    |  | 345                                   |  |  | 23,298                   
|Geological & geophysical         | 39,479                    |  | 891                           |  | 40,370                    |  | 1,441                                 |  |  | 41,811                   
|Maps & publications              | 3,106                     |  | 34                            |  | 3,140                     |  | 2                                     |  |  | 3,142                    
|                                 | 139,784                   |  | 11,513                        |  | 151,297                   |  | 3,290                                 |  |  | 154,587                  
|                                 |                           |  |                               |  |                           |  |                                       |  |  |                          
|Pamel Property                   |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                | 85,868                    |  | 18,654                        |  | 104,522                   |  | 15,601                                |  |  | 120,123                  
|Deferred exploration costs:      |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                           | 26,148                    |  | 116                           |  | 26,264                    |  | 38,684                                |  |  | 64,948                   
|Drilling                         | -                         |  | -                             |  | -                         |  | 204,443                               |  |  | 204,443                  
|Equipment maintenance & rental   | 44,886                    |  | 725                           |  | 45,611                    |  | 23,903                                |  |  | 69,514                   
|Field supplies & travel expenses | 26,286                    |  | 2,150                         |  | 28,436                    |  | 49,496                                |  |  | 77,932                   
|Field office & personnel         | 107,134                   |  | 13,007                        |  | 120,141                   |  | 186,670                               |  |  | 306,811                  
|Geological & geophysical         | 126,144                   |  | 9,822                         |  | 135,966                   |  | 143,097                               |  |  | 279,063                  
|Maps & publications              | 10,153                    |  | 94                            |  | 10,247                    |  | 4,970                                 |  |  | 15,217                   
|Options payments received        | (145,000)                 |  | -                             |  | (145,000)                 |  | (913,305)                             |  |  | (1,058,305)              
|                                 | 281,619                   |  | 44,568                        |  | 326,187                   |  | (246,441)                             |  |  | 79,746                   
|                                 |                           |  |                               |  |                           |  |                                       |  |  |                          
|Las Brujas Property              |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                | 16,801                    |  | 6,000                         |  | 22,801                    |  | 6,000                                 |  |  | 28,801                   
|Deferred exploration costs:      |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                           | 2,606                     |  | 22                            |  | 2,628                     |  | 17                                    |  |  | 2,645                    
|Equipment maintenance & rental   | 25                        |  | 57                            |  | 82                        |  | 1,018                                 |  |  | 1,100                    
|Field supplies & travel expenses | 7,605                     |  | 159                           |  | 7,764                     |  | 1,071                                 |  |  | 8,835                    
|Field office & personnel         | 24,687                    |  | 1,611                         |  | 26,298                    |  | 1,435                                 |  |  | 27,733                   
|Geological & geophysical         | 14,856                    |  | 659                           |  | 15,515                    |  | 1,994                                 |  |  | 17,509                   
|Maps & publications              | 2,314                     |  | 18                            |  | 2,332                     |  | 7                                     |  |  | 2,339                    
|                                 | 68,894                    |  | 8,526                         |  | 77,420                    |  | 11,542                                |  |  | 88,962                   

#

















118







CANDENTE RESOURCE CORP.

Consolidated Statements of Accumulated Unproven Mineral Rights

For the years ended December 31,

(Stated in U.S. Dollars)

|                                              | Balance
December
31, 2004 |  | Net
Expenditures & Write offs |  | Balance
December
31, 2005 |  | Net
Expenditures (Recovery/Write off) |  |  | Balance December
31, 2006
|--------------------------------------------- | ------------------------- |  | ----------------------------- |  | ------------------------- |  | ------------------------------------- |  |  | -------------------------
|                                              | (Note 13)                 |  | (Note 13)                     |  | (Note 13)                 |  |                                       |  |  |                          
|                                              | $                         |  | $                             |  | $                         |  | $                                     |  |  | $                        
|Canariaco Property                            |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                             | 120,433                   |  | 14,530                        |  | 134,963                   |  | 72,902                                |  |  | 207,865                  
|Deferred exploration costs:                   |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                                        | 21,356                    |  | 110,953                       |  | 132,309                   |  | 104,077                               |  |  | 236,386                  
|Drilling                                      | 245,911                   |  | 704,353                       |  | 950,264                   |  | 1,516,088                             |  |  | 2,466,352                
|Equipment maintenance & rental                | 42,324                    |  | 79,776                        |  | 122,100                   |  | 128,230                               |  |  | 250,330                  
|Field supplies & travel expenses              | 87,366                    |  | 118,051                       |  | 205,417                   |  | 219,023                               |  |  | 424,440                  
|Field office & personnel                      | 214,547                   |  | 541,800                       |  | 756,347                   |  | 742,424                               |  |  | 1,498,771                
|Geological/geophysical/Engineering            | 232,864                   |  | 320,319                       |  | 553,183                   |  | 603,256                               |  |  | 1,156,439                
|Maps & publications                           | 6,898                     |  | 10,300                        |  | 17,198                    |  | 97,066                                |  |  | 114,264                  
|                                              | 971,699                   |  | 1,900,082                     |  | 2,871,781                 |  | 3,483,066                             |  |  | 6,354,847                
|Alto Dorado/Toril Property                    |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                             | 109,439                   |  | 30,508                        |  | 139,947                   |  | 44,239                                |  |  | 184,186                  
|Deferred exploration costs:                   |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                                        | 43,784                    |  | 860                           |  | 44,644                    |  | 12,657                                |  |  | 57,301                   
|Drilling                                      | 146,010                   |  | -                             |  | 146,010                   |  | 184,211                               |  |  | 330,221                  
|Equipment maintenance & rental                | 100,970                   |  | 14,498                        |  | 115,468                   |  | 9,870                                 |  |  | 125,338                  
|Field supplies, camp & travel                 | 145,149                   |  | 13,320                        |  | 158,469                   |  | 28,717                                |  |  | 187,186                  
|Field office & personnel                      | 403,471                   |  | 62,065                        |  | 465,536                   |  | 65,736                                |  |  | 531,272                  
|Geological & geophysical                      | 498,443                   |  | 70,540                        |  | 568,983                   |  | 45,104                                |  |  | 614,087                  
|Maps & publications                           | 32,465                    |  | 12,212                        |  | 44,677                    |  | 1,781                                 |  |  | 46,458                   
|Option payments received                      | -                         |  | (200,000)                     |  | (200,000)                 |  | (201,587)                             |  |  | (401,587)                
|                                              | 1,479,731                 |  | 4,003                         |  | 1,483,734                 |  | 190,728                               |  |  | 1,674,462                
|Other Properties                              |                           |  |                               |  |                           |  |                                       |  |  |                          
|Acquisition costs                             | 247,727                   |  | 89,803                        |  | 337,530                   |  | 74,144                                |  |  | 411,674                  
|Deferred exploration costs:                   |                           |  |                               |  |                           |  |                                       |  |  |                          
|Assays                                        | 46,773                    |  | 8,176                         |  | 54,949                    |  | 11,764                                |  |  | 66,713                   
|Equipment maintenance & rental                | 31,062                    |  | 7,738                         |  | 38,800                    |  | 17,424                                |  |  | 56,224                   
|Field supplies & travel expenses              | 72,166                    |  | 26,723                        |  | 98,889                    |  | 24,993                                |  |  | 123,882                  
|Field office & personnel                      | 186,598                   |  | 23,009                        |  | 209,607                   |  | 43,457                                |  |  | 253,064                  
|Geological & geophysical                      | 199,292                   |  | 50,151                        |  | 249,443                   |  | 126,169                               |  |  | 375,612                  
|Maps & publications                           | 34,960                    |  | 4,604                         |  | 39,564                    |  | 4,693                                 |  |  | 44,257                   
|Option payments received                      | (10,000)                  |  | -                             |  | (10,000)                  |  | -                                     |  |  | (10,000)                 
|Write-down for impairment of properties value | (25,000)                  |  | -                             |  | (25,000)                  |  | -                                     |  |  | (25,000)                 
|                                              | 783,578                   |  | 210,204                       |  | 993,782                   |  | 302,644                               |  |  | 1,296,426                
|Peru - Total                                  | 4,253,903                 |  | 2,170,647                     |  | 6,424,550                 |  | 3,799,285                             |  |  | 10,223,835               



119









CANDENTE RESOURCE CORP.

Consolidated Statements of Accumulated Unproven Mineral Rights

For the years ended December 31,

(Stated in U.S. Dollars)



|                                          |                                  | Balance
December
31, 2004 |  | Net
Expenditures & Write offs |  | Balance
December
31, 2005 |  | Net
Expenditures (Recovery/Write off) |  |            | Balance December
31, 2006
|----------------------------------------- | -------------------------------- | ------------------------- |  | ----------------------------- |  | ------------------------- |  | ------------------------------------- |  | ---------- | -------------------------
|                                          |                                  | (Note 13)                 |  | (Note 13)                     |  | (Note 13)                 |  |                                       |  |            |                          
|                                          |                                  | $                         |  | $                             |  | $                         |  | $                                     |  |            | $                        
|                                          | Mexico Property                  |                           |  |                               |  |                           |  |                                       |  |            |                          
|                                          | El Oro Property                  |                           |  |                               |  |                           |  |                                       |  |            |                          
|                                          | Acquisition costs                | -                         |  | -                             |  | -                         |  | 53,483                                |  |            | 53,483                   
|                                          | Deferred exploration costs:      |                           |  |                               |  |                           |  |                                       |  |            |                          
|                                          | Assays                           | -                         |  | -                             |  | -                         |  |                                       |  |            |                          
|                                          | Equipment maintenance & rental   | -                         |  | -                             |  | -                         |  |                                       |  |            |                          
|                                          | Field supplies & travel expenses | -                         |  | -                             |  | -                         |  | 22,476                                |  |            | 22,476                   
|                                          | Field office & personnel         | -                         |  | -                             |  | -                         |  | 7,247                                 |  |            | 7,247                    
|                                          | Geological & geophysical         | -                         |  | 688                           |  | 688                       |  | 65,829                                |  |            | 66,517                   
|                                          | Maps & publications              | -                         |  | -                             |  | -                         |  | 618                                   |  |            | 618                      
|                                          | Telecommunications               | -                         |  | -                             |  | -                         |  |                                       |  |            |                          
|                                          |                                  |                           |  | 688                           |  | 688                       |  | 149,653                               |  |            | 150,341                  
|                                          | Mexico Total                     | -                         |  | 688                           |  | 688                       |  | 149,653                               |  |            | 150,341                  
|                                          | CANADA (NEWFOUNDLAND)            |                           |  |                               |  |                           |  |                                       |  |            |                          
|Virgin Arm, Staghorn and Other Properties |                                  |                           |  |                               |  |                           |  |                                      
|Acquisition costs                         |                                  | 166,139                   |  | (97,023)                      |  | 69,116                    |  | 47,964                                |  | 117,080   
|Exploration bonds                         |                                  | 19,068                    |  | (7,629)                       |  | 11,439                    |  | (11,439)                              |  | -         
|Deferred exploration costs:               |                                  |                           |  |                               |  |                           |  |                                       |  |           
|Assays                                    |                                  | 16,582                    |  | (7,679)                       |  | 8,903                     |  | (13)                                  |  | 8,890     
|Drilling                                  |                                  | 50,281                    |  | (50,281)                      |  | -                         |  | -                                     |  | -         
|Equipment maintenance & rental            |                                  | 20,702                    |  | (8,272)                       |  | 12,430                    |  | 2,724                                 |  | 15,154    
|Field supplies & travel expenses          |                                  | 79,090                    |  | (56,597)                      |  | 22,493                    |  | (432)                                 |  | 22,061    
|Field office & personnel                  |                                  | 59,269                    |  | (34,337)                      |  | 24,932                    |  | (530)                                 |  | 24,402    
|Geological & geophysical                  |                                  | 307,578                   |  | (167,864)                     |  | 139,714                   |  | (2,133)                               |  | 137,581   
|Maps & publications                       |                                  | 1,984                     |  | (1,623)                       |  | 361                       |  | -                                     |  | 361       
|Telecommunications                        |                                  | 4,348                     |  | (1,756)                       |  | 2,592                     |  | (442)                                 |  | 2,150     
|Canada Total                              |                                  | 725,041                   |  | (433,061)                     |  | 291,980                   |  | 35,699                                |  | 327,679   
|Total Unproven Mineral Rights             |                                  | 4,978,944                 |  | 1,738,274                     |  | 6,717,218                 |  | 3,984,637                             |  | 10,701,855

















120





CANDENTE RESOURCE CORP.

Notes to Consolidated Financial Statements

December 31, 2006, 2005 and 2004

(Stated in U.S. Dollars)





1.

NATURE OF OPERATIONS AND CONTINUED OPERATIONS



The Company is an exploration stage company incorporated in British Columbia, Canada and its activity is the acquisition and exploration of mineral properties in Peru, Mexico and Newfoundland, Canada.  The recoverability of amounts shown for mineral properties is dependent upon the discovery of economically recoverable reserves, the ability of the Company to complete the exploration and development of the properties, and upon future profitable production or proceeds from the disposition thereof.



The ability of the Company to continue as a going concern and to realize the carrying values of its assets and discharge its liabilities and obligations when due, is dependent upon raising additional capital.  These financial statements do not give effect to any adjustments, which may be necessary should the Company be unable to continue as a going concern and such adjustments may be material.  If future financing is unavailable, the Company may not be able to meet its ongoing obligations, in which case the realizable values of its assets may decline materially from current estimates.



These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments, in the normal course of business.



Although the Company has taken steps to verify title to mineral properties in which it has an interest in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Companys title.





2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Principles of Consolidation



These consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada. References to the Company included herein are inclusive of the Canadian parent company and its wholly owned subsidiaries in the British Virgin Islands, Peru and its 50% subsidiary in Mexico which is accounted for on a proportional basis of accounting.  All significant inter-company transactions and balances have been eliminated.



Unproven Mineral Rights



The cost of mineral properties and their related exploration costs are deferred and amortized over their estimated useful lives following the commencement of production or written-off if the properties are sold or abandoned.  Cost includes the cash consideration and the fair market value of shares issued on the acquisition of mineral properties.  The proceeds from option payments received are credited against the costs of the relevant mineral property and any excess is recognized in income.  The recorded costs of mineral claims and deferred exploration costs represent costs incurred and are not intended to reflect present or future values.



The Company reviews capitalized costs on its mineral properties on a periodic basis, and will recognize an impairment in value based upon current exploration results if any, and upon managements assessment of the probability of future profitable revenues from the property or from the sale of the property.  Managements assessment of the propertys estimated current fair market value is also based upon its review of other property transactions in the same geographic area.



Equipment



Equipment is recorded at cost and amortized over its estimated useful economic lives on a declining balance basis as follows, with half of the normal amount being taken in the year of acquisition; Computer Equipment 30%; Exploration Equipment  20%; Office Furniture and Equipment 20%; Truck 30%; Security Equipment 20%.









121





2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)





Foreign Currency Translation



The Company conducts exploration activities in Peru and incurs exploration expenditures in Mexican Pesos, Peruvian new soles and U.S. dollars and maintains an administrative office in Canada where expenses are incurred in Canadian dollars. The Company considers the U.S. Dollar to be its functional currency.



The Company translates its foreign operations into U.S. dollars on the following basis: monetary assets and liabilities are translated at the rate of exchange in effect at the balance sheet date and non-monetary assets and liabilities are translated at their historical rates.  Expenses are translated at rates prevailing at the date of the transaction except for amortization of equipment, which is translated at historical rates.



Foreign exchange gains and losses from translation of foreign operations are recognized in the current period.



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 the disclosure of any contingent assets and liabilities as at the date of the financial statements, as well as the reported amounts of expenses incurred during the period.  Significant areas requiring that the use of management estimates relate to amortization, valuation of mineral properties and stock-based compensation.  Actual results could differ from those estimates.



Share Capital



Common shares issued for non-monetary consideration are recorded at their fair market value based upon the trading price of the Companys shares on the Toronto Stock Exchange.  Flow-through shares are common shares, which are issued under an agreement that, as provided for in the Canadian Income Tax Act, the Company transfers to the purchaser of the shares the benefits of the exploration expenditures that are financed by the proceeds of the share issue.



Fair Value of Financial Instruments



The carrying amount of cash and cash equivalents, amounts receivable, marketable securities, amounts due to & from related parties, promissory notes receivable, value added tax receivable, and accounts payable and accrued liabilities approximatetheir aggregate fair value due to the short term nature of their component balances.



Cash, marketable securities, and amounts receivable are exposed to credit risk due to the potential for parties to default on their contractual obligations.  The maximum potential loss on the financial instruments is equal to the carrying amounts of those items



Stock-Based Compensation



Stock-based compensation is accounted for at fair value using a fair value option pricing model method.  The estimated fair value of awards of stock-based compensation are charged to operations as options vest,   with offsetting amounts recognized as contributed surplus.  The proceeds received by the Company on the exercise of options are credited to share capital.



Income Taxes



The Company accounts for the tax consequences of the differences in carrying amounts of tax assets and liabilities and their tax bases, using tax rates expected to apply when these temporary differences are expected to be settled.  When the future realization of income tax assets does not meet the test of being more likely than not to occur, a valuation allowance in the amount of the potential future benefit is taken and no future tax asset is recognized.  The Company has taken a valuation allowance against all such potential tax assets.











122





2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)



Cash Equivalents



Cash equivalents consist of temporary investments in commercial paper that is highly liquid and readily convertible to known amounts of cash, with maturity dates of less than 90 days and includes the dollar equivalent of gold in gold grams .  Cash equivalents are inclusive of accrued interest as receipt of these amounts is also considered to be certain and measurable.



Asset Retirement Obligations



The fair value of a liability for an asset retirement obligation is recognised on a discounted cash flow basis when a reasonable estimate of the fair value of the obligation can be made.  The asset retirement obligation is recorded as a liability with a corresponding increase to the carrying amount of the long-lived asset.  Subsequently, the asset retirement cost is allocated to expense using a systematic and rational method and is adjusted to reflect period-to-period changes in the liability resulting from the passage of time and from revisions to either expected payment dates or the amounts comprising the original estimate of the obligation.  The Company has determined that it does not currently have any asset retirement obligations.



Impairment of Long-Lived Assets



Long-lived assets are assessed for impairment when events and circumstances warrant.  The carrying value of a long-lived asset is impaired when the carrying amount exceeds the estimated undiscounted net cash flow from use and fair value.  In that event, the amount by which the carrying value of an impaired long-lived asset exceeds its fair value is charged to earnings.



Marketable Securities



Marketable securities are recorded at cost and are subject to adjustment, to the lower of cost and market value at the end of each reporting period.





3.

UNPROVEN MINERAL RIGHTS



PERU



a)

El Tigre, Lunahuana and Las Sorpresas Properties

Northern Peru



The Company has a 100% interest in the El Tigre, Lunahuana and Las Sorpresas mineral properties, all located in Northern Peru.



During 2004, the Company entered into two separate option agreements whereby the optionee can earn a 51% interest in each of the El Tigre and Las Sorpresas gold properties in Peru by spending $2,500,000 on each property over 3.5 years and by making either cash payments of $570,000 or issuing 250,000 common shares by January 31, 2008.  On July 11, 2006 Orex advised Candente of their decision to withdraw from their option on the El Tigre property.



The Las Sorpresas Property remains under option from Candente to Orex but is not currently active in exploration while community contracts are being negotiated.





b)

Picota Property

Northern Peru



The Company owns mineral claims comprising approximately 3,200 hectares in Northern Peru, which had been acquired by staking.











123







3.

UNPROVEN MINERAL RIGHTS (Continued)



c)

Pamel Property

Central Peru



The Company owns mineral claims comprising approximately 5,800 hectares in the Western Andes which had been acquired by staking and acquired other claims by the issue of 30,000 shares in 2000 and the commitment to issue 30,000 shares at completion of the initial drilling program. There remains further commitment to issue 50,000 shares upon commencement of commercial production.



During 2005, the Company entered into an option agreement whereby the optionee can earn a 51% interest in the property by spending $2,500,000 over 3.5 years and by making either cash payments of $570,000 or by issuing 250,000 shares, to the Company by May 31, 2010.  The Company remains operator of the exploration program for the period of the agreement.



d)

Las Brujas Property

Northern Peru



The Company owns mineral claims comprising approximately 1,000 hectares in Northern Peru, which had been acquired by staking and the payment of a finders fee of 20,000 shares in 2000.



e)

Cañariaco Property

Northern Peru



The Company owns a 100% interest in the Cañariaco mineral property located in Northern Peru which had been acquired for $75,880 in 2001.



f)

Alto Dorado/Toril Property

Central Peru



The Company owns a 100% interest in the Alto Dorado mineral property by payment of $10,000 and the issuance of 100,000 common shares.  The Company paid $50,277to the Peruvian government to acquire a 100% interest in the Toril claims.  The Alto Dorado property is subject to a 2.5% net smelter royalty, which may be reduced to 1.0% by the Company paying $1,500,000.



During 2005, the Company entered into an option agreement whereby the optionee could earn a 50% interest in the property by spending $5,400,000 over 3.5 years.  The optionee was also granted 535,000 share purchase warrants had they elected to proceed at various stages of the agreement. In March 2006, the optionee advised the Company of their decision to withdraw from their option agreement.



g)

Other Peruvian Properties



The Company owns 20 other mineral properties in Peru totaling approximately 37,832 hectares, which had been acquired by staking.



Michoacan/Mexico State, Mexico



h)

During 2006 the Company entered jointly (50%/50%) into an option agreement with another company.  This agreement gives the combined companies the right to earn up to a seventy percent (70%) interest in all of the 24 El Oro exploration and mining concessions (14,950 hectares).





Newfoundland, Canada



i)

Staghorn Property



The Company has a 100% interest in 67 claims in Southwestern Newfoundland known as the Staghorn property by paying Cdn$105,520, issuing 120,000 common shares and completing Cdn$500,000 in exploration expenditures before November 30, 2006. The property is subject to a 2.5% net smelter royalty, which may be reduced to 1.5% by the Company paying Cdn$1,000,000.  During 2006, the Company issued 42,424 common shares in lieu of a required cash payment of Cdn $28,000.



124



j)

Virgin Arm Property



The Company has staked 92 claims located in the Botwood Basin.



4.

EQUIPMENT

|                               |            |  | Accumulated  |  | Net Book Value
|------------------------------ | ---------- |  | ------------ |  | --------------
|                               | Cost       |  | Amortization |  | 2006          
|Office furniture and equipment | $   27,721 |  | $   15,519   |  | 12,202        
|Computer equipment             | 49,604     |  | 30,637       |  | 18,967        
|Security equipment             | 13,410     |  | 6,437        |  | 6,973         
|Truck                          | -          |  | -            |  | -             
|Exploration equipment (Canada) | 38,234     |  | 13,065       |  | 25,169        
|Exploration equipment (Peru)   | 196,633    |  | 108,756      |  | 87,877        
|                               | $ 325,602  |  | $  174,414   |  | 151,188       



5.

SHARE CAPITAL



a)

Authorized:

Unlimited number of common shares without par value.



b)

Issued:

|                           |  | December 31, 2006 |  | December 31, 2005
|-------------------------- |  | ----------------- |  | -----------------
|                           |  | Number of Shares  |  | Amount           
|Balance, beginning of year |  | 43,718,954        |  | $12,409,512      
|Private Placements         |  | 8,380,066         |  | 6,879,155        
|Stock options              |  | 725,000           |  | 383,390          
|Warrants                   |  | 300,000           |  | 182,134          
|Mineral Properties         |  | 132,424           |  | 99,683           
|Stock-based compensation   |  | -                 |  | 148,780          
|Balance, end of year       |  | 53,256,444        |  | $20,102,654      



On March 31, 2006 the company completed a private placement for 5,830,066 shares at Cdn$0.85 for cash proceeds of Cdn$4,573,056.  Each unit consisted of one common share and one half share purchase warrant.  Agents fees and other share issue costs of Cdn$256,593 were paid in cash and agents warrants totaling 265,575 were issued.  The Company also completed a private placement on December 7, 2006 for 3,000,000 shares at Cdn$1.25 for cash proceeds of Cdn$3,750,000. Agents fees and other share issue costs of Cdn$105,250 were paid in cash. Each unit consisted of one common share and one half share purchase warrant.



c)

Contributed Surplus



|                                          | 2006          |  | 2005        
|----------------------------------------- | ------------- |  | ------------
|Balance, beginning of year                | $   1,414,117 |  | $  1,218,269
|Stock-based Compensation on stock options | 574,889       |  | 195,848     
|Stock-based Compensation on warrants      | 25,203        |  | -           
|Stock options exercised                   | (148,780)     |  | -           
|Balance, end of year                      | $   1,865,429 |  | $  1,414,117



125



5.

SHARE CAPITAL(continued)



d)

Stock options



|Expiry Date                 | Exercise Price Cdn$ | Balance December 31, 2005 | Issued    | Exercised | Expired/ Cancelled | Balance December 31, 2006
|--------------------------- | ------------------- | ------------------------- | --------- | --------- | ------------------ | -------------------------
|6-Feb-07                    | 0.17                | 60,000                    | -         | (50,000)  | -                  | 10,000                   
|5-Apr-07                    | 0.23                | 36,250                    | -         | (20,000)  | -                  | 16,250                   
|23-Apr-07                   | 0.33                | 65,000                    | -         | -         | -                  | 65,000                   
|6-Sep-07                    | 0.33                | 547,500                   | -         | (90,000)  | -                  | 457,500                  
|17-Jan-08                   | 0.48                | 430,000                   | -         | (5,000)   | (10,000)           | 415,000                  
|4-Feb-08                    | 0.48                | 521,000                   | -         | (30,000)  | (25,000)           | 466,000                  
|15-Oct-08                   | 0.69                | 59,850                    | -         | (30,000)  | -                  | 29,850                   
|31-Oct-08                   | 0.80                | 470,000                   | -         | (30,000)  | -                  | 440,000                  
|2-Mar-09                    | 0.80                | 421,650                   | -         | (15,000)  | (60,000)           | 346,650                  
|6-Jul-09                    | 0.70                | 111,000                   | -         | -         | -                  | 111,000                  
|19-Aug-09                   | 0.70                | 160,000                   | -         | (40,000)  | (20,000)           | 100,000                  
|7-Oct-09                    | 0.70                | 300,000                   | -         | -         | -                  | 300,000                  
|6-Jan-10                    | 0.70                | 600,000                   | -         | -         | (50,000)           | 550,000                  
|15-Jun-10                   | 0.70                | 150,000                   | -         | (150,000) | -                  | -                        
|6-Jul-10                    | 0.70                | 200,000                   | -         | (75,000)  | (75,000)           | 50,000                   
|7-Nov-10                    | 0.70                | 200,000                   | -         | -         | -                  | 200,000                  
|3-Jan-11                    | 0.70                | -                         | 1,053,750 | (190,000) | -                  | 863,750                  
|9-Feb-11                    | 0.75                | -                         | 275,000   | -         | (50,000)           | 225,000                  
|9-Mar-11                    | 0.75                | -                         | 375,000   | -         | -                  | 375,000                  
|21-Jun-11                   | 0.80                | -                         | 100,000   | -         | -                  | 100,000                  
|29-Sep-11                   | 0.85                | -                         | 150,000   | -         | -                  | 150,000                  
|22-Oct-11                   | 0.85                | -                         | 1,670,000 | -         | -                  | 1,670,000                
|                            |                     | 4,332,250                 | 3,623,750 | (725,000) | (290,000)          | 6,941,000                
|Weighted Average Prices Cdn | $      0.56         | $      0.79               | $    0.60 | $    0.70 | $      0.70       



At December 31, 2006, the weighted average remaining life of the outstanding options is 3.16 years (2005 - 3.54 years).



During the current year, the Company recorded stock-based compensation expense of $574,889 (2005 - $195,848) and share issue costs for agents options of $25,203 (2005 - $Nil).



The fair value of options in 2006 and 2005 has been estimated using the Black-Scholes Option Pricing Model based on the following assumptions: a risk-free interest rate of 3.9 to 4.5% (2005 - 3.3% to 3.7%); an expected life of 5 years (2005 - 5 years); an expected volatility of 52% to 57% (2005 - 40% to 49%); and no expectation for the payment of dividends.



Option pricing models require the input of highly subjective assumptions, particularly as to the expected price volatility of the stock and expected life of the option. Changes in these assumptions can materially affect the fair value estimate and therefore it is managements view that the existing models alone do not necessarily provide a reliable measure of the fair value of the Companys stock option grants.











126



5.

SHARE CAPITAL(continued)



The fair value of stock options granted to directors, officers and employees were estimated at the grant date based on the Black-Scholes option pricing model, using the following weighted average assumptions:



|                                                     |  |  | 2006     | 2005    
|---------------------------------------------------- |  |  | -------- | --------
|Expected volatility                                  |  |  | 54.14%   | 43.95%  
|Risk-free interest rate                              |  |  | 4.03%    | 3.62%   
|Expected lives                                       |  |  | 5 years  | 5 years 
|Dividend yield                                       |  |  | 0%       | 0%      
|                                                     |  |  |          |         
|Weighted average fair value of stock options granted |  |  | Cdn$0.40 | Cdn$0.22





e)

Share Purchase Warrants Outstanding



|Expiry Date                     | Exercise Price Cdn $ | Balance December 31, 2005 | Issued     | Exercised   | Expired/ Cancelled | Balance December 31, 2006
|------------------------------- | -------------------- | ------------------------- | ---------- | ----------- | ------------------ | -------------------------
|                                |                      |                           |            |             |                    |                          
|22-Oct-06                       | 0.70                 | 300,000                   | -          | (300,000)   | -                  | -                        
|8-Mar-06                        | 0.90                 | -                         | 320,000    | -           | (320,000)          | -                        
|8-Mar-06                        | 1.35                 | -                         | 215,000    | -           | (215,000)          | -                        
|31-Mar-07                       | 1.25                 | -                         | 185,205    | -           | -                  | 185,205                  
|31-Mar-07                       | 1.25                 | -                         | 24,870     | -           | -                  | 24,870                   
|31-Mar-07                       | 1.25                 | -                         | 52,500     | -           | -                  | 52,500                   
|31-Mar-07                       | 1.25                 | -                         | 3,000      | -           | -                  | 3,000                    
|31-Mar-07                       | 1.25                 | -                         | 2,690,033  | -           | -                  | 2,690,033                
|7-Dec-07                        | 1.65                 | -                         | 1,500,000  | -           | -                  | 1,500,000                
|                                |                      | 300,000                   | 4,990,608  | (300,000)   | (535,000)          | 4,455,608                
|Weighted Average Exercise Price | $      0.70          | $   1.35                  | $     0.70 | $      1.08 | $      1.38       





6.

MARKETABLE SECURITIES



At December 31, 2006, the Company held marketable securities with a cost of $33,296 (2005  $21,496) and a market value of $52,175 (2005  $25,000).



7.

RELATED PARTY TRANSACTIONS



All transactions with related parties have occurred in the normal course operations and are measured at their fair value as determined by management. Unless otherwise specified, the balances are non-interest bearing, unsecured, receivable or payable on demand with no specific terms for repayment and have arisen from the provision of services and expense reimbursements or advances.



At December 31, 2005, the Company was owed $38,500 for a loan and $4,142 for an expense advance made to a director during the year from a director. These amounts were paid in full during 2006.



8.

LOSS PER SHARE



Loss per share has been calculated using the weighted average number of shares outstanding during the year. Fully-diluted loss per share has not been disclosed as it is anti-dilutive.





127



9.

SEGMENTED INFORMATION



|                              | December 31, |  | December 31, 
|----------------------------- | ------------ |  | -------------
|                              | 2006         |  | 2005         
|Assets by geographic segment: |              |  |              
|                              |              |  |              
|Canada                        | $  3,880,490 |  | $   1,551,005
|Mexico                        | 25,394       |  | -            
|Peru                          | 11,235,706   |  | 6,647,977    
|                              |              |  |              
|                              | $15,141,590  |  | $   8,198,982



10.

INCOME TAXES



The reconciliation of income tax provision computed at statutory rates to the reported income tax provision is as follows:



|                                                                   |  | 2006                  |  | 2005                
|------------------------------------------------------------------ |  | --------------------- |  | --------------------
|Loss before income taxes for accounting purposes                   |  | $(1,792,115)          |  | $(1,426,952)        
|Adjustments for differences between accounting and taxable income: |  |                       |  |                     
|Amortization of Equipment                                          |  | 65,018                |  | 32,236              
|Stock-based compensation                                           |  | 574,889               |  | 195,848             
|Resource property costs written-off                                |  | 3,777                 |  | 419,470             
|Unrealized foreign exchange (gains) losses                         |  | (63,181)              |  | 397                 
|Consolidated loss for tax purposes                                 |  | (1,1211,612)          |  | (779,001)           
|Tax rate                                                           |  | 39%                   |  | 39%                 
|Expected tax recovery for the year                                 |  | (472,529)             |  | (303,810)           
|Reductions in tax recovery due to:                                 |  |                       |  |                     
|Valuation allowance                                                |  | 472,529               |  | 303,810             
|Tax expense (recovery) for the year                                |  | $                   - |  | $                  -



Future income taxes reflect the net effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  The significant components of the Companys future tax assets as at December 31, 2006 are as follows:





|                                           |  | 2006               |  | 2005              
|------------------------------------------ |  | ------------------ |  | ------------------
|Non-capital loss carry-forwards            |  | $1,927,211         |  | $1,600,280        
|Resource property exploration expenditures |  | 723,892            |  | 654,363           
|Equipment                                  |  | 30,411             |  | 8,709             
|                                           |  | 2,681,514          |  | 2,263,352         
|Valuation allowance                        |  | (2,681,514)        |  | (2,263,352)       
|                                           |  | $                - |  | $                -



128



10.

INCOME TAXES(continued)



At December 31, 2006, the Company has non-capital losses carried forward for Canadian income tax purposes totaling approximately Cdn $6.6 million, expiring in various periods from 2007 to 2016, and resource and other tax pools available to reduce Canadian taxable income that aggregate approximately Cdn  $2.8 million at December 31, 2006 (2005 - Cdn  $2.6 million).  The Company also has net operating loss carry forwards and resource deductions totaling approximately $4.5 million for Peruvian income tax purposes which are currently being substantiated, and if not utilized to reduce taxable income in future periods, will expire four years after the attainment of profitable commercial operations in Peru.





11.

VALUE ADDED TAX RECEIVABLE



The Company has an agreement with Peruvian taxation authorities for the refund of a portion of the IVA tax paid, subject to audit.  Any amounts not recovered will be added to mineral property costs.





12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)



Under Canadian GAAP applicable to junior mineral exploration companies, exploration expenditures may be deferred on prospective properties until such time as it is determined that further exploration is not warranted, at which time the property costs are written-off.  Under U.S. GAAP, all exploration costs must be expensed until an independent feasibility study has determined that the property is capable of economic commercial production, and accordingly under U.S. GAAP, exploration costs are disclosed in the statements of cash flows as operating activities while under Canadian GAAP they are disclosed as investing activities. Acquisition amounts paid to unrelated parties may be capitalized, however for U.S. GAAP reporting purposes the Company has chosen to write off all mineral property expenditures. The following items (a) to (f) provide a summary of the impact on these financial statements that would result from the application of U.S. accounting principles to deferred property costs.





|                                                                              | 2006         |  | 2005        |  | 2004       
|----------------------------------------------------------------------------- | ------------ |  | ----------- |  | -----------
|                                                                              | $            |  | $           |  | $          
|a)
Assets                                                                     |              |  |             |  |            
|Unproven Mineral property costs                                               |              |  |             |  |            
|Unproven mineral property costs under Canadian GAAP                           | 10,701,855   |  | 6,717,218   |  | 4,978,944  
|Less unproven mineral property costs                                          | (10,701,855) |  | (6,717,218) |  | (4,978,944)
|Unproven mineral property costs under U.S. GAAP                               | -            |  | -           |  | -          
|                                                                              |              |  |             |  |            
|b)
Operations                                                                 |              |  |             |  |            
|Net loss under Canadian GAAP                                                  | (1,792,115)  |  | (1,426,952) |  | (1,556,932)
|Unproven mineral property costs expensed under U.S. GAAP                      | (3,988,414)  |  | (2,157,744) |  | (2,599,695)
|Unproven mineral property costs written-off under Canadian GAAP               | 3,777        |  | 419,470     |  | 728,751    
|Foreign exchange (gain) loss included in comprehensive income
under U.S. GAAP | (63,181)     |  | 397         |  | (222,216)  
|Net loss under U.S. GAAP                                                      | (5,839,933)  |  | (3,164,829) |  | (3,650,092)









129





12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)(Continued)



c) Deficit



|Closing deficit under Canadian GAAP                                                                   | (7,691,042)  |  | (5,898,927)  |  | (4,471,975)
|----------------------------------------------------------------------------------------------------- | ------------ |  | ------------ |  | -----------
|Adjustment to deficit for unproven mineral property costs

written-off under U.S. GAAP                | (10,701,855) |  | (6,717,218)  |  | (4,978,944)
|Accumulated other comprehensive (income) loss under U.S. GAAP included in deficit under Canadian GAAP | (298,578)    |  | (235,397)    |  | (235,794)  
|Closing deficit under U.S. GAAP                                                                       | (18,691,475) |  | (12,851,542) |  | (9,686,713)
|                                                                                                      |              |  |              |  |            



|                                                                                           | 2006        |  | 2005        |  | 2004       
|------------------------------------------------------------------------------------------ | ----------- |  | ----------- |  | -----------
|d)
Cash Flows - Operating Activities                                                       | $           |  | $           |  | $          
|Funds used for operating activities under Canadian GAAP                                    | (1,234,432) |  | (903,709)   |  | (613,786)  
|Reclassify value added tax receivable                                                      | (598,335)   |  | (217,853)   |  | (173,781)  
|Reclassify unproven mineral property exploration costs                                     | (4,142,748) |  | (2,216,323) |  | (2,690,634)
|Reclassify unproven mineral property acquisition costs                                     | (284,053)   |  | (203,328)   |  | (288,915)  
|Reclassify option payments and exploration funds received                                  | 1,242,520   |  | 300,000     |  | 769,896    
|Funds used for operating activities under U.S. GAAP                                        | (5,017,048) |  | (3,241,213) |  | (2,997,220)
|                                                                                           |             |  |             |  |            
|e)
Cash Flows - Investing Activities                                                       |             |  |             |  |            
|Funds used for investing activities under Canadian GAAP                                    | (5,070,215) |  | (2,691,898) |  | (3,296,329)
|Reclassify value added tax receivable                                                      | 598,335     |  | 217,853     |  | 173,781    
|Reclassify unproven mineral property exploration costs                                     | 4,142,748   |  | 2,216,323   |  | 2,690,634  
|Reclassify unproven mineral property acquisition costs                                     | 284,053     |  | 203,328     |  | 288,915    
|Funds used for investing activities under U.S. GAAP                                        | (45,079)    |  | (54,394)    |  | (142,999)  
|                                                                                           |             |  |             |  |            
|f)
Cash Flows  Financing Activities                                                       |             |  |             |  |            
|Funds provided by financing activities under Canadian GAAP                                 | 8,712,402   |  | 3,231,633   |  | 1,283,052  
|Less option proceeds and exploration funds received and included as income under U.S. GAAP | (1,242,520) |  | (300,000)   |  | (769,896)  
|                                                                                           |             |  |             |  |            
|Funds used for financing activities under U.S. GAAP                                        | 7,469,882   |  | 2,931,633   |  | 513,156    



















130



12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)(Continued)





g)

Loss Per Share



Under Canadian GAAP, shares held in escrow are included in the calculation of loss per share.  Under U.S. GAAP, shares held in escrow are excluded from the weighted-average number of shares outstanding until all contingencies for the issue of these shares have been met. The following is a reconciliation of the denominators and the basic and diluted loss per share calculations under U.S.GAAP:

|                                                                   | 2006        |  | 2005        |  | 2004       
|------------------------------------------------------------------ | ----------- |  | ----------- |  | -----------
|                                                                   | $           |  | $           |  | $          
|Numerator: Net loss for the year under U.S. GAAP (per Note 12 (b)) | (5,839,933) |  | (3,164,829) |  | (3,650,092)
|Denominator: Weighted-average number of shares under Canadian GAAP | 48,318,120  |  | 41,585,889  |  | 35,763,716 
|Adjustment required under U.S. GAAP (escrow shares)*               | -           |  | -           |  | -          
|Weighted-average number of shares under U.S. GAAP                  | 48,318,120  |  | 41,585,889  |  | 35,763,716 
|Basic and diluted loss per share under U.S. GAAP                   | $    (0.12) |  | $    (0.08) |  | $(0.10)    





*As at December 31, 2004, all escrow contingencies were met and therefore the escrow shares are not excluded from the calculation. The shares were released during 2005.



h)

Stockholders Equity



i)

Stock-based Compensation



There are no differences between Canadian and US GAAP for the years ended December 31, 2006, 2005 and 2004 regarding the disclosure of stock-based compensation.



ii)

Marketable Securities



Under Canadian GAAP, no write-down to market value is required if an investment in considered by management to be held for the long-term, unless there has been an other-than-temporary decline in the value of that investment.  Under US SFAS 115, the investments held by the Company are considered to be available for sale securities and are required to be reported at fair value, with any unrealized holding gains and losses included in current Other Comprehensive Income, a component of Stockholders Equity.



The following provides reconciliation to US GAAP of a pro-forma application of SFAS 115 to these financial statements:





|                                                                               | 2006       |  | 2005        |  | 2004          
|------------------------------------------------------------------------------ | ---------- |  | ----------- |  | --------------
|                                                                               |            |  |             |  |               
|Investments under Canadian GAAP                                                | $   33,296 |  | $    21,496 |  | $       20,799
|Other Comprehensive Income (Loss) under U.S. GAAP  current year               | 15,375     |  | (4,885)     |  | 8,389         
|Accumulated Other Comprehensive Income (Loss) under U.S. GAAP  previous years | 3,504      |  | 8,389       |  | -             
|Investments under US GAAP                                                      | $   52,175 |  | $    25,000 |  | $       29,188







131



12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)(continued)



iii)

Foreign Currency Accounting



The Companys functional currency is the U.S. dollar.   Year or period-end monetary assets and liabilities resulting from Canadian dollar or Peruvian New Sole-denominated transactions are recorded in U.S. dollars utilizing year or period-end rates, while transactions involving income and expense accounts are recorded using the average rates in effect during the period or year.  Under U.S. GAAP, gains and losses arising from foreign currency transactions are included in current operations, while such items arising from the translations of non-U.S. dollar-denominated balances are separately disclosed on a current basis and are included, on a cumulative basis, as a separate component of Stockholders Equity.  Under Canadian GAAP, all such current exchange gains and losses involving integrated foreign operations are included in current operations.



Financial statements line items would be impacted from the adoption of U.S. GAAP standards applicable to foreign currency and marketable securities accounting, as follows: (i) and (j)*.



i)

Comprehensive Income (Loss)

|                                                   | 2006
$      |  | 2005
$      |  | 2004
$     
|-------------------------------------------------- | ----------- |  | ----------- |  | -----------
|
|Comprehensive income (loss) under Canadian GAAP    | -           |  | -           |  | -          
|Net loss under U.S. GAAP (per note 12 (b))         | (5,839,933) |  | (3,164,829) |  | (3,650,092)
|Other comprehensive income (loss) under U.S. GAAP: |             |  |             |  |            
|Foreign exchange translation gain (loss)           | 63,181      |  | (397)       |  | 222,216    
|Holding gains (losses) on marketable securities    | 15,375      |  | (4,885)     |  | 8,389      
|Comprehensive (loss) under U.S. GAAP               | (5,761,377) |  | (3,170,111) |  | (3,419,487)



j)

Stockholders Equity



Under SFAS 130, the Company is now required to record certain gains and losses as a component of Stockholders Equity, with the current changes in the component balances comprising the balance sheet figure disclosed in a separate statement or in a financial statement note.  The only items in the Companys financial statements impacting Comprehensive Income are the unrealized gains on the Companys marketable securities and foreign exchange translation gains and losses.

|                                                              | 2006     |  | 2005     |  | 2004    
|------------------------------------------------------------- | -------- |  | -------- |  | --------
|                                                              | $        |  | $        |  | $       
|Accumulated other comprehensive loss under Canadian GAAP      | -        |  | -        |  | -       
|Other comprehensive loss under U.S. GAAP  2002 and prior     | (11,563) |  | (11,563) |  | (11,563)
|Other comprehensive income under U.S. GAAP  2003             | 25,141   |  | 25,141   |  | 25,141  
|Other comprehensive income under U.S. GAAP  2004             | 230,605  |  | 230,605  |  | 230,605 
|Other comprehensive loss under U.S. GAAP  2005               | (5,282)  |  | (5,282)  |  | -       
|Other comprehensive income under U.S. GAAP  2006             | 78,556   |  | -        |  | -       
|Accumulated other comprehensive income (loss) under U.S. GAAP | 317,457  |  | 238,901  |  | 244,183 



* For purposes of convenience in connection with this pro-forma disclosure, U.S. GAAP standards in respect to foreign currency accounting have been applied prospectively as at January 1, 2000.



132



k)

Share Purchase Warrants



The SEC has recently provided guidance to their interpretation of the US accounting rules contained in the Statement of Financial Accounting Standards 133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities as it relates to the accounting treatment for the Companys share purchase warrants under US GAAP.



Under Canadian GAAP, share purchase warrants are accounted for as equity.  The SECs interpretation of SFAS 133 appears to require that when a Companys share purchase warrants have an exercise price denominated in a currency other than a companys functional currency, those share purchase warrants must be fair valued with any resulting gains or losses being included in the calculation of US GAAP earnings.  In these circumstances a loss (gain) would be recorded by the Company when the value of the share purchase warrants increases (decreases).  Upon exercise the relevant liabilities is transferred to common shares.



The Financial Accounting Standards Board (FASB) has initiated a project to determine the accounting treatment for convertible debt with elements of foreign currency risk.  This project is expected to provide further US GAAP guidance in respect of accounting for share purchase warrants.



The Company expects to make the adjustment when required but has not reflected this change at this time.  The Company has estimated a fair value of $72,553 using the Black-Scholes Option Pricing Model, based on the following assumptions: risk free rate of 4.04%; expected dividend yield of nil; an expected volatility of 54%; and an expected life of 0.52 years.



13.

COMPARATIVE FIGURES



Certain 2005 comparative figures have been reclassified to conform to the financial statement presentation used in 2006.





14.

SUBSEQUENT EVENTS





Subsequent to December 31, 2006:



a)

The Company received cash of Cdn$224,825 from the exercise of 297,500 stock options by employees and consultants.  The option exercise prices were between Cdn$0.17 and Cdn$0.85.



b)

424,780 warrants have been exercised at $1.25 for which the company received cash of Cdn$530,975.



































133







Signature Page



Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.





Candente Resource Corp.

Registrant





Dated: October 26, 2007

Signed: /s/  Joanne Freeze

Joanne Freeze,

President, CEO and Director

































































134



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