Annual
Information Form of MAG Silver Corp.


For
the fiscal year ended December 31, 2007






























































Dated:
March 26, 2008
















MAG
Silver Corp.
 2007
Annual Information Form


Table of
Contents






Preliminary
      Notes
              4Date
      of Information
              4Currency
      and Exchange Rates
              4Metric
      Equivalents
              4Forward
      Looking Statements
              5CORPORATE
      STRUCTURE
              7Incorporation
              7Intercorporate
      Relationships
              7GENERAL
      DEVELOPMENT OF THE BUSINESS
              8Three
      Year History
              8Significant
      Acquisitions
              9DESCRIBE
      THE BUSINESS
              9General
              9Risk
      Factors
              12Companies
      with Asset-backed Securities Outstanding
              18Companies
      with Mineral Projects
              19DIVIDENDS
              44DESCRIPTION
      OF CAPITAL STRUCTURE
              44Common
      Shares
              44Shareholder
      Rights Plan
              45Stock
      Options
              45MARKET
      FOR SECURITIES
              47Trading
      Price and Volume
              47Prior
      Sales
              48ESCROWED
      SECURITIES
              48DIRECTORS
      AND OFFICERS
              48Name,
      Occupation and Security Holding
              48Cease
      Trade Orders, Bankruptcies, Penalties or
    Sanctions
              50Conflicts
      of Interest
              50Audit
      Committee
              51Compensation
      Committee
              53Corporate
      Governance and Nomination Committee
              53Disclosure
      Committee
              53LEGAL
      PROCEEDINGS AND REGULATORY ACTIONS
              54INTEREST
      OF MANAGEMENT AND OTHERS IN MATERIAL
    TRANSACTIONS
              54TRANSFER
      AGENTS AND REGISTRARS
              55MATERIAL
      CONTRACTS
              55INTERESTS
      OF EXPERTS
              55ADDITIONAL
      INFORMATION
              56Schedule
      “A”
              57Schedule
      “B”
              62







Preliminary
Notes




In this
Annual Information Form (“AIF”), unless the context otherwise requires, the
terms “the Company” and “MAG” refer to MAG Silver Corp.




Date
of Information




All
information in this AIF is as of December 31, 2007 unless otherwise
indicated.




Currency
and Exchange Rates




All
dollar amounts in this AIF are expressed in Canadian dollars unless otherwise
indicated. MAG Silver Corp. accounts are maintained in Canadian dollars. All
references to “US dollars” or to “US$” are to United States dollars. All
references to “pesos” are to Mexican Pesos.





The
following table sets forth the rate of exchange for the Canadian dollar
expressed in United States dollars in effect at the end of the periods
indicated, the average of exchange rates in effect on the last day of each month
during such periods, and the high and low exchange rates during such periods
based on the noon rate of exchange as reported by the Bank of Canada for
conversion of Canadian dollars into United States dollars.





Year
      Ended December 31Canadian
      Dollars toUS
      dollars
            
            2007
            
            
            2006
            
            
            2005Rate
      at end of period
            
            $
            US1.0120
            
            
            $
            US0.8581
            
            
            $
            US0.8577Average
      rate for period
            
            $
            US0.9310
            
            
            $
            US0.8815
            
            
            $
            US0.8254High
      for period
            
            $
            US1.0905
            
            
            $
            US0.9099
            
            
            $
            US0.8690Low
      for period
            
            $
            US0.8437
            
            
            $
            US0.8528
            
            
            $
            US0.7872





The noon
rate of exchange on March 26, 2008 as reported by the Bank of Canada for the
conversion of Canadian dollars into United States dollars was Canadian $1.00
equals US$0.98.




Metric
Equivalents




For ease
of reference, the following factors for converting Imperial measurements into
metric equivalents are provided:





To
      convert from Imperial
            To
      metric
            
            Multiply
      byAcres
            Hectares
            
            
            0.404686Feet
            Metres
            
            
            0.30480Miles
            Kilometres
            
            
            1.609344Tons
            Tonnes
            
            
            0.907185Ounces
      (troy)/ton
            Grams/Tonne
            
            
            34.2857





Terms
used and not defined in this AIF that are defined in National Instrument 51-102
Continuous Disclosure Obligations shall bear that definition. Other definitions
are set out in National Instrument 14-101 Definitions, as amended.




Forward
Looking Statements




This
Annual Information Form contains forward-looking statements and information
within the meaning of Canadian and U.S. Securities laws relating to the Company
that are based on the beliefs and estimates of management as well as assumptions
made by and information currently available to the Company. Such forward-looking
statements and information include, but are not limited to:





·  The
future price of silver;




·  The
estimation of mineral reserves and mineral resources;




·  Estimates
of the time and amount of future silver production for specific
operations;




·  Estimated
future exploration expenditures and other expenses for specific
operations;




·  Permitting
time lines;




·  Requirements
for additional capital;




·  Litigation
risks;




·  Currency
fluctuations; and




·  Environmental
risks and reclamation cost.





When used
in this document, any statements that express or involve discussions with
respect to predictions, beliefs, plans, projections, objectives, assumptions or
future events of performance (often but not always using words or phrases such
as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, “strategy”,
“goals”, “objectives”, “project”, “potential” or variations thereof or stating
that certain actions, events, or results “may”, “could”, “would”, “might” or
“will” be taken, occur, or be achieved, or the negative of any of these terms
and similar expressions), as they relate to the Company or management, are
intended to identify forward-looking statements and information.





Such
statements reflect the Company’s current views with respect to future events and
are subject to certain known and unknown risks, uncertainties and
assumptions.





Many
factors could cause actual results, performance or achievements to be materially
different from any future results, performance or achievements that may be
expressed or implied by such forward-looking statements and information,
including, among others:





•
            risks
      relating to the Company’s ability to finance the exploration and
      development of its mineral
properties;





•
            permitting
      risks relating to the Company’s exploration and development of its mineral
      properties and business activities;





•
            risks
      and uncertainties relating to the interpretation of exploration results,
      geology, grade and continuity of the Company’s mineral
      deposits;





•
            commodity
      price fluctuations (particularly gold and silver
    commodities);





•
            currency
      fluctuations;





•
            risks
      related to governmental regulations, including environmental
      regulations;





•
            risks
      related to possible reclamation activities on the Company’s
      properties;





•
            the
      Company’s ability to attract and retain qualified management and the
      Company’s dependence upon such management in the development of its
      mineral properties;





•
            increased
      competition in the exploration
industry;





•
            the
      Company’s lack of infrastructure;
and





•
            the
      Company’s history of losses and expectation of future
    losses.





Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein. This list is not exhaustive of the factors that may affect any
of the Company’s forward-looking statements and information. Forward-looking
statements are statements about the future and are inherently uncertain, and
actual achievements of the Company or other future events or conditions may
differ materially from those reflected in the forward-looking statements and
information due to a variety of risks, uncertainties and other factors,
including without limitation, those referred to in this document under the
heading “Risk Factors” and elsewhere. The Company’s forward-looking statements
and information are based on the reasonable beliefs, expectations and opinions
of management on the date the statements are made, and the Company does not
assume any obligation to update forward-looking statements and information if
circumstances or management’s beliefs, expectations or opinions should
change.





For the
reasons set forth above, investors should not attribute undue certainty to or
place undue reliance on forward-looking statements and information.





Please
consult the Company's public filings at
http://www.sedar.com/search/search_form_pc_en.htm and
http://www.sec.gov/edgar/searchedgar/companysearch.html for further, more
detailed information concerning these matters.





The staff
of the United States Securities and Exchange Commission takes the position
that mining companies, in their filings with the SEC, should describe
only those mineral deposits that the companies themselves can economically
and legally extract or produce.  This Annual Information Form contains
information regarding adjacent properties on which we have no right to
explore or mine, and is considered by management to be of material
importance to the Company and its land holdings in the area.  Investors are
cautioned that mineral deposits on adjacent properties are not necessarily
probative of the existence, nature or extent of mineral deposits on our
properties.







CORPORATE
STRUCTURE




Incorporation







MAG
Silver Corp.’s head office is located at:





328 – 550
Burrard Street


Vancouver,
British Columbia


Canada,
V6C 2B5





The
Company’s registered office is located at:





Fasken
Martineau DuMoulin LLP


2900 –
550 Burrard Street


Vancouver,
British Columbia


Canada,
V6C 0A3




The
Company was originally incorporated under the Company Act(British
Columbia) on April 21, 1999 under the name “583882 B.C. Ltd.”.  On
June 28, 1999, in anticipation of becoming a capital pool company, the Company
changed its name to “Mega Capital Investments Inc.”  On April 22,
2003, the Company changed its name to “MAG Silver Corp.” to reflect its new
business upon the completion of its Qualifying Transaction.  Effective
March 29, 2004, the Company
Act(British Columbia) was replaced by the Business Corporations Act(British Columbia). Accordingly, on July 27, 2005, the Company adopted
new Articles and concurrently increased its authorized capital from
1,000,000,000 Common Shares to an unlimited number of Common Shares without par
value and an unlimited number of Preferred Shares without par
value.




Our North
American office and principal place of business is located at Suite 328, 550
Burrard Street, Vancouver, British Columbia, Canada, V6C 2B5
(phone:  604-630-1399).




The
Company is a “reporting” company in the Provinces of British Columbia, Alberta
and Ontario.




The
Company’s Common Shares were listed and posted for trading on the TSX Venture
Exchange (formerly CDNX) on April 19, 2000 under the symbol
“MGA”.  Concurrent with the Company’s name change to MAG Silver Corp.
on April 22, 2003, the trading symbol was changed to “MAG”.  On July
9, 2007, the Company listed on the American Stock Exchange under the symbol
“MVG”.  On October 5, 2007, the Company delisted from the TSX Venture
Exchange concurrent with its listing on the Toronto Stock Exchange, with the
Company’s Common Shares continuing to trade under the symbol “MAG”.




Intercorporate
Relationships




The
Company is the registered owner of 99% of the issued Class I shares of Minera
Los Lagartos, S.A. DE C. V. (“Lagartos”). The remaining 1% of the issued Class I
shares of Lagartos is held by Dan MacInnis, President, CEO and a director of the
Company, in trust for the Company. The Company effectively has 100% beneficial
ownership of Lagartos. The registered and records office of Lagartos is located
at Paseo de Los Tamarindos 60, Bosques de Las Lomas, 05120 Mexico, D.F.,
Mexico.




The
Company’s subsidiary, Lagartos, is the registered owner of a 44% interest in
Minera Juanicipio, S.A. DE C.V. (“Minera Juanicipio”) while Industrias Peñoles,
S.A. DE C.V. (“Peñoles”) holds a 56% interest.  In December 2007, Lagartos
and Peñoles established Minera Juanicipio to hold and operate all mineral and
surface rights related to the Juanicipio property located in Zacatecas State,
Mexico.  At the date of this AIF, Minera Juanicipio is operated according
to a shareholders agreement (“Shareholders Agreement”) included as a term of the
2005 option agreement whereby Peñoles acquired a right to earn into the
Juanicipio property.  According to the Shareholders Agreement the partners
will participate in the Juanicipio property through Minera Juanicipio and each
shareholder is to provide funding to Minera Juanicipio pro rata to its interest
in Minera Juanicipio, with Peñoles contributing 56% and MAG, through Lagartos,
contributing 44% respectively. See more detail at “Describe the Business –
Companies with Mineral Projects - The Juanicipio Property” below.  The
registered and records office of Minera Juanicipio is located at Carretera A
Francisco I. Madero 1, Col. Cieneguillas, Zacatecas, ZAC, C.P.
98171.




The
following is a list of each subsidiary of the Company and the jurisdiction of
incorporation and the direct or indirect percentage ownership by the Company of
each subsidiary:





Name
      of Subsidiary
            Jurisdiction
      of Organization
            
            Percentage
      of Voting Securities Owned or ControlledMinera
      Los Lagartos, S.A. DE C.V.
            Mexican
      Republic
            
            
            100
            %*Minera
      Juanicipio, S.A. DE C.V.
            Mexican
      Republic
            
            
            44
            %
      **




* On
October 9, 2005 the assets of Lexington Capital Group Inc., previously a
subsidiary of the Company, were merged with Lagartos, so that all of the
Company’s indirect interests in the Juanicipio claim are held by one company,
being Lagartos.




** Owned
by Lagartos, which in turn is owned by the Company.




GENERAL DEVELOPMENT OF THE
BUSINESS




Three Year
History




The
Qualifying Transaction




On April
5, 2001, the Company entered into a letter of intent to acquire all of the
issued and outstanding share capital of Advanced Disc Manufacturing Corporation
(“ADMC”), a private British Columbia start-up company engaged in the manufacture
of injection moulded compact discs.  Effective May 2, 2001, a formal
share exchange agreement was entered into among the Company, ADMC and the
shareholders of ADMC in which the terms of the acquisition were set forth (the
“ADMC Agreement”).  This proposed acquisition was intended to serve as
the Company’s Qualifying Transaction.  In contemplation of the closing
of this transaction, the Company advanced ADMC a total of $268,758 to finance
its operations.  On September 26, 2001, the Company issued a press
release to announce that it would not be proceeding with its intended purchase
of the share capital of ADMC as a result of certain breaches of the ADMC
Agreement by the vendors of the ADMC shares.  Of the amounts advanced
by the Company to ADMC, only $16,338 was returned.  As a result, the
Company wrote off to expense the outstanding advances to ADMC in the amount of
$252,420.




Subsequent
to the termination of the ADMC Agreement, the Company was introduced to Dr.
Peter Megaw who presented the Company with what appeared to be favourable
opportunities involving the acquisition and exploration of silver properties in
Mexico.  After reviewing these new opportunities, the Company felt the
proposal represented a favourable business concept for the
Company.  Management was of the opinion that the Company was well
equipped to pursue the opportunities and therefore adopted the
concept.




In August
2002, the Company entered into an arms’ length agreement dated August 8, 2002
(the “Lagartos Agreement”) with Ing. Porfirio Cesar Augusto Padilla Lara, Dr.
Peter Megaw and Dr. Carl Kuehn (collectively, the “Vendors”) pursuant to which
the Company acquired (the “Acquisition”) an effective 100% ownership of the
issued and outstanding Common Shares of Lagartos.  Lagartos is a
private company incorporated under the laws of the Mexican Republic in the
mineral exploration business, as described below.  Lagartos had
acquired interests or options to acquire interests in the Juanicipio, Batopilas
(Don Fippi) and Guigui properties, located in Mexico, in exchange for certain
cash payments and work commitments.  These property interests and
options were the primary reason for the Company’s acquisition of
Lagartos.  As consideration for the Acquisition of Lagartos, the
Company agreed to pay the Vendors the sum of US$5,000, and to further pay the
sum of US$50,000 for the reimbursement of funds advanced to secure the
Juanicipio option, plus applicable purchase and transfer costs. The Acquisition
of beneficial ownership of 100% of Lagartos was completed on January 15, 2003.
The Company’s Qualifying Transaction to enable its full listing on the TSX
Venture Exchange (formerly CDNX) was completed on April 15, 2003, with a
concurrent financing, which raised gross proceeds of $5,750,000.  See
“Describe the Business – Companies with Mineral Projects - The Juanicipio
Property” for further information.




Subsequent
to the completion of its Qualifying Transaction the Company has acquired by
staking or option various other mineral property interests. The Company’s three
most material properties at the date of this AIF, being Juanicipio, Batopilas
and Cinco de Mayo, are described in more detail below.




As at
March 26, 2008, $22,523,734 has been advanced by the Company as an
intercorporate loan to Lagartos, with no fixed terms of repayment, for
acquisition costs of mineral rights of $2,392,993 and exploration expenditures
of $11,208,644 and investment in the Juanicipio joint venture of $6,665,139. The
balance of $2,256,958 on December 31, 2007 is made up of cash, receivables, and
other operating and administration expenses.




Apart
from the advancement of intercorporate loans to Lagartos and property
expenditures described herein, the Company has completed no material capital
expenditures or divestitures in the past three fiscal years.







Significant
Acquisitions




No
significant acquisitions for which disclosure is required under Part 8 of
National Instrument 51-102 were completed by the Company during its most
recently completed financial year.




DESCRIBE THE
BUSINESS




General




The
Company is in the mineral acquisition, exploration and development business. The
Company is in the exploration stage and there is no assurance that a
commercially viable mineral deposit exists on any of our properties. Further
exploration will be required before a final evaluation as to the economic and
legal feasibility of any of the Company’s properties is determined. Even if the
Company completes its exploration program and is successful in identifying a
mineral deposit, it will have to spend substantial funds on further drilling and
engineering studies before it will know if it has a commercially viable mineral
deposit or reserve.




Carrying
on Business in Mexico




The
Company’s property interests are located in Mexico.  A summary of the
regulatory regime material to the business and affairs of the Company is
provided below.




Mining
Regulation




The
exploration, exploitation and beneficiation of minerals in Mexico may be carried
out by Mexican citizens or Mexican companies incorporated under Mexican law by
means of obtaining concessions (currently covering exploration and
exploitation).  Concessions are granted by the Mexican federal
government for a period of fifty years from the date of their recording in the
Public Registry of Mining.  The term of mining concessions previously
issued by the Mexican federal government (for exploration and/or exploitation)
was automatically extended by the enactment of the recent amendments to the
Mexican mining law.  Likewise, due to such amendments, the holders of
mining concessions for exploration were automatically authorized to carry out
not only exploration work, but also exploitation works.




Holders
of concessions may, within the five years prior to the expiration of such
concessions, apply for their renewal for the same period of
time.  Failure to apply prior to the expiration of the term of the
concession will result in termination of the concession.  Concessions
are subject to annual work requirements and payment of surface taxes which are
assessed and levied on a semi-annual basis.  Such concessions may be
transferred or assigned by their holders, but such transfers or assignments must
comply with the requirements established by the Mexican Mining Law and be
registered before the Public Registry of Mining in order to be valid against
third parties.




Mineral
concessions may also be obtained by foreign citizens or foreign corporations, in
this latter case, through the establishment of a branch or subsidiary in Mexico,
and in the case of foreign citizens, provided that they comply with certain
requirements set forth in the Law of Foreign Investment.  Foreign
citizens are required to apply for the corresponding authorization before the
Ministry of Foreign Affairs and register their investment in the National
Registry of Foreign Investment.  In the case of a branch of foreign
corporations, in addition to registration in the National Registry of Foreign
Investment, additional authorization from the Ministry of Economy is required in
order to obtain subsequent registration in the corresponding local Public
Registry of Commerce.




Mexican
mining law does not require payment of finder’s fees or royalties to the
Government, except for a discovery premium in connection with national mineral
reserves and claims or allotments contracted directly from the Mexican
Geological Service.  None of the property interests held by Lagartos
are under such fee regime.  However, holders of exploitation
concessions are required to pay surface taxes which are assessed and levied on a
semi-annual basis.




Foreign Investment
Regulation




Foreign
investment regulation in Mexico is basically governed by the Law of Foreign
Investment and its Regulations.  Foreign investment of up to 100% in
Mexican mining companies is freely permitted.  Foreign companies or
companies with foreign investment in their capital stock must be registered with
the National Registry of Foreign Investment which is maintained by the Ministry
of Economy.




Environmental
Regulation




Mexico
has federal, state and municipal laws and regulations relating to the protection
of the environment and natural resources (“Environmental Laws”), including laws
and regulations concerning water pollution, air pollution, noise pollution,
hazardous substances and forest protection.  The principal federal
environmental law in Mexico is the Ley General del Equilibrio Ecológico
y la Protección al Ambiente(the “General Law of Ecological Balance and
Environmental Protection” or the “General Law”), pursuant to which general
environmental rules and policies have been promulgated addressing air pollution,
hazardous substances and environmental impact among various others.




Another
federal law particularly relevant for the mining sector is the Ley General para la Gestión Integral
de los Residuos and its recently enacted regulations the Reglamento de la Ley General para la
Prevención y Gestión Integal de los Residuos,which regulate the
generation, handling, transportation, storage and final disposal of hazardous
waste, as well as the import and export of hazardous materials and hazardous
wastes, and assigns liability for ownership and possession of contaminated sites
and for contaminating activities.   The Ley General de Desarrollo Forestal
Sustentable and its regulations (the “Forestry Protection Laws”) are also
relevant, as they address reforestation obligations and compensation measures on
projects which may have a deforestation impact, such as certain mining
projects.




Applicable
Environmental Laws foresee the creation and regulation of Natural Protected
Areas (Areas Naturales
Protegidas)which along with Ecological Ordinance Programs (Programas de Ordenamiento Ecológico)constitute two of the main instruments that will regulate the use of land
in the areas within their jurisdiction, including restrictions on certain
activities and sectors, such as the mining sector.




Additionally,
there are a series of “Mexican Official Norms” which are technical standards
issued by competent regulatory authorities, pursuant to the Ley General de Metrología y
Normalizaciónand to other laws that include the aforementioned
environmental laws, which establish standards relating to air emissions, waste
water discharges, the generation, handling and disposal of hazardous wastes and
noise control, among others. There are Mexican Official Norms regarding soil
contamination (mainly with total petroleum hydrocarbons and heavy metals) and
waste management (the “Ecological Standards”). Of particular importance to the
mining sector are Mexican Official Norms NOM-120-SEMARNAT-1997 regulating
environmental protection of mining activities in certain zones, and
NOM-141-SEMARNAT-2003 which addresses certain aspects of tailings (jales de minería)from mining
activities, among other Ecological Standards applicable to mining
activities.




The Secretaría de Medio Ambiente y
Recursos Naturales(the “Ministry of the Environment and Natural
Resources” or “SEMARNAT” for its initials in Spanish) is the federal agency in
charge of enacting and overseeing environmental regulation at the federal level,
including the General Law and federal statutes and the Environmental Laws, as
well as the Ecological Standards.  On enforcement matters the SEMARNAT
acts mainly through the “Procuraduría Federal de Protección
al Ambiente”(the “Federal Bureau of Environmental Protection” or
“PROFEPA” for its initials in Spanish) and in certain cases through other
governmental entities under its control, such as the Comisión Nacional del Agua (or
National Water Commission).




Environmental
Laws also regulate environmental protection in the mining industry in
Mexico.  In order to comply with these laws, a series of permits,
licences and authorizations must be obtained by a concession holder during the
exploration and exploitation stages of a mining project.  Generally,
these permits and authorizations are issued on a timely basis after the
completion of an application by a concession holder. Additionally, periodic
reporting of hazardous wastes and federal air emissions and federal waste water
discharges to Federal authorities is required under the Environmental
Laws.   To the best of the Company’s knowledge, all of the
Company’s property interests are currently in compliance with the Environmental
Laws.




In the
exploration stage, the cost of complying with such Environmental Laws is
included in the exploration budget. Until such time as the Company conducts
larger more invasive procedures, such as trenching or bulk sampling, there is
only nominal cost associated with compliance with the Environmental Laws. The
Company’s programs are not yet sufficiently advanced to allow an estimate of the
future cost of such environmental compliance.




Currency




The
official monetary unit of Mexico is the peso. The currency exchange rate freely
floats and the country has no currency exchange
restrictions.  Nevertheless, following the devaluation of the Mexican
peso in December, 1994, uncertainties continue with respect to the financial
situation of Mexico.  See “Describe the Business - Risk Factors”,
specifically those risk factors dealing with currency fluctuation and
inflation.




The
following table presents a five-year history of the average annual exchange
rates to convert one Canadian dollar into Mexican pesos, calculated by using the
average of the exchange rates on the last day of each month during the given
year.




Year
            
            Average
      Exchange Rate2007
            
            
            10.28462006
            
            
            9.60252005
            
            
            8.99182004
            
            
            8.689132003
            
            
            7.73190




Value Added
Tax




In
Mexico, VAT is charged on all goods and services at a rate of 15%
percent.  Proprietors selling goods or services must collect VAT on
behalf of the government.  Goods or services purchased incur a credit
for VAT paid.  The resulting net VAT is then remitted to, or collected
from the Government of Mexico through a formalized filing process.




Trend
Information




Other
than the obligations under the Company's property option agreements set out in
“Tabular Disclosure of Contractual Obligations”, there are no identifiable
trends, demands, commitments, events or uncertainties that will result in, or
that are reasonably likely to result in, the Company's liquidity either
increasing or decreasing at present or in the foreseeable future.  The
Company will require sufficient capital in the future to meet its acquisition
payments and other obligations under property option agreements for those
properties it considers worthy to incur continued holding and exploration costs
upon.  The need to make such payments is a “Trend” as it is unlikely
that all such obligations will be eliminated from the Company’s future business
activities.  The Company intends to utilize cash on hand in order to
meet its obligations under property option agreements until at least March 31,
2010. The scale and scope of the Juanicipio Joint Venture could change this
timeline as exploration progresses. It is unlikely that the Company will
generate sufficient operating cash flow to meet these ongoing obligations in the
foreseeable future. Accordingly the Company will likely need to raise additional
capital by issuance of equity in the future.  At this time the Company
has no plan or intention to issue any debt in order to raise capital for future
requirements.





At the
time of writing there is a noted favourable trend with regard to the market for
metal commodities and related companies, however, it is the opinion of the
Company that its own liquidity will be most affected by the results of its
exploration activities.  The discovery of an economic mineral deposit
on one of its mineral properties may have a favourable effect on the Company’s
liquidity, and conversely, the failure to find one may have a negative
effect.




Risk
Factors




The
following is an overview of the risk factors to be considered in relation to our
business. Specific risk factors to be considered are as follows:




General




1.
            The Company has a lack of cash
      flow, which may affect its ability to continue as a going
      concern.




2.
            Values attributed to the
      Company’s assets may not be realizable, the Company has no proven history
      and its ability to continue as a going concern depends upon a number of
      significant variables. The amounts attributed to the Company’s
      exploration concessions in its financial statements represent acquisition
      and exploration costs and should not be taken to represent realizable
      value. Further, the Company has no proven history of performance,
      revenues, earnings or success. As such, the Company’s ability to continue
      as a going concern is dependent upon the existence of economically
      recoverable resources, the ability of the Company to obtain the necessary
      financing to complete the development of its interests and future
      profitable production or alternatively, upon the Company’s ability to
      dispose of its interests on a profitable
basis.




3.
            The Company is dependent on its
      key personnel, some of whom have not entered into written agreements with
      the Company and whom are not insured by the Company.The Company is
      dependent upon the continued availability and commitment of its key
      management and consultants, whose contributions to immediate and future
      operations of the Company are of central importance.  The
      Company relies on its President, Dan MacInnis, and its other officers,
      some of whom have entered into written employment agreements with the
      Company, for the day-to-day operation of the Company, its projects and the
      execution of the Company’s business plan.  The Company also
      relies heavily on Dr. Peter Megaw for the planning, execution and
      assessment of the Company’s exploration programs.  Dr. Megaw was
      formerly an arm’s length consultant to and is currently a director of and
      consultant to the Company and he is paid a fee for his consulting services
      based on fair market rates and his submission of invoices for services
      rendered. The Company has not obtained “key man” insurance for any of its
      management or consultants. The loss of either Dan MacInnis or Dr. Megaw
      may have a temporary negative impact on the Company until they were
      replaced.




4.
            The Company does not pay
      dividends.Payment of dividends on the Company’s Common Shares is
      within the discretion of the Company’s Board and will depend upon the
      Company’s future earnings, its capital requirements and financial
      condition, and other relevant factors.  The Company does not
      currently intend to declare any dividends for the foreseeable
      future.




5.
            The Company’s directors and
      officers may have conflicts of interest which may not be resolved in
      favour of the Company, which in turn may adversely affect the
      Company. None of the Company’s directors or officers devotes their
      full time to the affairs of the Company. All of the directors and officers
      of the Company are also directors, officers and shareholders of other
      natural resource or public companies, as a result of which they may find
      themselves in a position where their duty to another company conflicts
      with their duty to the Company.  None of the Company’s
      constating documents or any of its other agreements contains any
      provisions mandating a procedure for addressing such conflicts of
      interest. There is no assurance that any such conflicts will be resolved
      in favour of the Company.  If any of such conflicts are not
      resolved in favour of the Company, the Company may be adversely affected.
      See “Directors and Officers” for details of other companies that the
      Company’s officers and directors are involved
  with.




Risk
Factors Relating to Title




6.
            Title to the properties in
      which the Company has an interest may be in doubt and any challenge to the
      title to any of such properties may have a negative impact on the
      Company.  A full investigation of legal title to the
      Company’s property interests has not been carried out at this
      time.  Accordingly, title to these property interests may be in
      doubt.  Other parties may dispute title or access to the
      properties in which the Company has an interest.  The Company’s
      property interests may also be subject to prior unregistered agreements or
      transfers or land claims and title may be affected by undetected
      defects.  Any challenge to the title or access to any of the
      properties in which the Company has an interest may have a negative impact
      on the Company as the Company will incur delay and expenses in defending
      such challenge and, if the challenge is successful, the Company may lose
      any interest it may have in the subject
  property.




7.
            Title opinions provide no
      guarantee of title and any challenge to the title to any of such
      properties may have a negative impact on the
      Company.  Although the Company has or will receive title
      opinions for any concessions in which it has or will acquire a material
      interest, there is no guarantee that title to such concessions will not be
      challenged or impugned.  In Mexico, a title opinion does not
      provide absolute comfort that the holder has unconditional or absolute
      title.  Any challenge to the title or access to any of the
      properties in which the Company has an interest may have a negative impact
      on the Company as the Company will incur expenses in defending such
      challenge and, if the challenge is successful, the Company may lose any
      interest it may have in the subject
property.




8.
            Titles to the properties in
      which the Company has an interest are not registered in the name of the
      Company, which may result in potential title disputes having a negative
      impact on the Company. All of the agreements under which the
      Company may earn interests in properties have either been registered or
      been submitted for registration with the Mexican Public Registry of
      Mining, but title relating to the properties in which the Company may earn
      its interests are held in the names of parties other than the Company. Any
      of such properties may become the subject of an agreement which conflicts
      with the agreement pursuant to which the Company may earn its interest, in
      which case the Company may incur expenses in resolving any dispute
      relating to its interest in such property and such a dispute could result
      in the delay or indefinite postponement of further exploration and
      development of properties with the possible loss of such
      properties.




Risk
Factors Relating to the Company’s Property Interests




9.
            The
      terms of the Shareholders Agreement governing the operation of Minera
      Juanicipio provides effective control to Peñoles over many of the
      activities of Minera Juanicipio since it holds a majority (56%) of the
      shares of Minera Juanicipio. However a limited number of decisions of the
      shareholders or the directors of Minera Juanicipio require a special
      majority of 60%, and in one instance 75%, giving the company an effective
      veto over any such decisions. The special matters comprise the
      following:




a) The
execution of any credit, lease, purchase or sale agreement regarding any fixed
asset valued at more than US$500,000;




b) The
transfer or encumbrance of any assets in order to guarantee third party
obligations;




c) The
approval of the annual exploration budget or any of its amendments;




d) The
authorization of any expense or investment that exceeds 10% of total assets that
has not been included in an approved budget, except for such temporary
operations that may be approved at a shareholders meeting;




e) The
acquisition of assets by the shareholders, through any legal means, which may
result in a change of control of the corporation or of any subsidiary or
affiliate;




f) Any
amendment to the attendance or voting quorum requirements established by the
By-Laws;




g)Any change
dividing the corporation’s capital or addressing a merger, transformation or
amendment of the By-Laws will require the approval of at least 75% of the
shareholders.




The
Shareholders Agreement calls for adjustments to the interests of the
shareholders in Minera Juanicipio where either shareholder fails to fund cash
calls within certain specified periods. If the Company fails to fund cash calls,
it risks having its interest reduced and may lose its effective veto power and
ultimately could be diluted out of Minera Juanicipio altogether.




10.
            The properties in which the
      Company has an interest are in the exploration stage and most exploration
      projects do not result in the discovery of commercially mineable
      deposits.  All of the Company’s property interests are at
      the exploration stage only (even when due to the amendments to the Mexican
      mining law the mining concessions covering such property interests allow
      in all the cases the exploitation of minerals) and there are no known
      commercial quantities of minerals or precious gems on such
      properties.  Most exploration projects do not result in the
      discovery of commercially mineable deposits of ores or gems. Estimates of
      reserves, mineral deposits and production costs can be affected by such
      factors as environmental permit regulations and requirements, weather,
      environmental factors, unforeseen technical difficulties, unusual or
      unexpected geological formations and work interruptions. In addition, the
      grade of precious metals ultimately discovered may differ from that
      indicated by drilling results. There can be no assurance that precious
      metals recovered in small-scale tests will be duplicated in large-scale
      tests under on-site conditions or in production scale. Because the
      probability of an individual prospect ever having reserves is extremely
      remote, in all probability the Company’s properties do not contain any
      reserves, and any funds spent on exploration will be lost. The failure of
      the Company to find an economic mineral deposit on any of its exploration
      concessions will have a negative effect on the
  Company.




11.
            The properties in which the
      Company has an interest are in Mexico.The Company’s
      property interests are located in Mexico.  Any changes in
      governmental laws, regulations, economic conditions or shifts in political
      attitudes or stability in Mexico are beyond the control of the Company and
      may adversely affect its business. See “Describe the Business – General -
      Carrying on Business in Mexico”.




12.
            There is no guarantee licenses
      and permits required by the Company will be obtained which may result in
      the Company losing its interest in the subject property.The
      Company’s ability to explore and exploit the property interests is subject
      to ongoing approval of local governments.  The operations of the
      Company may require licenses and permits from various governmental
      authorities.  The Company may not be able to obtain all
      necessary licenses and permits that may be required to carry out
      exploration, development and mining operations at its
      projects.  Failure to obtain such licenses and permits may
      adversely affect the Company’s business as the Company would be unable to
      legally conduct its intended exploration work, which may result in it
      losing its interest in the subject
property.




13.
            Environmental regulations are
      becoming more onerous to comply with and the cost of compliance with
      environmental regulations and changes in such regulations may reduce the
      profitability of the Company’s operations.The Company’s operations
      are subject to environmental regulations promulgated by government
      agencies from time to time.  Environmental legislation provides
      for restrictions and prohibitions of spills, release or emission of
      various substances produced in association with certain mining industry
      operations, such as seepage from tailing disposal areas, which could
      result in environmental pollution.  Failure to comply with such
      legislation may result in the imposition of fines and
      penalties.  In addition, certain types of operations require
      submissions to and approval of environmental impact
      assessments.  Environmental legislation is evolving in a manner
      which means stricter standards and enforcement, fines and penalties for
      non-compliance are more stringent.  Environmental assessments of
      proposed projects carry a heightened degree of responsibility for
      companies and directors, officers and employees.  The cost of
      compliance with environmental regulations and changes in such regulations
      may reduce the profitability of the Company’s operations. See “Describe
      the Business – General – Carrying on Business in Mexico – Environmental
      Regulation”.




14.
            Mexican Foreign Investment and
      Income Tax Laws apply to the Company.Under the Foreign Investment
      Law of Mexico, there is presently no limitation on foreign capital
      participation in mining operations; however, the applicable laws may
      change in a way which may adversely impact the Company and its ability to
      repatriate profits.  Under Mexican Income Tax Law, dividends
      paid out of “previously taxed net earnings” are not subject to Mexican
      taxes.  Otherwise, such dividends paid are subject to the
      Mexican income tax at the corporate level, which presently is 28 percent
      over a gross up basis (amount of the dividend times 1.3889), payable by
      the Mexican company as an advance of its annual income
      tax.  Currently, there is no withholding tax on dividends paid
      by a Mexican company.




15.
            Foreign currency fluctuations
      and inflationary pressures may have a negative impact on the Company’s
      financial position and results.  The Company’s property
      interests in Mexico make it subject to foreign currency fluctuations and
      inflationary pressures which may adversely affect the Company’s financial
      position and results. Several of the Company’s options to acquire
      properties in Mexico may result in option payments by the Company
      denominated in Mexican Pesos or in US dollars over the next few years.
      Exploration and development programs to be conducted by the Company in
      Mexico will also be funded in Mexican Pesos or in US dollars. As the
      Company maintains its accounts in Canadian and US dollars, any
      appreciation in Mexican currency against the Canadian or US dollar will
      increase our costs of carrying out operations in
      Mexico.  Further, any decrease in the US dollar against the
      Canadian dollar will result in a loss on our books to the extent we hold
      funds in US dollars.  The steps taken by management to address
      foreign currency fluctuations may not eliminate all adverse effects and,
      accordingly, the Company may suffer losses due to adverse foreign currency
      fluctuations. The Company also bears the risk of incurring losses
      occasioned as a result of inflation in
Mexico.




16.
            None of the properties in which
      the Company has an interest has any reserves.Currently, there are
      no reserves on any of the properties in which the Company has an
      interest.




Risk
Factors Relating to Mining Generally




17.
            Mining exploration is a
      speculative business and most exploration projects do not result in the
      discovery of commercially mineable deposits.  Exploration
      for minerals or precious gems is a speculative venture necessarily
      involving substantial risk. The expenditures made by the Company described
      herein may not result in discoveries of commercial quantities of minerals
      or precious gems. The failure to find an economic mineral deposit on any
      of the Company’s exploration concessions will have a negative effect on
      the Company.




18.
            Mining operations generally
      involve a high degree of risk and potential
      liability.  Hazards such as unusual or unexpected
      formations and other conditions are involved in mining.  The
      Company may become subject to liability for pollution, fire, explosions,
      cave-ins or hazards against which it cannot insure or against which it may
      elect not to insure.  The incurrence of any such liabilities may
      have a material, adverse effect on the Company’s financial
      position.




19.
            Mineral prices and
      marketability fluctuate and any decline in mineral prices may have a
      negative effect on the Company.Mineral prices,
      particularly gold and silver prices, have fluctuated widely in recent
      years.  The marketability and price of minerals and precious
      gems which may be acquired by the Company will be affected by numerous
      factors beyond the control of the Company.  These other factors
      include delivery uncertainties related to the proximity of its reserves to
      processing facilities and extensive government regulation relating to
      price, taxes, royalties, allowable production land tenure, the import and
      export of minerals and precious gems and many other aspects of the mining
      business.  Declines in mineral prices may have a negative effect
      on the Company.




20.
            Mining is a highly competitive
      industry.  The mining industry is intensely competitive
      and the Company must compete in all aspects of its operations with a
      substantial number of large established mining companies with substantial
      capabilities and greater financial and technical resources than the
      Company.  The Company may be unable to acquire additional
      attractive mining properties on terms it considers to be
      acceptable.  The inability of the Company to acquire attractive
      mining properties would result in difficulties in it obtaining future
      financing and profitable
operations.





21.
            Surface
      access.  The majority of the Company’s mineral properties
      are located in remote and relatively uninhabited areas.  There
      are currently no areas of interest to the Company within its mineral
      concessions that are overlain by significant habitation or industrial
      users.  Notwithstanding this there are potential overlapping
      surface usage issues in some areas.  Some surface rights are
      owned by local communities or “Ejidos” and some surface rights are owned
      by private ranching or dwelling interests.  The Company will be
      required to negotiate the acquisition of surface rights in those areas
      where it may wish to develop mining operations.  Exploration
      activities are not materially impacted by competing surface rights issues,
      although in some areas the Company has been required to negotiate
      compensation for surface rights holders in order to secure right of
      access.




Risk
Factors Relating to Financing




22.
            Adequate funding may not be
      available, resulting in the possible loss of the Company’s interests in
      its properties.  Sufficient funding may not be available
      to the Company for further exploration and development of its property
      interests or to fulfil its obligations under applicable
      agreements.  The Company may not be able to obtain adequate
      financing in the future or the terms of such financing may not be
      favourable.  Failure to obtain such additional financing could
      result in delay or indefinite postponement of further exploration and
      development of properties with the possible loss of such
      properties.  The Company will require new capital to continue to
      operate its business and to continue with exploration on its properties,
      and additional capital may not be available when needed, if at
      all.




23.
            Funding and property
      commitments will result in dilution to the Company’s
      shareholders.  It is likely any additional capital
      required by the Company as described in Risk Factor #22 above will be
      raised through the issuance of additional equity which will result in
      dilution to the Company’s shareholders. Further, the Company, from time to
      time, is required to issue Common Shares to earn its interests in
      properties. Such property share issuances will also result in dilution to
      the Company’s shareholders.




24.
            Substantial expenditures are
      required for commercial operations and if financing for such expenditures
      is not available on acceptable terms, the Company may not be able to
      justify commercial operations.  If mineable deposits are
      discovered, substantial expenditures are required to establish reserves
      through drilling, to develop processes to extract the resources and, in
      the case of new properties, to develop the extraction and processing
      facilities and infrastructure at any site chosen for
      extraction.  Although substantial benefits may be derived from
      the discovery of a major deposit, resources may not be discovered in
      sufficient quantities to justify commercial operations or the funds
      required for development may not be obtained at all or on terms acceptable
      to the Company.




25.
            Lack of funding to satisfy
      contractual obligations may result in the Company’s loss of property
      interests.  The Company may, in the future, be unable to
      meet its share of costs incurred under agreements to which it is a party
      and the Company may have its property interests subject to such agreements
      reduced as a result or even face termination of such
      agreements.  The Company has options to acquire interests in
      properties in Mexico and in order to obtain ownership of such properties,
      it must make payments to the current owners and incur certain exploration
      expenditures on those properties. In order to secure ownership of these
      properties, additional financing will be required. Failure of the Company
      to make the requisite payments in the prescribed time periods will result
      in the Company losing its entire interest in the subject property and the
      Company will no longer be able to conduct certain aspects of its business
      as described in this AIF. The Company may not have sufficient funds to:
      (a) make the minimum expenditures to maintain its properties in good
      standing under Mexican law; and (b) make the minimum expenditures to earn
      its interest in such properties.  In such event, in respect of
      any of the properties, the Company may seek to enter into a joint venture
      or sell the subject property or elect to terminate its
    option.




Miscellaneous
Risk Factors




26.
            The price of the Company’s
      Common Shares is volatile.  Publicly quoted securities
      are subject to a relatively high degree of price volatility.  It
      may be anticipated that the quoted market for the Common Shares of the
      Company will be subject to market trends generally, notwithstanding any
      potential success of the Company in creating sales and
      revenues.




27.
            There is an absence of a liquid
      trading market for the Company’s Common
      Shares.  Shareholders of the Company may be unable to
      sell significant quantities of Common Shares into the public trading
      markets without a significant reduction in the price of their Common
      Shares, if at all.  The Company may not continue to meet the
      listing requirements of the Exchange or AMEX or achieve listing on any
      other public listing exchange.




28.
            Classification as a Passive
      Foreign Investment Company has adverse income tax consequences for United
      States shareholders.  The Company believes it is a
      Passive Foreign Investment Company (“PFIC”), as that term is defined in
      Section 1297 of the Internal Revenue Code of 1986, as amended, and
      believes it will be a PFIC in the foreseeable future. Consequently, this
      classification will result in adverse tax consequences for U.S. holders of
      the Company’s Common Shares. For an explanation of these effects on
      taxation U.S. shareholders and prospective holders of the Company’s Common
      Shares are also encouraged to consult their own tax
    advisers.




29.
            The Company and its principals
      and assets are located outside of the United States which makes it
      difficult to effect service of process or enforce within the United States
      any judgments obtained against the Company or its officers or
      directors.  Substantially all of the Company’s assets are
      located outside of the United States and the Company does not currently
      maintain a permanent place of business within the United
      States.  In addition, most of the directors and officers are
      nationals and/or residents of countries other than the United States, and
      all or a substantial portion of such persons’ assets are located outside
      the United States.  As a result, it may be difficult for
      investors to effect service of process or enforce within the United States
      any judgments obtained against the Company or its officers or directors,
      including judgments predicated upon the civil liability provisions of the
      securities laws of the United States or any state thereof.  In
      addition, there is uncertainty as to whether the courts of Canada, Mexico
      and other jurisdictions would recognize or enforce judgments of United
      States courts obtained against the Company or its directors and officers
      predicated upon the civil liability provisions of the securities laws of
      the United States or any state thereof, or be competent to hear original
      actions brought in Canada, Mexico or other jurisdictions against the
      Company or its directors and officers predicated upon the securities laws
      of the United States or any state thereof. Further, any payments as a
      result of judgments obtained in Mexico should be in pesos and service of
      process in Mexico must be effectuated personally and not by
      mail.







Companies with Asset-backed
Securities Outstanding




The
Company has no asset-backed securities outstanding. Cash and cash equivalents
consist of cash and short-term money market instruments which are readily
convertible into cash and have original maturities of 90 days or
less.




Companies with Mineral
Projects




All of
the Company’s mining claims are located in Mexico and are issued by the Federal
Government. As of the date of this AIF, the Company does not own any surface
lands on any of its properties other than the Juanicipio property, where some
surface lands have been purchased overlying the Valdecañas and Juanicipio
Veins.  These surface rights are held in the operating company Minera
Juanicipio.  The Juanicipio property is operated by Peñoles, a major
Mexican mining company.





The
majority of the Company’s mineral properties are located in remote and
relatively uninhabited areas.  There are currently no areas of
interest to the Company within its mineral concessions that are overlain by
significant habitation or industrial users.  Notwithstanding this
there are potential overlapping surface usage issues in some
areas.  Some surface rights are owned by local communities or “Ejidos”
and some surface rights are owned by private ranching or dwelling
interests.  The Company will be required to negotiate the acquisition
of surface rights in those areas where it may wish to develop mining
operations.  Exploration activities are not materially impacted by
competing surface rights issues, although in some areas the Company has been
required to negotiate compensation for surface rights holders in order to secure
right of access.





In some
of the more remote property locations the access to water, power and basic
infrastructure is limited or non-existent.  Any mining operations
undertaken in such areas will need to take the supply of such requirements into
consideration.  For the Juanicipio, Batopilas and Cinco de Mayo
properties, the available supply or the ability to establish supply, of water,
power and infrastructure is considered to be adequate or
manageable.





To
maintain 50 year mining concessions the Company must pay yearly taxes and file
an annual work report. If the Company files for an extension before the term of
the concession expires an additional 50 years can be granted.





The
concessions listed in the following table are 100% owned by the Company with the
exception of the Juanicipio property which is owned by Minera Juanicipio,
thereby effecting a holding of 44% indirectly by the Company and 56% by
Peñoles.




CLAIM
      NUMBER
              FILE
              TITLE
              DATE
              DATE
              SURFACE
              RIGHTSSTARTING
              FINISHING
              AREA
              TO
      PAY1/2008(PESOS)MINERA
      LOS LAGARTOS S.A. DE C.VJUANICIPIO
      PROJECTJUANICIPIO
      1
              8/
              1-1706
              226339
              13-Dec-2005
              12-Dec-2055
              7,679.2106
              52,833TOTAL:
              52,833BATOPILAS
      PROJECTDON
      FIPPI
              1/1/
              1358
              222629
              3-Aug-2004
              2-Aug-2054
              3,160.5780
              21,745DON
      FIPPI FRAC. 1
              10/
              22430
              *
              12.9315DON
      FIPPI 2
              16/
              30103
              215474
              22-Feb-2002
              21-Feb-2048
              152.0234
              4,354DON
      FIPPI 3
              16/
              30953
              215481
              22-Feb-2002
              21-Feb-2048
              56.0000
              1,604DON
      FIPPI 4
              16/
              30952
              217251
              2-Jul-2002
              1-Jul-2048
              10.0000
              142SANTO
      DOMINGO
              16/
              29872
              214671
              30-Oct-2001
              29-Oct-2046
              26.6062
              762SAN
      MARTIN
              16/
              29873
              214672
              30-Oct-2001
              29-Oct-2046
              2.1536
              62PASTRANA
              16/
              31077
              217467
              16-Jul-2002
              15-Jul-2048
              82.6803
              1,177ANEXO
      A SAN MARTIN
              16/
              31801
              220044
              3-Jun-2003
              2-Jun-2049
              6.7443
              96TESCALAMA
              16/
              32058
              220927
              28-Oct-2003
              27-Oct-2049
              12.0000
              171ROSALINDA
              16/
              32057
              220926
              28-Oct-2003
              27-Oct-2049
              25.6222
              365TOTAL:
              30,478GUIGUI
      PROJECTGUIGUI
              1-1.3/
              938
              217493
              16-Jul-2002
              15-Jul-2052
              4,009.0334
              57,089GUIGUI
      2
              16/
              27991
              219640
              28-Mar-2003
              27-Mar-2050
              489.1300
              6,965GUIGUI
      3 FRAC. 1
              16/
              29944
              219648
              28-Mar-2003
              27-Mar-2050
              17.0200
              242GUIGUI
      3 FRAC. 2
              16/
              29944
              219649
              28-Mar-2003
              27-Mar-2050
              1.5200
              22GUIGUI
      4
              16/
              30320
              219650
              28-Mar-2003
              27-Mar-2050
              3.0000
              43EL
      FAISAN
              1/1.3
              1182
              214631
              26-Oct-2001
              25-Oct-2051
              16.0000
              458LOS
      ARENALES
              1/1.3
              1011
              214622
              26-Oct-2001
              25-Oct-2051
              18.0000
              516TOTAL:
              65,335SIERRA
      DE RAMIREZ PROJECTBUENOS
      AIRES
              25/
              31061
              220223
              25-Jun-2003
              24-Jun-2050
              4,443.4510
              63,275BUENOS
      AIRES 2
              25/
              31492
              224623
              25-May-2005
              24-May-2055
              11,044.0597
              75,983BUENOS
      AIRES 3
              25/
              32816
              228842
              9-Feb-2007
              8-Feb-2057
              10.0000
              46BUENOS
      AIRES 4
              25/
              32867
              229714
              8-Jun-2007
              7-Jun-2057
              62.0644
              286LA
      MIA
              2/1.3
              2081
              218361
              5-Nov-2002
              4-Nov-2052
              7.9641
              113LAS
      CUMBRES
              9/
              10299
              147709
              18-May-1967
              17-May-2017
              8.2731
              834EL
      TRIUNFO
              9/
              5853
              170047
              15-Mar-1982
              14-May-2032
              7.8098
              787LA
      AZTECA
              9/
              2125
              167702
              5-Dec-1980
              4-Dec-2030
              6.0000
              605AMPL.
      DEL FUNDADOR
              9/
              12803
              163903
              14-Dec-1978
              13-Dec-2028
              11.7929
              1,189EL
      CONSUELO
              9/
              9590
              167701
              5-Dec-1980
              4-Dec-2030
              12.0000
              1,209PLATEROS
              9/
              56
              177825
              29-Apr-1986
              28-Apr-2011
              2.0000
              202LA
      PUERTA
              9/
              10878
              180619
              13-Jul-1987
              12-Jul-2037
              3.0000
              302SAN
      PABLO
              9/
              1099
              180584
              13-Jul-1987
              12-Jul-2037
              4.0000
              403Sub
      Total
              
              
              
              
              
              
              145,234AREA
      "EL PAVO"HERCULES
              9/
              11876
              164365
              7-May-1979
              6-May-2029
              14.8928
              1505UNIFICACION
      SANTA RITA
              321.42
              959
              170680
              11-Jun-1982
              10-Jun-2032
              24.3516
              2460LA
      CIMA
              EXT
              87
              75632
              1-Jan-1961
              31-Dec-2014
              9.7032
              980SAN
      ELOY
              9/
              2734
              114713
              10-Jun-1950
              *
              18.9060
              1910SAN
      ELIGIO
              25/
              2148
              104099
              25-Jan-1994
              24-Jan-2011
              3.0000
              303EL
      TUNEL
              25/
              2151
              105012
              28-Mar-1944
              27-Mar-2011
              6.4504
              652UNIFICACION
      SAN PEDRO
              
              958
              170679
              11-Jun-1982
              10-Jun-2032
              48.0242
              4850AMPL.
      DE LA ESCUADRA
              9/
              459
              82608
              27-Jan-1936
              26-Jan-2011
              11.0000
              1111UNIFICACION
      LA GARIFA
              
              960
              170596
              2-Jun-1982
              1-Jun-2032
              52.1095
              5263SEGUNDA
      AMPLIACION DE LA ESCUADRA
              25/
              1
              83962
              25-Jun-1936
              24-Jun-2011
              4.1783
              422TERCERA
      AMPLIACION DE LA ESCUADRA
              25/
              1
              88105
              24-Jan-1937
              *
              22.5652
              2279CUARTA
      AMPLIACION DE LA ESCUADRA
              
              
              115235
              *
              *
              4.0000
              404LA
      VIA
              25/
              2147
              104098
              25-Jan-1961
              24-Jan-2011
              21.0000
              2121LOS
      COLORADOS
              25/
              3161
              115041
              5-Jul-1950
              *
              40.0000
              4040AMPLIACION
      NORTE DE VERDUN
              25/
              1
              111892
              23-Nov-1948
              22-Nov-2011
              4.9282
              498SAN
      LUIS
              7/
              8057
              139973
              21-Oct-1959
              20-Oct-2011
              8.0000
              808AMPLIACION
      DE VERDUN
              2/
              322.2-594
              73731
              11-May-1932
              *
              5.2926
              535ARTURO
              25/
              2895
              113690
              9-Sep-1949
              *
              8.8462
              894PROVIDENCIA
              
              
              4118
              *
              *
              3.0000
              303EL
      CAMBIO
              
              
              4996
              *
              *
              13.6137
              1375LA
      ESCUADRA
              
              
              81507
              *
              *
              12.3351
              1246GUADIANA
              
              
              98321
              *
              *
              8.3278
              841UNIFICACION
      SAN AGUSTIN
              321.42/
              957
              170595
              2-Jun-1982
              1-Jun-2032
              67.5088
              6819LA
      CHAPA
              9/
              1953
              177824
              29-Apr-1986
              28-Apr-2036
              20.6736
              2088LA
      LLAVE
              9/
              1952
              103722
              22-Dec-1943
              21-Dec-2011
              8.4385
              852Sub
      Total
              
              
              
              
              
              
              44559TOTAL:
              189,793ADARGAS
      PROJECTADARGAS
              16/
              31647
              218511
              5-Nov-2002
              4-Nov-2048
              300.0000
              8,926ADARGAS
      2
              16/
              32169
              221710
              17-Mar-2004
              16-Mar-2050
              527.0000
              7,582ADARGAS
              16/
              31653
              218523
              5-Nov-2002
              4-Nov-2048
              25.0000
              745TOTAL:
              17,253CINCO
      DE MAYO PROJECTDON
      JOSE
              1
              1300
              222251
              22-Jun-2004
              21-Jun-2054
              1,640.0000
              23,354DON
      JOSE II
              1
              1391
              207171
              8-May-1998
              7-May-2048
              2,462.9828
              248,244DON
      JOSE III
              1
              1492
              224331
              26-Apr-2005
              25-Apr-2055
              78.7872
              542DON
      JOSE III FRAC. 2
              16/
              24502
              209293
              30-Mar-1999
              29-Mar-2049
              32.7879
              1,877DON
      JOSE IV        T-212524 PASO
      A
              16/
              24773
              218474
              31-Oct-2000
              *
              348.5547
              4,963DON
      JOSE V
              16/
              24789
              212878
              13-Feb-2001
              12-Feb-2046
              47.7166
              1,367DON
      ROBERTO
              1
              1462
              224252
              22-Apr-2005
              21-Apr-2055
              453.4431
              3,120CINCO
      DE MAYO
              16/
              31459
              216086
              9-Apr-2002
              8-Apr-2048
              65.0000
              1,862DANIEL
              16/
              33396
              229222
              27-Mar-2007
              26-Mar-2057
              1,653.9137
              7,608DANIEL
      1
              16/
              34715
              229249
              28-Mar-2007
              27-Mar-2057
              4.8630
              23INDEPENDENCIA
              16/
              34753
              229744
              13-Jun-2007
              12-Jun-2057
              17,096.9082
              78,646LA
      MARY
              16/
              35303
              230455
              4-Sep-2007
              3-Sep-2057
              12.0000
              55LA
      AMISTAD
              16/
              34983
              230454
              4-Sep-2007
              3-Sep-2057
              11.4935
              53EL
      PLOMO
              16/
              35374
              230475
              6-Sep-2007
              5-Sep-2057
              20.0000
              92TOTAL:
              371,806LAGARTOS
      (ZACATECAS) PROJECTLAGARTOS  I
              93/
              26834
              220667
              9-Sep-2003
              8-Sep-2050
              11,206.7018
              159,583LAGARTOS
      II
              93/
              26857
              221035
              13-Nov-2003
              12-Nov-2050
              3,720.0000
              52,973LAGARTOS
      III
              93/
              26865
              221355
              27-Jan-2004
              26-Jan-2052
              36,995.1738
              526,811LAGARTOS
      IV
              93/
              26898
              221805
              26-Mar-2004
              25-Mar-2052
              63,184.3347
              899,745LAGARTOS  V
              93/
              26951
              222761
              27-Aug-2004
              26-Aug-2052
              7,092.6638
              48,798LAGARTOS  VI
              93/
              27344
              228340
              8-Nov-2006
              7-Nov-2056
              3,638.0752
              16,735LAGARTOS  VII
              93/
              27345
              224097
              31-Mar-2005
              30-Mar-2054
              234.0000
              1,610LAGARTOS  VIII
              93/
              27346
              224098
              31-Mar-2005
              30-Mar-2054
              540.0000
              3,715LAGARTOS  9
              93/
              27391
              225009
              6-Jul-2005
              5-Jul-2054
              8,000.0000
              55,040LAGARTOS
      X
              93/
              27998
              228253
              17-Oct-2006
              16-Oct-2056
              22,767.9220
              104,732LAGARTOS
      XI
              93/
              27611
              Proposed
      for title
              
              363.6348LAGARTOS
      XII
              93/
              28006
              228569
              8-Dec-2006
              7-Dec-2056
              2,854.9938
              13,133LAGARTOS
      XIII
              93/
              27927
              228633
              15-Dec-2006
              14-Dec-2056
              12.5392
              58LAGARTOS
      XIV
              93/
              28056
              228767
              23-Jan-2007
              22-Jan-2057
              719.7292
              3,311GEMINIS
      XIII
              93/
              27357
              224581
              20-May-2005
              19-May-2055
              86.6423
              596GEMINIS
      XXIII
              93/
              27788
              227962
              15-Sep-2006
              14-Sep-2056
              94.3131
              434CUMBRES
      I
              93/
              27360
              224582
              20-May-2005
              19-May-2055
              331.6280
              2,282SAN
      MARTINITO
              321.1/8
              250
              196156
              16-Jul-1993
              15-Jul-2043
              12.0000
              1,209LA
      CONSTANCIA
              8/1.3
              1992
              196319
              16-Jul-1993
              15-Jul-2043
              25.9648
              2,617PAULINA
              8/1.3
              1157
              217496
              16-Jul-2002
              15-Jul-2052
              7.6958
              110LA
      CAMOCHA 2
              93/
              27397
              224841
              14-Jun-2005
              13-Jun-2055
              8.3405
              57LAS
      MARIAS
              93/
              25713
              215229
              14-Feb-2002
              13-Feb-2052
              73.5433
              2,106SAN
      MIGUEL
              93/
              25598
              215509
              22-Feb-2002
              21-Feb-2052
              16.1263
              462SAN
      FERNANDO
              93/
              11369
              162437
              12-Jun-1978
              *
              20.6911
              2,085AMPL.
      A SAN FERNANDO
              93/
              11501
              162400
              12-Jan-1978
              11-Jan-2028
              65.2211
              6,574PREDILECTA
              93/
              9747
              164960
              3-Aug-1979
              *
              32.0000
              3,225LAG
              93/
              27992
              Research
      ongoing
              2,468.7166LAG
      F-1
              93/
              27992
              Research
      ongoing
              387.2650LAG
      F-2
              93/
              27992
              Research
      ongoing
              1,813.5911LAG
      F-3
              93/
              27992
              Research
      ongoing
              6.4567LAG
      F-4
              93/
              27992
              Research
      ongoing
              8.4830LAG
      F-5
              93/
              27992
              Research
      ongoing
              1.2925LAG
      F-6
              93/
              27992
              Research
      ongoing
              8.8846LAG
      F-7
              93/
              27992
              Research
      ongoing
              19.7332LAG
      F-8
              93/
              27992
              Proposed
      for title
              3.8895LAG
      F-9
              93/
              27992
              Research
      ongoing
              67.0928LAGF-10
              93/
              27992
              Research
      ongoing
              95.6858LAG
      F-11
              93/
              27992
              Research
      ongoing
              1.3324LAG
      F-12
              93/
              27992
              Research
      ongoing
              1.0981LAG
      F-13
              93/
              27992
              Research
      ongoing
              0.9569LAG
      5
              93/
              28235
              230023
              10-Jul-2007
              9-Jul-2057
              8,747.6164
              40,239GRAND
      TOTAL:
              2,675,738(JANUARY
      3, 2008 PESO TO U.S. DOLLAR EXCHANGE RATIO 11:1)
              
              
              $US
      Total
              243,249


* Note: pending
renewal.





The
Juanicipio Property





Readers
are encouraged to read the following technical reports, from which the
discussions in this section are derived:





1.
            Filed
      on SEDAR April 2, 2003: a NI43-101 technical report, dated November 19,
      2002, entitled “The Geology and Exploration Potential of the Juanicipio
      property, Fresnillo District, Zacatecas, Mexico” prepared by Qualified
      Person, Clancy J. Wendt, P.G., of Pincock, Allen and Holt, of Lakewood,
      Colorado;


2.
            Filed
      on SEDAR December 27, 2006: a NI43-101 technical report, dated July 5,
      2006, entitled “Independent Technical Report, Juanicipio Silver Project,
      Zacatecas State, Mexico” prepared by Qualified Person, Stephen Wetherup,
      B.Sc., P.Geo., of Caracle Creek International Consulting Inc. of
      Vancouver, British Columbia.




Introduction





The
roughly 8,000 hectare Juanicipio property is located in Zacatecas State, Mexico
just outside the mining town of Fresnillo. The Fresnillo mine area has been in
continuous silver production since the 1500’s and today is host to the world’s
largest producing silver mine operated by Industrias Peñoles, S.A. DE C.V.
(“Peñoles”). The Peñoles/MAG Juanicipio Joint Venture lies 5 kilometres west
from the principal production head-frame of the Fresnillo Mine and 1.5
kilometres west from the Saucito vein, currently undergoing preproduction
development.





This is
the most important project in the Company’s portfolio of
properties.  The Juanicipio property is host to a new discovery of a
high grade gold silver vein.  The Valdecañas vein was discovered in
December of 2005 and is undergoing a significant drill campaign to delineate its
full potential.  To date the vein is averaging almost 5.8 metres wide,
has a down dip length in excess of 400 metres and has been traced for 1,500
metres along strike.  The average grade of 14 holes (out of 17) that
are within the high grade silver/gold zone is 1,292 grams per tonne silver, 2.50
g/t gold and 8.7% combined lead and zinc.





The
Juanicipio property and its potential were first recognized by a consultant in
the late 1990’s.   Subsequently the Company was presented with an
opportunity to acquire the Juanicipio property.  In a series of
business transactions involving shares and cash between July 18th, 2002
and July 16th, 2003,
the Company through its 100% owned Mexican subsidiary, Lagartos, acquired a 100%
beneficial interest in the Juanicipio property. See “General Development of the
Business – Three Year History – The Qualifying Transaction”.




A series
of nine drill holes were drilled by the Company between April 2003 and December
2004.  Significant intercepts of silver and gold were encountered in
this early stage drill program. During this period of drilling the Company was
approached by Peñoles, a major Mexican mining company, who expressed an interest
in a joint venture arrangement for the Juanicipio property.




Through a
formal agreement effective July 1, 2005 with Peñoles, the Company granted to
Peñoles an option to earn a 56% interest in the Juanicipio property in
consideration for Peñoles conducting staged exploration expenditures totalling
US$5,000,000 over 4 years and purchasing US$1,000,000 of securities of the
Company.




Peñoles,
through the efforts of their exploration program, made a significant epithermal
vein discovery called the Valdecañas vein, carrying high grade values of silver,
gold, lead and zinc.  The Valdecañas vein was discovered at depth in
late 2005 during an exploration program conducted by Peñoles on the Juanicipio
property.




By May of
2007, Peñoles had fulfilled their expenditure commitment to earn a 56% interest
in the Juanicipio property and in December of 2007, the Company and Peñoles
incorporated a joint venture company, Minera Juanicipio, to operate the joint
venture. Minera Juanicipio is held 44% by the Company through its 100% owned
Mexican subsidiary, Lagartos, and Peñoles holds a 56% interest in Minera
Juanicipio.  Peñoles is the operator of the project and both parties
fund on-going and future programs in proportion to their interests.




By the
end of 2007, a vein of approximately 1,500 metres long averaging 5.8 metres wide
and having a dip length in excess of 400 metres was outlined by a series of 20
holes that have intersected the vein.  The program to fully delineate
the vein is still in progress.




Project Description and
Location




The
Juanicipio property (the “Juanicipio property” or “Juanicipio”) is located in
the Fresnillo District, Zacatecas, Mexico, and approximately 6 kilometres west
of the city of Fresnillo.




Figure 1
- Juanicipio property, Zacatecas State (roads in black, December 20,
2007)




The
Juanicipio property covers approximately 7,679 hectares (18,967 acres) and is in
the northeastern part of the Sierra Valdecañas, a 13 kilometre by 30 kilometre
long mountain range that lies immediately west of Fresnillo.  The
property lies on the western edge of the Mexican Altiplano or “Mesa
Central”.  The Altiplano is that portion of central northern Mexico
lying north of the Trans-Mexico Volcanic Belt, between the Sierra Madre Oriental
and Sierra Madre Occidental.





Water is
abundant at depth. The Mexican Mining Law states: Article 19. Mining Concessions
grants the right to:





V.  Utilize
      the waters emanating from the works in the mines for their exploration or
      exploitation, the beneficiation of minerals or substances obtained and the
      domestic use of personnel employed
thereat;


VI.
      Obtain a preferential right for a concession on the mine waters for any
      use other than those indicated in the preceding paragraphs, in terms of
      the applicable law.





Power
      is located a few miles from the main part of the Juanicipio property and
      is available.




Accessibility




Paved
highways on the eastern, northern and western sides surround the Sierra
Valdecañas, with a good-quality unpaved road linking the paved roads across the
southern end of the range.  This southern road is in the process of
being paved.  Despite the ruggedness of the central part of the Sierra
Valdecañas, access to the northeastern area, where the Juanicipio property is
located, is good.  A high quality dirt road runs about 1.5 kilometres
up the Linares Canyon from the village of Presa Linares.  This
provides access to the extreme northeastern corner of the Juanicipio
property.  A separate road proceeds from Fresnillo to the village of
Valdecañas, and from there to a pass that allows access to Linares Canyon, some
4 kilometres south of the village of Presa Linares.  Despite this road
access, principal access to the bulk of the area of maximum interest is by
foot.  One major drill target should be accessible from existing
roads; others will require road building up Linares Canyon.  The
routes for these roads have already been approved by the Mexican environmental
agency.




Ownership




Pursuant
to an agreement dated July 18, 2002 as amended December 19, 2002 between
Lagartos and Ing. Martin Bernardo Sutti Courtade I (“Sutti”), of Zacatecas,
Mexico (the “Juanicipio Agreement”), Sutti granted to the Company’s Mexican
subsidiary Lagartos an option (the “Juanicipio Option”) to acquire a 100%
interest in the Juanicipio property in exchange for cash payments and a work
commitment.  Sutti subsequently assigned his interest to Minera Venus,
S.A. DE C.V.




Minera
Venus, S.A. DE C.V. was owned as to 99% by Lexington Capital Group Inc. and as
to 1% by attorney Jose Ruiz Lopez. Lexington Capital Group Inc. was owned as to
100% by Strategic Investments Resources Ltd.  Pursuant to a stock
purchase agreement dated May 29, 2003 between the Company and Strategic
Investments Resources Ltd., on July 16, 2003, for consideration of US$250,000
and 200,000 Common Shares of the Company at a price of $0.90 per share for a
deemed value of $180,000, the Company acquired 100% of the issued shares of
Lexington Capital Group Inc., thereby acquiring 99% ownership of the Juanicipio
Property (with the remaining 1% later being transferred to the ownership of a
director of the Company in trust).  The Company subsequently merged
and amalgamated Minera Venus, S.A. DE C.V. into Lagartos, wound up Lexington
Capital Group Inc. and terminated the Juanicipio Agreement, thereby eliminating
its obligations under the original Juanicipio Option to make any further option
payments, fulfill any further work commitments or pay any royalty.




Pursuant
to a letter of intent dated March 17, 2005 and a formal agreement effective July
1, 2005 (the “Agreement”) with Peñoles, the Company and Lagartos granted to
Peñoles or any of its subsidiaries an option to earn a 56% interest in the
Juanicipio property in Mexico in consideration for Peñoles: (a) conducting
US$5,000,000 of exploration on the property over four years as follows: (i)
minimum US$750,000 in year 1, including a minimum of 3,000 metres of diamond
drilling; (ii) US$1,000,000 in year 2; (iii) US$1,250,000 in year 3; and (iv)
US$2,000,000 in year 4; and (b) Peñoles purchasing US$500,000 of Common Shares
of the Company within 30 business days after the Agreement becomes effective at
a price calculated based on the average closing price of the Company’s Common
Shares for the 10 trading days prior to the purchase; and (c) Peñoles purchasing
US$500,000 of Common Shares of the Company within 30 business days after the
first anniversary of the execution of the Agreement, taking into account the
average closing price of the Company’s Common Shares for the 10 trading days
prior to such purchase.




At
December 31, 2007, Peñoles had met all of the earn-in requirements of the
Agreement.  Delineation, exploration and geotechnical drilling
continues on the Juanicipio property at the date of this AIF.




In
December 2007 the Company and Peñoles created Minera Juanicipio for the purpose
of holding and operating the Juanicipio property.  Minera Juanicipio
is held as to 56% by Peñoles and 44% by the Company through its subsidiary,
Lagartos.  Prior to December 31, 2007 all mineral rights and surface
rights relating to the Juanicipio project held by the Company or Peñoles were
transferred into Minera Juanicipio.  At the date of this AIF, Minera
Juanicipio is operated according to the terms and conditions of the Shareholders
Agreement.  All costs relating to the property and Minera Juanicipio
will be shared by the Company and Peñoles pro-rata on their ownership interests
in Minera Juanicipio.




For its
interests in the Juanicipio property, to December 31, 2007 the Company had
incurred to its own account $919,458 in acquisition costs, consisting of
$486,125 in cash and $433,333 for the issue of 366,667 Common Shares, and
exploration costs of $2,230,216.




To
December 31, 2007, the Company has invested $9,174,692 on the Juanicipio
property and contributions to Minera Juanicipio.  After accounting for
cost recoveries of $2,509,553 and a foreign currency translation adjustment of
$716,778, a net investment of $5,948,361 has been recorded by the Company at
year end.





To
capitalize Minera Juanicipio the Company invested 63.40 million pesos ($6.025
million) into Minera Juanicipio while Peñoles invested 80.69 million pesos
($7.668 million). MAG then received a payout from Minera Juanicipio of 26.41
million pesos ($2.510 million) against its contribution of the Juanicipio
mineral rights while Peñoles received 70.28 million pesos ($6.68 million)
against its contribution of surface rights and the Company’s 44% share of
exploration costs incurred by Peñoles in the period subsequent to completion of
their earn-in.





At
December 31, 2007 the assets of Minera Juanicipio consisted of cash in the
amount of 5.54 million pesos ($526,474), IVA receivables in the amount of 18.48
million pesos ($1.76 million) and mineral and surface rights at a deemed value
of 123.12 million pesos ($11.7 million).  Payables to Peñoles for
exploration work amounted to 3.05 million pesos ($290,000) while shareholders
equity was 144.09 million pesos ($13.69 million).  As Minera
Juanicipio was created just before year end there were no results from
operations to report.




History




The
Juanicipio property has seen sporadic, small-scale prospecting by unknown
individuals over the last several hundred years, but has seen no
production.  Previous work by Sunshine Mining and the Consejo de
Recursos Minerales (the Mexican Geologic Survey) has produced geologic maps,
geochemical data bases, alteration and geologic maps, geophysical maps, Landsat
images, topographic and structure maps.




Geological
Setting




District
Geology




The
Fresnillo District section consists of the lower Cretaceous rocks composed of
limestones.  The limestones are overlain (perhaps in over thrust
contact) by the Chilitos Formation, composed of marine volcanic derived
sediments and volcanic flows and mafic intrusive bodies.  The section
is capped by the Tertiary age conglomerates and volcanic derived sediments and
overlying rhyolite ash-flow tuffs.  Everything older than the
Fresnillo Formation is intruded by intermediate dikes and a quartz-monzonite
porphyry. The pre-Tertiary section has been folded, tilted (N55W, 30SW) and
complexly thrust faulted.




Juanicipio
Geology




The
stratigraphy of the Juanicipio area is very similar to that of the adjacent
Fresnillo District.  The rocks exposed appear similar to the upper
Valdecañas Sediments of the Proaño Group as seen in the main portion of the
Fresnillo District.




The next
oldest rocks are thinly bedded sediments and volcanic rocks. These rocks are
poorly resistant to weathering and crop out sparingly beneath materials sloughed
off the bold outcrops of volcanic rocks along Linares Canyon and at
Piedras.  This surface is buried by Tertiary age alluvium, surface
debris, and a variety of volcanic ash flows.




Environmental
Surveys




Environmental
surveys done on the Juanicipio property to date are those required for drill
permitting.  These surveys involve preparing inventories of floral and
faunal species and assessments of the impact of road building for
drilling.




The only
previous surface disturbances on the Juanicipio property were small prospect
pits from which there has been no production.  Reconnaissance coverage
indicates that there are no inherited environmental liabilities from these
disturbances.




Mineral Resources and
Reserves




The
Juanicipio property is at an advanced staged exploration and delineation
stage.  Not enough data has been generated from which to estimate
resources and reserves.




Exploration
Program





Prior to
drilling in 2003 and 2004, no silver, gold or base metal mineralization had been
documented on the Juanicipio property, only the extensive clay alteration and
silicification of the Tertiary rocks, which alluded to mineralization at depth.
Drilling by the Company during its 2003 and 2004 drilling campaign directed
toward geophysically delineated structures changed this when it encountered
significant high-grade silver (Ag), gold, (Au) and lead (Pb) and zinc (Zn)
mineralization at depth.





Mineralization
observed in the drill core consists of either base metal sphalerite-galena veins
or precious metal, banded or brecciated quartz-Pyrargyrite (silver
mineral)-acanthite (silver mineral)-polybasite (silver mineral)-galena (lead
mineral)-sphalerite (zinc mineral) veins. Alteration in the sedimentary host
rock is limited to silicification, weak pyritization, and weak clay alteration.
Within a metre of the veins silicification and disseminated sulphide minerals
increase significantly (generally pyrite-sphalerite-galena).





The
silver rich veins encountered in Holes JI03-01 and Hole JI03-01A averaged
approximately 6.9 g/t gold , 467 g/t silver, 0.1% zinc over 2.99 metres
including 10.9 g/t gold and 689 g/t silver over 2.00 metres and 0.7 g/t gold ,
401 g/t silver, 0.1% lead over 1.7 metres respectively. These veins display
several stages of brecciation and quartz sealing, local rhythmic
microcrystalline quartz-Pyrargyrite banding on the millimetre
scale.





In late
2005 during their earn-in phase, Peñoles discovered high-grade silver-gold
mineralization in the Valdecañas vein when Hole 16 intercepted 1,798 g/t Ag,
2.91 g/t gold, 3.43% Pb, and 5.51% Zn over 6.35 metres. Since then, Peñoles
obtained the permitting for definition drilling and road construction and has
completed 20 diamond drill holes on the Valdecañas vein discovery. The
mineralization is now known to strike for more than 1500 metres and extend from
300 metres to 750 metres below surface for an approximate down-dip distance of
450 metres. Mineralized intercepts average 5.8 metres true width.





To date
the vein is averaging 5.8 metres wide, has a down dip length in excess of 400
metres and has been traced for 1,500 metres along strike.  The average
grade of 14 holes (out of 17) that are within the high grade silver/gold zone is
1,292 g/t silver, 2.50 g/t gold and 8.7 % combined lead and zinc.





The
amount of gold in the system appears to be higher than other veins in the
district.





Significant
progress was achieved on the Juanicipio property in 2007. The following table
summarizes the intersections to date within the high grade zone of the
Valdecañas vein.




The joint
venture also purchased more land to add to the Juanicipio
property.  The new land purchase is located to the west of the
Valdecañas vein discovery and ties directly to the west of the land purchased
last year. Combined with last year’s purchase the joint venture now has
uninterrupted coverage of 4.5 kilometres of the strike projection of the
Valdecañas vein from east to west. Late in 2007 the joint venture also elected
to purchase over 2.5 kilometres of surface rights along the strike projection of
the Juanicipio vein.  This purchase underscores the importance the
joint venture places on the Juanicipio vein.





These
land purchases have become assets of the new company, Minera Juanicipio, which
was established to own and operate the Juanicipio Joint Venture.





At
December 31, 2007, the Valdecañas vein remains at an early definition drilling
stage.  No data has yet been generated from which to estimate
resources and reserves. Exploration drilling continues on the greater Juanicipio
property area. By the end of 2007, approximately 13,500 metres of a proposed
28,000 metre program of definition drilling was completed on the Valdecañas
silver/gold vein discovery.




Interpretation and
Conclusions





Valdecañas
lies 2.5 kilometres southwest from the principal production San Carlos vein and
2.5 kilometres northwest from the Saucito vein, currently undergoing
preproduction development. Geologically and mineralogically the Valdecañas vein
has affinities to the Santo Niño vein, at one time the principal production vein
at Fresnillo.





The
drilling to date clearly demonstrates that Valdecañas is an epithermal vein
typical of the Fresnillo District. However, the Valdecañas and the Juanicipio
veins (discovered by MAG in 2003) contain significantly higher gold grades (2-4
grams gold per tonne) than the average veins (0.5 grams gold per tonne) in the
principal production parts of the district (averages: 1,292 g/t silver, 2.50 g/t
gold and 8.7% combined lead and zinc).





The
Valdecañas vein has undergone multiple mineralizing events as evidenced by
various stages of brecciation and quartz sealing. The vein exhibits the
characteristic metal zoning of the principal veins at Fresnillo, observed as a
change from silver and gold rich zones at the top to increased base metals in
the deeper intersections. Notably, the gold rich mineralization cuts across the
silver rich zones, which in turn cut earlier base-metal dominant stage
indicating complex multi-stage mineralization combining stages seen separately
in other parts of the district.   Overall, the precious metals
rich zone has an interval of 350 metres in vertical height, which is typical of
major producing veins in the district although it lies slightly lower in
elevation than the comparable precious metals zones being mined elsewhere in the
district. Within ten to twenty metres of the vein, the wall rocks are
progressively pervasively silicified and cut by quartz veinlets carrying
pyrite-sphalerite-galena sulphide minerals. Alteration in the
volcanic/sedimentary host rock farther away from the vein is characterized by
weak pyritization, moderate clay alteration, and calcite veining.




Work
Program




From the
time that Peñoles began the exploration program on the Juanicipio property, they
have completed approximately 28,212 metres of drilling in a total of 32
holes.  Of that total, 20 holes (21,000 metres) including 7 restarted
holes were targeted on the Valdecañas vein.




Work Program for
2008





Objective Strategy:Drilling will continue
to be directed to the delineation of the Valdecañas vein.  Work will
begin to test the Juanicipio vein located 1.0 kilometre to the south of
Valdecañas. Exploration will also focus on new areas in the search for other
deeply buried veins on the Juanicipio property.




Work Program:There will be a
minimum of 4 drills operating initially on sections G, Q, O, U and
I.  There are plans to address drilling at VP-2 (see below), a deep
hole GE (down dip of GD) and review potential in area of JU-03-08 with the view
to drilling.




Metallurgical
sampling and testing is ongoing and results are expected in early
2008.




Drilling
at Valdecañas shows that the vein extends off the Juanicipio property to the
east and is nearing the northern boundary as well.  It is possible
(not confirmed) that the full extent of the vein (1500 metres) on the Juanicipio
property has been identified. The down dip portion would remain on JV property
for another 200 -350 metres in a westerly direction. The strike of the vein is
in question due to lack of drilling in the western fault block. However, there
is still room to add significant ounces down dip to the west and
east.




There is
a significant gap between section M and Section S (~600m) where there is a
paucity of drill information.  The drill program will be focused on
sections O, Q, S and U for the most of the first half of the year. Drilling on
in-fill sections at 100m spacing may be necessary ahead of proposed plans for a
ramp to explore the vein from underground. These plans are still in the
incubation period at this time and have yet to be formally presented to the
Joint Venture for approval.




A review
of past drilling by the Joint Venture in the context of the Valdecañas vein
discovery has revived interest in Hole VP – 02 drilled in 2006. This hole is
located on the Juanicipio property 1,200 metres to the west of Valdecañas vein
section G.  This hole reported a one metre section of 7.70 g/t
goldand 4.0 g/t
silver, 700 metres below surface.  The presence of strong gold values
in this intersection and its relative proximity to the Valdecañas vein is
considered highly significant, and the exploration program will examine this
structure with drilling in the near future.




For the
coming year 24,000 metres of drilling are proposed on the Juanicipio property at
a cost of US$3,000,000 (100% to the joint venture). An additional $78,750 has
been earmarked for geology and $25,000 for miscellaneous
expenditures.




The
following budget has been approved by the Company for funding its 44% of this
additional work:





JUANICIPIO
      EXPLORATION
            
            Units
            
            
            Cost
            
            
            TotalLand
      / Payments / Tax
            
            
            x
            
            
            
            x
            
            
            
            5,283.30Geology
            
            
            175.00
            
            
            
            450.00
            
            
            
            78,750.00Geophysics
            
            
            
            
            
            
            
            
            
            
            0.00Geochemistry
            
            
            
            
            
            
            
            
            
            
            0.00Trenching
      / Roads
            
            
            
            
            
            
            
            
            
            
            0.00Labour/
      Contract
            
            
            
            
            
            
            
            
            
            
            0.00Drilling
            
            
            24,000.00
            
            
            
            125.00
            
            
            
            1,320,000.00GIS/Map/Processing
            
            
            
            
            
            
            
            
            
            
            0.00AEM
            
            
            
            
            
            
            
            
            
            
            0.00Miscellaneous
            
            
            10.00
            
            
            
            2,500.00
            
            
            
            25,000.00TOTAL
            
            
            
            
            
            
            
            
            
            
            1,429,033.30




Sampling, Analysis &
Security of Samples





Peñoles
is the world’s largest producer of primary silver and they follow a specific set
of QA/QC procedures.  Peñoles geological personnel oversee the logging
of all core and the selection and collection of all core
samples.  Core samples are shipped from the point of collection on the
project directly in security-sealed bags to ALS-Chemex Laboratories preparation
facility in Guadalajara, Jalisco, Mexico (Certification ISO 9001). Samples
shipped also include intermittent standards and blanks. Pulp samples are
subsequently shipped to ALS-Chemex Laboratories in North Vancouver, Canada for
analysis. Two extra pulp samples are also prepared and are analyzed (in
progress) by SGS Laboratories (Certification ISO 9001) and Inspectorate
Laboratories (Certification ISO 9001) (or other recognized lab). The bulk reject
is subsequently sent to CIDT (Center for Investigation and Technical
Development) of Peñoles in Torreon, Mexico for metallurgical testing where a
fourth assay for each sample is analyzed and a calculated head grade is received
on the basis of a concentrate balance. The CIDT also does a full
microscopic, XRF and XRD mineralogical analysis.




The
Batopilas (Don Fippi) Property





Readers
are encouraged to read the following technical reports, from which the
discussions in this section are derived:





1.
            Filed
      on SEDAR January 4, 2007: a NI43-101 technical report, dated September 19,
      2006, entitled “The Geology and Exploration Potential of the Don Fippi
      Project, Chihuahua State (27o02’N,
      107o44’W),
      Mexico” prepared by Clancy J. Wendt, P.Geo., Reno,
  Nevada;


2.
            Filed
      on SEDAR April 2, 2003: a NI43-101 technical report, dated November 19,
      2002, entitled “The Geology and Exploration Potential of the Don Fippi
      Project, Chihuahua State (27o02’N,
      107o44’W),
      Mexico” prepared by Clancy J. Wendt, P.G., of Pincock, Allen and Holt, of
      Lakewood, Colorado.




Introduction




The
Batopilas property (“Batopilas” or the “Batopilas property”) covers 3,547
hectares and is located deep within the famous Copper Canyon country of
south western Chihuahua State, Mexico.  Batopilas is owned 100%
by MAG and can be described as a rare “native” silver district. High-grade
native silver outcrops in the Batopilas district were discovered around 1630 and
production records begin in 1632. The district produced almost 300 million
ounces until the Mexican Revolution in 1912 disrupted production from which the
district never recovered.  MAG’s control of this unique and high grade
district is the first consolidation of the district’s silver mines (over 70 in
total) and the first modern exploration program to be conducted in over 93
years.




The
Company over the past four years has generated the first modern detailed
geological and structural map of the district and is combining it with a number
of modern geophysical and geochemical exploration techniques to aid exploration
for new high grade silver veins.




There
have been three phases of drilling at Batopilas and each phase has added to the
formulation of the present exploration model.




MAG in
2004 selected a limited area in the central part of the district for initial
exploration based on a combination of favourable geology, surface and
underground access.  The area lies in a largely unexplored area across
a major fault (the “Roncesvalles Fault”) and near a heavily mined area with
excellent underground access via the 2.4 kilometres long Porfirio Diaz
Tunnel.  The area is also accessible via one of the district’s few
surface roads.




A
ten-hole 2500 metre drill program was initiated in the fall of 2005 to test
preliminary drill targets and help refine the exploration methods MAG developed
to explore its land holdings at Batopilas.




MAG
announced in January, 2006 that a single high-grade silver mineralization had
been intersected in initial drilling at Batopilas. Hole 02 intersected the Don
Juan with 1.70 metres (5.6 feet) of 2,358 grams per tonne silver (75.8 ounces
per ton).





Other
work in 2006/07 at Batopilas included: underground topographic surveys of the
old workings; a detailed 590 line kilometre airborne geophysical survey focusing
on delimiting structures over the entire 40 square kilometre land package
(initiated in late February 2007); a detailed stream sediment and ridge and spur
soil sampling program that focused on the signature multi-element suite defined
during the drill program; and a detailed geological re-mapping of the entire
project area.


The drill
rig was remobilized for the next phase of drilling in mid February 2007. A total
of 12 holes were drilled for an additional 3,025 metres.





This work
was successful in identifying a number of important exploration control vectors
at Batopilas that included a better understanding of the lithological controls
of the native silver mineralization, the structural history and structural ore
host controls, the vein and structural geochemistry as well as the lateral and
vertical metal zoning characteristics of the vein mineralization.




Drilling
in 2008 is designed to test this new model.




Property Description and
Location




The
Batopilas property comprises seven exploration claims covering approximately
3,547 ha. in the Batopilas Mining District in southwestern Chihuahua State of
Mexico.




Batopilas
lies in the topographically rugged central spine of the Sierra Madre. The
Batopilas property area is roughly centred on the town of Batopilas which lies
at the bottom of the deep canyon of the Rio Batopilas at about 600 metres
elevation.




Batopilas Map




Accessibility, Climate,
Local Resources, Infrastructure and Physiography




There is
a good quality 70 kilometres unpaved road connecting Batopilas to the paved
highway that leads to Creel and thence to the cities of La Junta, Cuauhtemoc and
Chihuahua 300 kilometres to the east.  The main road runs along the
river and is in very good condition through the town of
Batopilas.  Conditions deteriorate south of the town, but the road is
passable south to Satevo and west to Camuchin.  A few spur roads run
from the main road to the area above the Porfirio Diaz Tunnel.  Access
to the balance of the area is by foot or horseback.  Underground
access is extensive through the Santo Domingo, San Miguel, Peñasquito and
Pastrana mines.  The Porfirio Diaz Tunnel was caved, about 1.5
kilometres from the mine portal, but cleared by the Company in early 2007. The
back 2.5 kilometres is now accessible. Both water and power are available at the
Batopilas property.




Ownership




Under the
terms of a November 18, 2002 option agreement between the Company, Lagartos and
Minera Bugambilias, S.A. DE C.V. (“Bugambilias”), Bugambilias granted to
Lagartos an option to acquire a 100% interest in the Batopilas
property.




On April
20, 2005 the Batopilas Agreement was amended whereby the Company acquired a 100%
interest in the Batopilas property through a one time final payment of 750,000
Common Shares and the grant of a 4.5% net smelter returns royalty to
Bugambilias.  The purchase eliminated the Company’s prior obligations
to make further cash payments of US$450,000, incur further work expenditures of
approximately US$3,410,000 and issue 673,822 additional Common Shares under the
original Batopilas Agreement.




To
December 31, 2007 the Company has incurred $1,422,672 Cdn in acquisition costs
and $3,344,413 Cdn in exploration costs on the Batopilas property.




All
properties acquired by Lagartos, Bugambilias or any of their affiliates within
the borders of the Batopilas property became part of the Batopilas property and
were included under the Batopilas Agreement.




History




High-grade
native silver outcrops in the Batopilas district were discovered around 1630 and
production records begin in 1632.  Batopilas produced an estimated
300,000,000 ounces of silver between 1632 and 1912 from ore shoots of very high
grade crystalline native silver hosted in calcite veins.




The
district has not seen any consolidation since the closure in 1912 and this is
the fist time the district has been under a single land ownership. The Company
has generated the first modern detailed geological and structural map of the
district and is combining it with a number of modern geophysical and geochemical
exploration techniques.




Geological
Setting




Regional
Geology




The
Batopilas District lies in the heart of the Sierra Madre Occidental magmatic
province.  Geologically, this province consists of two thick Tertiary
volcanic sequences deposited on a basement of Mesozoic sediments, metasediments,
and intrusive rocks.  The two sequences are referred to as the lower
volcanic complex and the upper volcanic complex.




The
Batopilas veins are distinct from the other epithermal vein deposits of the
region, which typically have a productive zone a few hundred metres high. The
Batopilas silver veins were productive over a vertical interval of at least 700
metres and the bottom of the system has apparently never been
reached.




Batopilas
District Geology




Geologically,
the Batopilas District lies in the Sierra Madre Occidental magmatic province,
which is host to a multitude of epithermal gold-silver vein
systems.




Batopilas
District mineralization is hosted entirely within the lower volcanic complex
which consists of intermediate composition intrusive rocks, dominantly dacites
and diorites, and extrusive rocks, dominantly andesite tuffs, flows and volcanic
derived sediments.  Rhyolite ash-flows of the upper volcanic
supergroup form the prominent mesas that rim the canyon several hundreds to
thousands of metres above the vein system.




Mineralization and
Alteration




Mineralization
in the silver zone dominantly occurs in a volcanic Dacite, but some occurs in
the Tahonas Granodiorite and Dolores Microdiorite.  Pre-mineral
quartz-porphyry and post-intra-mineral basalt dikes in veins are mineralized and
locally altered to serpentinite.  Mineralization throughout the silver
zone overwhelmingly consists of crystallized native silver in calcite
gangue.  The silver ores were high grade, ranging from the Batopilas
Mining Company’s 1880-1913 average direct-smelting grade of 8,000 g/T (257 oz/T)
to extremely high-grade pods carrying up to 75% Ag.  The Batopilas
Mining Company also produced a significant tonnage of “milling ore” grading 265
g/T (8.5 oz/T).  Oreshoots typically are 15 – 80 metres long, 0.5 -
4.6 metres wide (1 metre average) and up to 350 metres down
plunge.  Shoots are connected by up to 90 metres of barren calcite
veinlets, often only .1 - .3 millimetre wide.




Environmental
Surveys




Environmental
surveys done on the Batopilas property to date are those required for drill and
trench permitting.  These surveys involve preparing inventories of
floral and faunal species and assessments of the impact of road building for
drilling and for trenching.




Old
workings and prospect pits dot the surface of the Batopilas
property.  Most dumps, and all tailings were originally deposited on
the banks of the Rio Batopilas, and 80 years of flooding have long since carried
them away. Reconnaissance and detail SEMARNAT coverage indicates that there are
no inherited environmental liabilities from these disturbances.




At
present the construction of drill roads, drill pads and trenches are the only
“modern” disturbances found at Batopilas. Active programs of road reclamation
are being conducted by the Company and are monitored under the auspices of
SEMARNAT and the Mexican National permitting process.




To date
all permits and reclamation efforts are valid and in compliance with the
environmental regulations of Mexico.




Mineral Resource and Mineral
Reserves




The
Batopilas property remains at mid to early exploration stage.  No data
has yet been generated from which to estimate resources and
reserves.




Exploration
Program




Results
of the 2007 exploration program in the  Batopilas Native Silver
District has encountered high grade silver in: drilling in the Roncesvalles –
Todos Santos area, drilling in the Las Animas area (The Cobriza veins)
and  a series of drill roads and trenches in the Las Animas Ridge
area. A seven hole 2,907 metre drill program that started in mid-February was
completed.




Highlights
of the program include Hole BA07-15 at Todos Santos which intersected 1.0 metre
of 3,070 g/t silver (89.5 ounces per ton), 3.6% lead and 0.63% zinc. This
intercept is located on the east side of the Roncesvalles Fault Zone (RFZ) in
the footwall of the Todos Santos – San Roberto vein system. The intercept is
interpreted to be a parallel footwall vein or splay of the historically highly
productive “Todos Santos Vein” that was last worked around 1915. This intercept
and last year’s “Don Juan” intercept (1.7 metres of 2,357g/t Silver or 68.7
ounces per ton) are on opposite sides of the major Roncesvalles Fault Zone and
their relationship to each other is under additional study.




Other
significant drilling highlights include two intercepts in the Las Animas Area of
1.0 metre of 156 g/t (4.54 ounces per ton) and 1.0 metre of 186 g/t (5.42 ounces
per ton) silver respectively in Holes BA07-17 and BA07-18.  Both
represent about 200 metres down dip intersections from the veins and vein
structures discovered by a series of roads and trenches constructed this year to
follow up on silt and soil geochemical anomalies. The drill intercepts provide
important information to help in determining the strike and dip continuity of
these mineralized structures.




A
highlight from the 2,495 metre program of trench and road work includes the
discovery and exposure of the Cobriza North vein structure. This vein is exposed
in a 4.0 metre high road-cut and is from 0.25 to 1.0 metre wide. Eleven samples
totalling 281.54 kilograms (620 pounds) of bulk material was collected for
analysis. Metallic screen analysis has returned an average minimum grade for
this bulk sample of 11,158 grams per tonne silver (325.4 ounces per ton). This
analysis does not include the 2,776 grams (89.3 ounces) of native silver that
was hand collected from this location as well.




More than
a dozen other geochemically anomalous structures containing silver values from
10 to 580 grams per tonne silver (0.3 to 16.9 ounces per ton) in rock-chip
samples have yet to be followed up in detail.  Follow-up work is
planned.




The
results of this phase of work at Las Animas suggests that the mineralization may
represent one single north east-trending and northwest-dipping mineralized
structural zone with a strike length in excess of 500 m.




A revised
district scale geologic map of the Batopilas land holdings has been generated by
the Company. This study re-interprets the geology of the district and has
identified the lower part of the Batopilas formation as the preferred host for
the most significant silver mineralization throughout the region. The revised
structural and stratigraphic model indicates that a large intrusive-cored radial
dike-vein system is centered under the south slope of Cerro de Las Animas near
the projected intersection of the Roncesvalles Fault Zone and Pastrana vein
system.  This new understanding allows improved targeting of the
highest potential structures in the preferentially favourable Batopilas
formation host rocks.




A high
resolution airborne magnetics and electromagnetic survey was flown by a contract
airborne service over the entire Batopilas district. The approximately 770 line
kilometres of new data clearly highlight stratigraphic, intrusive and structural
features defined in the new district scale mapping and provide a sound basis for
targeting further exploration drilling throughout the Batopilas silver
district.




Interpretation




The
2006-2007 Batopilas geological-geochemical-geophysical and drilling programs in
the focus  area has dramatically improved the overall understanding of
mineralization controls and should allow significantly improved targeting for
further drilling throughout the district.  The overall structural
fabric has been outlined and the apparent close spatial relationship between
mineralization and distinctive quartz latite-monzonite dikes has been
recognized.  Combining this with the recent recognition of the
specific stratigraphic units that are the most favorable hosts mean that it is
now possible to target the most favorable structures within the most favorable
stratigraphy, in close proximity to the potentially important quartz
latite-Monzonite dikes.  This kind of geologic focus has not been
previously attainable.





Work Program for
2008




Objective/Strategy:                                                      The exploration target
ishigh grade
silver in veins as native silver and/or acanthite. To test the new stratigraphic
and structural model with a series of diamond drill holes at La Escondida, Las
Animas and Santo Domingo.




First
targets will be around the Escondido slide block to test the Company’s new
exploration model and deep vein hypothesis.  At least one of these
holes will be targeted deep to pursue novel mineralization styles in proximity
to an inferred intrusive center.  Subsequent targets will be tested in
the Animas Ridge trench area and the northern projection of the Santo Domingo
vein swarm. Field work has located surface expressions of these silver bearing
structures with visible mineralization (galena) nearly 500 metres north from the
Santo Domingo Adit.  At least 2 drill holes are planned to test this
set of veins around 150 and 350m north of the northern limits of the historic
mining. The trench program will continue from where it stopped at the end of the
last field season in the Los Animas area. The main emphasis will be to extend
road one to the point of the ridge and then to extend road two to intersect the
silver geochemical anomalies detected earlier.  A Pulse
Electromagnetic down hole geophysical survey is also planned upon the completion
of the drill campaign.





BATOPILAS
            
            Units
            
            
            Cost
            
            
            TotalLand
      / Payments / Tax
            
            
            x
            
            
            
            x
            
            
            
            3,047.80Geology
            
            
            45.00
            
            
            
            450.00
            
            
            
            20,250.00Geophysics/BHG
            
            
            5.00
            
            
            
            2,500.00
            
            
            
            12,500.00Geochemistry
            
            
            750.00
            
            
            
            28.00
            
            
            
            21,000.00Trenching
      / Roads
            
            
            4.00
            
            
            
            30,000.00
            
            
            
            120,000.00Labour/
      Contract
            
            
            200.00
            
            
            
            250.00
            
            
            
            50,000.00Rent
      bldg/ core
            
            
            12.00
            
            
            
            2,500.00
            
            
            
            30,000.00Drilling
            
            
            3,500.00
            
            
            
            190.00
            
            
            
            665,000.00GIS/Map/Processing
            
            
            10.00
            
            
            
            400.00
            
            
            
            4,000.00AEM
            
            
            
            
            
            
            
            
            
            
            0.00Miscellaneous
            
            
            12.00
            
            
            
            2,500.00
            
            
            
            30,000.00TOTAL
            
            
            
            
            
            
            
            
            
            
            955,797.80




Sampling, Analysis &
Security of Samples





The
Company has implemented a quality control program to ensure best practices in
sampling and analysis of core samples. The Company’s geological staff first log
and then split the core in half during the sampling process with the remaining
half being retained for verification and reference purposes. Duplicates,
standards and blanks are inserted randomly into the sample
stream.  The samples are delivered directly in security sealed bags to
ALS-Chemex Laboratories preparation facility in either Chihuahua, Chihuahua or
Hermosillo, Sonora (Certification ISO 9001). Sample pulps are shipped from there
to ALS-Chemex Laboratories in North Vancouver, Canada for analysis by ICP
techniques. Metallic screen fire analyses for Silver are also regularly run as
an additional QA/QC check.





Cinco
de Mayo Property




Introduction




The Cinco
de Mayo property is located approximately 80 kilometres north of the city of
Chihuahua, Mexico. Major highways lead to the town of Benito Juarez and from
there dirt roads and tracks lead to the Cinco de Mayo property.  Cinco
de Mayo is one of MAG’s three Carbonate Replacement Deposit (“CRD”) style
targets.




CRDs have
contributed 40% of Mexico’s historic silver production, making them second only
to epithermal veins in total ounces of silver produced in Mexico. CRDs can be
very large systems ranging from 25 to 100 million tons of high-grade
silver/lead/zinc ores. Mexico’s CRDs occur along the intersection of the Mexican
Thrust Belt and the Tertiary age volcanic plateau of the Sierra Madre
Occidental, a zone where structurally prepared limestone host rocks were invaded
by metals-rich intrusive bodies.




The
acquisition of the Cinco de Mayo property evolved from a review of data
collected during 15 years of systematic exploration and a study of the geologic
characteristics of the CRDs prospects in Chihuahua. There is virtually no
outcrop at Cinco de Mayo save for the prominent range-front jasperoid outcrops
and a narrow limestone ridge containing two small historic mines.




MAG began
preliminary regional geologic mapping and sampling at Cinco de Mayo in
mid-2004.




The work
program continued in early 2005 with MAG executing an orientation biogeochemical
survey that revealed strong linear zinc and copper anomalies along trend from
strongly anomalous structures exposed in limited outcrop.




The
results from the first nine holes (3,975 metres) drilled at Cinco de Mayo in
2006/2007 were very noteworthy. Six of the nine holes
were drilled over a strike length of 2.0 kilometres along a very prominent NW
trending fault zone that cuts strongly folded massive limestone and
limestone-rich sedimentary rocks.  Structurally controlled replacement
style massive to semi-massive sulphide mineralization occurring within broad
mineralized and altered zones was intercepted in all six of the holes.
Mineralization is open in all directions. At least trace mineralization was
encountered in the remaining 3 holes.




MAG’s
2006 and 2007 drill program at Cinco de Mayo in northern Chihuahua State,
continues to confirm that a significant Carbonate Replacement silver, lead and
zinc system underlies the alluvium covering 75% of the Cinco de Mayo property
area. All of the mineralization intersected in drilling to date were initially
identified as buried (blind) geophysical and geochemical anomalies that were
consistent with our exploration model.





Property Description and
Location





Cinco de
Mayo is a 5,000 hectare CRD prospect located in Chihuahua State. It occurs
proximal to the highly favourable western edge of the Chihuahua trough which
hosts several large (all greater than 25 million tonnes), operating mining
districts including Naica, Santa Eulalia and Bismarck.





The
property lies on the western bounding fault of the Chihuahua Trough which hosts
major CRDs like Santa Eulalia (MAG’s Guigui Property), Naica, San Pedro
Corralitos and Terrazas. This gives rise to a thick carbonate section to host
mineralization and a major regional zone of weakness for both ground preparation
and intrusive emplacement. These are essential elements of the mineralization
model.









Accessibility





The Cinco
de Mayo property is located approximately 80 kilometres north of the city of
Chihuahua. Major highways lead to the town of Benito Juarez and from there dirt
roads and tracks lead to the Cinco de Mayo property. Year round access is
good.





Ownership




Pursuant
to an arm’s length agreement dated as of April 15, 2004 among the Company,
Lagartos and Cascabel, Cascabel granted to Lagartos an option to acquire a 100%
interest in the 23,928 hectare (59,125 acre) Cinco de Mayo property subject to a
2.5% net smelter returns royalty.




During
the year ended December 31, 2005, the Company and Cascabel amended the terms of
the original Cinco de Mayo Agreement.  Under the amended terms, half
of each of the remaining property payments totalling US$775,000 due on or before
July 26, 2009 may be paid in Common Shares at a deemed price per share equal to
the average trading price of the Company’s Common Shares for 30 calendar days
prior to the date of the payment.  To that end, the Company paid cash
of US$62,500 and issued 30,840 Common Shares (2005 – US$37,500 and issued 59,830
Common Shares) for the property payment due July 26, 2006.  For the
property payment due July 26, 2007 the Company paid cash of
$175,000.  To December 31, 2007 the Company paid US$300,000 in cash,
issued 165,670 Common Shares at a value of $266,630 and completed $2,775,679 in
exploration costs.




This
early stage property is held 100% by the Company.




History




The
acquisition of the Cinco de Mayo property evolved from a review of data
collected during 15 years of systematic exploration and a study of the geologic
characteristics of the CRDs prospects in Chihuahua by Dr. Peter Megaw and
Cascabel. This compilation revealed key features that set the important CRD
systems like Santa Eulalia, Naica, Bismark, and San Pedro Corralitos apart from
the numerous small CRD showings and Mississippi Valley Deposits that occur
elsewhere in the region. There is virtually no outcrop at Cinco de Mayo save for
the prominent range-front jasperoid outcrops and a narrow limestone ridge
containing two small historic mines.




Regional
Setting





CRDs form
a spectrum ranging from stock contact skarns, through dike and sill contact
skarns and massive sulphides, to massive sulphide chimneys and mantos, with
large systems ranging from 25 to 100 million tons of high-grade ores. Mexico’s
CRDs occur along the intersection of the Mexican Thrust Belt and the Tertiary
age volcanic plateau of the Sierra Madre Occidental, a zone where structurally
prepared carbonate host rocks were invaded by metals-rich intrusive
bodies.




Local
Geology




The
Sierra Cinco de Mayo is an elongate limestone ridge, about 1 kilometres wide and
4.5 kilometres long flanked by broad alluvium mantled valleys. PEMEX data and
outcrop reconnaissance indicate that the alluvial cover is very thin and that a
very thick section of favourable carbonate host rocks lies immediately beneath
the cover. The ridge is cut by NE-SW and NW-SE structures that host both
mineralization and metal-bearing jasperoid alteration.  Little is
known of the historic mining at Cinco de Mayo, but there are two old mines on
the property that probably produced small amounts of high-grade silver and base
metal ores.  These jasperoids were the focus of a systematic mapping
and sampling program in 1998. This program revealed a number of geochemical
“hot-spots” along certain structural corridors leading towards the adjacent
covered areas that are in turn underlain by highly favourable host
rocks.





Locally,
there is abundant evidence that the western bounding fault of the Chihuahua
Trough has functioned more recently as a major shear zone, with strands passing
along the immediate flanks of the north-northwest-elongate Cinco de Mayo Ridge.
At Cinco de Mayo, there are numerous mineralization and alteration occurrences
associated with this fault. These include the prospects Abundancia, Celia and
Orientales and a host of unnamed occurrences dominated by iron rich jasperoids
with strongly anomalous Pb-Zn-Ag-As (Au) signatures, particularly along the
ridge.





Environmental
Surveys




Environmental
surveys done on the Cinco de Mayo Property to date are those required for drill
and road building permitting.  These surveys involve preparing
inventories of floral and faunal species and assessments of the impact of road
building for drilling.




Several
small and inconsequential old workings and prospect pits are found in and around
the Cinco de Mayo Property.  Reconnaissance and detail SEMARNAT
coverage indicates that there are no inherited environmental liabilities from
these workings.




At
present the construction of drill roads and drill pads are the only “modern”
disturbances found at Cinco de Mayo. Active programs of road reclamation are
being conducted by the Company and are monitored under the auspices of SEMARNAT
and the Mexican National permitting process.




To date
all permits and reclamation efforts are valid and in compliance with the
environmental regulations of Mexico.





Mineral Resources and
Reserves




The
property is in the early exploration phase. Not enough data has been obtained to
provide reserve or resource estimates.




Exploration
Program




Exploration
work in the covered areas is largely “blind” and necessitates using geochemical
and geophysical techniques to trace mineralization beneath this thin
cover.  The mineralization is known to contain magnetic pyrrhotite,
indicating that airborne or ground magnetics may be useful.  Other
high end use geophysics may also be useful in delineating deeper structure and
various soil-geochemical prospecting tools will be employed to locate
mineralization centers.




MAG began
preliminary regional geologic mapping and sampling at Cinco de Mayo in
mid-2004.  Unfortunately, unusually heavy summer and fall rains
deluged the region, washing out dams and cutting road access to the
property.




The work
program continued in early 2005 with MAG executing an orientation biogeochemical
survey that revealed strong linear zinc and copper anomalies along trend from
strongly anomalous structures exposed in limited outcrop.  These
results were encouraging enough to justify a 30 line-kilometre geophysical
survey testing historically exploited mineralization, geological features
identified in nearby outcrop and through cover utilizing a biogeochemical
survey.





The
Company contracted a 450 line kilometre airborne magnetic and electromagnetic
survey which was completed in late 2006.  The results are considered
very significant and were a significant guide to further drilling in 2007 when
integrated with previous work and the recent drill information.




In
combining the geological, geochemical, biogeochemical, geophysical data and
interpretations MAG developed a series of drill targets.




The
results from the first nine holes (3,975 metres) drilled at Cinco de Mayo in
2007 were very noteworthy.Six of the nine holes were drilled over a strike length of 2.0 kilometres
along a very prominent NW trending fault zone that cuts strongly folded massive
limestone and limestone-rich sedimentary rocks.  Structurally
controlled replacement style massive to semi-massive sulphide mineralization
occurring within broad mineralized and altered zones was intercepted in all six
of the holes. (e.g. Hole CDM-01 had 6.11 metres of 5.7% zinc, 1.4% lead and 22.5
grams per tonne silver). Mineralization is open in all directions. At least
trace mineralization was encountered in the remaining three holes.




The
intersections occur within broader zones of dispersed lead, zinc and iron
sulphides developed in the surrounding sedimentary rocks. Several holes were
drilled on a geophysical anomaly detected in the initial processing of a 450
line kilometre airborne electromagnetic and magnetic survey. This structure can
be traced for kilometres in either direction with this detailed magnetic survey.
Early interpretation indicates that the airborne survey can detect buried
mineralization and their related igneous heat sources and can be a valuable
ingredient in focusing ongoing exploration programs.




Early
systematic regional exploration work and the results of this first phase drill
program clearly show that Cinco de Mayo has many geological and mineralogical
characteristics in common with the largest CRDs in Mexico.




Drilling
in mid to late 2007 was targeted on newly discovered mineralization identified
in the first pass program completed in January of 2007.




The
Company has announced assay results from the 2007, 12 hole, 6,316 metre program
completed late last year on the Cinco de Mayo property.  The highlight
from this program of widely spaced holes was Hole 07-20 which intersected 6.8
metres (estimated true thickness) of galena and sphalerite-rich massive
sulphides grading 254 g/t (7.4 ounces per ton (opt)) silver, 6.4% lead and 7.0%
zinc. This includes a compositionally distinct interval, 2.12 metres thick,
grading 512 g/t (15.9 opt) silver, 12.15% lead and 13.10% zinc.




The first
two 50 metre step-outs from this intercept have been drilled and have also
intersected mineralization in the same relatively flat-lying structure. Hole
08-22, a 50 metre down-dip offset, hit 7.1 metres of multi-stage massive
sulphide breccia cut by calcite veins. Hole 08-23, a 50 metre offset to the
northwest, hit 0.85 metres of banded massive sulphides. Assays for both are
pending. All three intercepts lie at about 400 metres vertical depth and appear
to define a coherent massive sulphide manto ("blanket") developed within a
low-angle fault cutting strongly folded limestone. Textural evidence for
multiple mineralization stages is strong. Mineralization is open in all
directions.





Hole
07-21, drilled nearly 1 kilometre to the southwest of Hole 07-20 (and started
before Hole 07-20 reached massive sulphides) tested the down-dip projection of
prominent exposures of shallow northeast-dipping gold and silver-bearing iron
rich jasperoid that is exposed for 4 kilometres along the front of the adjoining
range. At roughly 150 metres vertical depth, this hole intersected 15 metres of
altered limestone, which contained a 1.0 metre thick zone grading 684 g/t silver
(20 opt) with minor base metals. Hole 07-14 drilled 1,300 metres to the
southeast from Hole 07-21 also tested the projection of the jasperoid zone and
reported 3.22 metres of 94 g/t silver (2.74 opt) and 0.23% lead and 1.03% zinc
in gossan.





The
intercepts in Holes 21 and 14 fall on the up-dip projection (over 1,000 metres)
of the sulphide manto intersected in Holes 20, 22 and 23, indicating that the
sulphides, silver-infused limestone of Hole 07-21, and jasperoid outcrops all
occur within the same low-angle fault zone. Notably, this alteration to
mineralization transition is similar to that seen in the distal fringes of
several important silver, lead and zinc rich massive sulphide districts of the
region. There are several other textural, structural and mineralogical
characteristics present to indicate we may have a very large CRD system present
at Cinco de Mayo.





There is
virtually no outcrop at Cinco de Mayo save for the prominent range-front
jasperoid outcrops and a narrow limestone ridge containing two small historic
mines. Exploration is guided by MAG's CRD exploration model and an airborne
magnetic survey that revealed a number of prominent linear anomalies and
prominent magnetic lows that are being systematically drilled. The new
mineralization lies along a very strong north west-trending magnetic anomaly
that runs over 3,000 metres through Hole 07-20 to the southeast to previously
reported sulphide-rich and hornfels intercepts. Numerous geophysical targets
lying along this trend to the northwest, and along parallel and intersecting
trends elsewhere in the district, remain to be drilled.





Despite
the extensive alluvial cover and limited drilling, the Company has now cut
significant mineralization within a laterally traceable low-angle structural
host over more than 8 square kilometres. The drill program will continue to
systematically offset the manto style mineralization intersected in the widely
spread drilling while at the same time continue to drill test the array of
geophysical anomalies.





Work Program for
2008




Drilling
in 2006 and 2007 intersected widespread silver/lead and zinc mineralization
along a major structure and hosted in limestones.  Two holes drilled
in the fall of 2007 intersected replacement style massive sulphide carrying
significant grades of silver, lead and zinc. Drilling is to continue with a
proposed 8,000 metre drill campaign to follow up on these significant
intersections.




Given the
strong intercept in Hole 20, and its location along a strong NW-trending
magnetic low feature, as well as its location within an interpreted low-angle
range bounding thrust fault, it is proposed to start with 50 metre drilling
offsets of Hole 20.




It is
believed that the massive sulphide hit in Hole 20 is distal CRD mineralization
emplaced within the interpreted low-angle thrust fault. If this interpretation
is correct, and this structure is the same structure as intersected in Holes 2,
14, 19, and 21, then we may be able to vector towards possibly more significant
source mineralization to the east or northeast or even northwest within the
fault.  The Company has a number of geophysical targets selected that might
tie in to this interpretation and they remain to be tested.




It is
also proposed to conduct a borehole Pulse Electromagnetic survey and that the
results be used as a targeting tool for tracing sulfide bearing zones at Cinco
de Mayo.  This information would aid the effort to use existing intercepts
to vector towards possible source mineralization.




CINCO
      DE MAYO
            
            Units
            
            
            Cost
            
            
            TotalLand
      / Payments / Tax
            
            
            x
            
            
            
            x
            
            
            
            287,180.60Geology
            
            
            30.00
            
            
            
            600.00
            
            
            
            18,000.00Geophysics/BHG
            
            
            5.00
            
            
            
            2,500.00
            
            
            
            12,500.00Geochemistry
            
            
            
            
            
            
            
            
            
            
            0.00Geophysics/INTG
            
            
            10.00
            
            
            
            800.00
            
            
            
            8,000.00Labour/
      Contract
            
            
            100.00
            
            
            
            250.00
            
            
            
            25,000.00Land
      Deals / Purchases
            
            
            1.00
            
            
            
            250,000.00
            
            
            
            250,000.00Drilling
            
            
            8,000.00
            
            
            
            185.00
            
            
            
            1,480,000.00GIS/Map/Processing
            
            
            10.00
            
            
            
            400.00
            
            
            
            4,000.00Ground
      Gravity
            
            
            2,250.00
            
            
            
            100.00
            
            
            
            225,000.00Miscellaneous
            
            
            12.00
            
            
            
            2,500.00
            
            
            
            30,000.00TOTAL
            
            
            
            
            
            
            
            
            
            
            2,339,680.60




Sampling, Analysis &
Security of Samples





The
Company has implemented a quality control program to ensure best practices in
sampling and analysis of core samples. The Company’s geological staff first log
and then split the core in half during the sampling process with the remaining
half being retained for verification and reference purposes. Duplicates,
standards and blanks are inserted randomly into the sample
stream.  The samples are delivered directly in security sealed bags to
ALS-Chemex Laboratories preparation facility in either Chihuahua, Chihuahua or
Hermosillo, Sonora (Certification ISO 9001). Sample pulps are shipped from there
to ALS-Chemex Laboratories in North Vancouver, Canada for analysis by ICP
techniques. Metallic screen fire analyses for Silver are also regularly run as
an additional QA/QC check.




Other
Properties




The
Company has several other exploration properties.  At this point in
time the Company is focused primarily on epithermal vein exploration along the
Fresnillo Silver Trend and on CRD exploration along the western edge of the
Chihuahua trough. The Company is constantly looking for other opportunities that
could offer us the potential to meet our exploration directives.




The
Company acquired and has identified a number of new project areas throughout our
targeted regions and will be directing these projects through the exploration
process in order to identify drill targets.




None of
the other projects are advanced enough to be able to identify any resource or
reserve figures.  All are very early to early grassroots exploration
stage properties.




DIVIDENDS




The
Company has not declared nor paid dividends on its Common Shares. The Company
has no present intention of paying dividends on its Common Shares, as it
anticipates that all available funds will be invested to finance the growth of
its business.




DESCRIPTION OF CAPITAL
STRUCTURE




Common
Shares





Our
authorized capital consists of an unlimited number of Common Shares without par
value and an unlimited number of Preferred Shares without par value, of which
48,545,566 Common Shares were issued and outstanding as at March 26, 2008. All
of the issued shares are fully paid and non-assessable. Our Company does not own
any of its shares.





The
shareholders are entitled to one vote for each Common Share on all matters to be
voted on by the shareholders. Each Common Share is equal to every other Common
Share and all Common Shares participate equally on liquidation, dissolution or
winding up of our Company, whether voluntary or involuntary, or any other
distribution of our assets among our shareholders for the purpose of winding up
our affairs after we have paid out our liabilities. The shareholders are
entitled to receive pro
rata such dividends as may be declared by the board of directors out of
funds legally available therefore and to receive pro rata the remaining
property of our Company upon dissolution. No shares have been issued subject to
call or assessment. There are no pre-emptive or conversion rights, and no
provisions for redemption, retraction, purchase or cancellation, surrender,
sinking fund or purchase fund. Provisions as to the creation, modification,
amendment or variation of such rights or such provisions are contained in the
Business Corporations Act(British Columbia) and the articles of the Company.





Shareholder Rights
Plan





On
January 18, 2008 the shareholders of the Company approved a Shareholder Rights
Plan (“Plan”).  The Plan was adopted to ensure the fair treatment of
shareholders in connection with any take-over bid for Common Shares of the
Company.  The Rights Plan was not adopted in response to any proposal
to acquire control of the Company.  The Rights Plan will expire at the
end of the third annual general meeting of the Company’s shareholders following
this approval, unless renewed by the shareholders. A copy of the Plan may be
obtained by request in writing to the Company at Suite 328 – 550 Burrard Street,
Vancouver, BC V6C 2B5.





Stock
Options





The
Exchange requires all Exchange listed companies to adopt stock options plans.
The Stock Option Plan is expected to benefit shareholders by enabling the
Company to attract and retain high calibre personnel by offering to them an
opportunity to share in any increase in value of the Common Shares of the
Company resulting from their efforts. The purpose of the Stock Option Plan is to
provide incentive to the Company’s employees, officers, directors, and
consultants responsible for the continued success of the Company. The Company
has a stock option plan in place that was approved by Shareholders on May 9,
2007. The maximum number of Common Shares to be reserved for issuance under
the Stock Option Plan will not exceed 10% of the number of Common Shares of the
Company issued and outstanding on the applicable date of grant. A copy of
the Plan may be viewed in electronic format at www.sedar.com.





MARKET FOR
SECURITIES




Trading Price and
Volume




The
following table provides information as to the high and low prices of the
Company’s Common Shares during the 12 months of the most recently completed
financial year as well as the volume of shares traded for each
month:




Toronto
      Stock Exchange/
              TSX
      Venture Exchange – MAGMonth
            
            High
            
            
            Low
            
            
            VolumeFebruary,
      2008
            
            
            15.42
            
            
            
            11.85
            
            
            
            2,556,509January,
      2008
            
            
            15.49
            
            
            
            12.58
            
            
            
            2,835,924December,
      2007
            
            
            15.50
            
            
            
            13.79
            
            
            
            1,238,184November,
      2007
            
            
            16.29
            
            
            
            14.01
            
            
            
            2,423,889October,
      2007
            
            
            15.06
            
            
            
            13.19
            
            
            
            2,045,108September,
      2007
            
            
            14.62
            
            
            
            12.80
            
            
            
            1,930,574August,
      2007
            
            
            14.78
            
            
            
            9.80
            
            
            
            2,260,659July,
      2007
            
            
            16.40
            
            
            
            11.40
            
            
            
            2,458,004June,
      2007
            
            
            12.46
            
            
            
            10.10
            
            
            
            2,512,170May,
      2007
            
            
            12.44
            
            
            
            9.00
            
            
            
            4,292,923April,
      2007
            
            
            9.77
            
            
            
            7.77
            
            
            
            2,790,730March,
      2007
            
            
            10.00
            
            
            
            8.35
            
            
            
            3,064,687February,
      2007
            
            
            8.75
            
            
            
            8.28
            
            
            
            2,207,430January,
      2007
            
            
            8.10
            
            
            
            5.51
            
            
            
            5,008,472







American
      Stock Exchange - MVGMonth
            
            High
            
            
            Low
            
            
            VolumeFebruary,
      2008
            
            
            15.78
            
            
            
            11.72
            
            
            
            683,234January,
      2008
            
            
            15.95
            
            
            
            12.08
            
            
            
            524,097December,
      2007
            
            
            16.09
            
            
            
            13.79
            
            
            
            391,138November,
      2007
            
            
            18.00
            
            
            
            14.34
            
            
            
            705,684October,
      2007
            
            
            15.83
            
            
            
            13.10
            
            
            
            497,300September,
      2007
            
            
            14.55
            
            
            
            12.15
            
            
            
            392,100August,
      2007
            
            
            13.75
            
            
            
            9.11
            
            
            
            985,000July,
      2007
            
            
            15.75
            
            
            
            10.85
            
            
            
            844,800June,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedMay,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedApril,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedMarch,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedFebruary,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedJanuary,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listed







Over
      The Counter Bulletin Board – MSLRFMonth
            
            High
            
            
            Low
            
            
            VolumeFebruary,
      2008
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedJanuary,
      2008
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedDecember,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedNovember,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedOctober,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedSeptember,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedAugust,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedJuly,
      2007
            
            not
      listed
            
            
            not
      listed
            
            
            not
      listedJune,
      2007
            
            
            11.53
            
            
            
            9.65
            
            
            
            449,323May,
      2007
            
            
            11.36
            
            
            
            8.1852
            
            
            
            632,748April,
      2007
            
            
            8.6516
            
            
            
            7.01
            
            
            
            579,825March,
      2007
            
            
            8.31
            
            
            
            7.45
            
            
            
            701,942February,
      2007
            
            
            7.6372
            
            
            
            6.8509
            
            
            
            568,073January,
      2007
            
            
            6.808
            
            
            
            4.8649
            
            
            
            558,337







Prior
Sales




There are
no securities of the Company issued but not listed on the Toronto Stock Exchange
or the American Stock Exchange as of March 26, 2008.




ESCROWED
SECURITIES




There are
no securities of the Company held in escrow or subject to a contractual
restriction on transfer.




DIRECTORS AND
OFFICERS




Name, Occupation and
Security Holding






Name
      &  Position(1)
            Principal
      Occupation or Employment during the past 5 years
            No.
      of Shares(5)(6)
            No.
      of Options/priceDANIEL
      T. MACINNIS
              President,
      CEO,
              Director
      (since Feb 1/05)
              British
      Columbia, Canada
            President
      and CEO of the Company since February 1, 2005; October 2003 to February
      2005, VP Exploration, Sargold Resources Corp., Sardinia, Italy, a
      gold exploration company; from July 2004 to February 2005, Mr. MacInnis
      ran D. MacInnis Exploration and Consulting in Reno, Nevada.  Mr.
      MacInnis is also a director of MAX Resources Corp.
            81,100
            100,000/$5.36
              90,000/$2.46
              100,000/$3.00
              60,000/$1.00
              250,000/$1.06PETER
      K. MEGAW
              Director
      (since Feb 6/06)
              British
      Columbia, Canada
            President
      of IMDEX/Cascabel and co-founder of Minera Cascabel S.A. DE C.V. since
      1988, a geological consulting company; Consulting geologist for the
      Company since 2003.  Mr. Megaw is also a director of Candente
      Resources Corp.
            696,621
            50,000/$5.36
              100,000/$3.00R.
      MICHAEL JONES(2)(3)(4)
              Director
      (since Mar 31/03)
              British
      Columbia, Canada
            President
      and Director of Platinum Group Metals Ltd. from February 2000 to present,
      a platinum focused company with a deposit interest in South Africa and
      exploration properties in Canada; director and advisor to West Timmins
      Mining Inc. from 2006 to present; previously Vice President of Corporate
      Development for Aber Resources Ltd. from September 1997 to September
      1999.  Mr. Jones is also a director of Jerico Explorations
      Inc.
            8,102
            50,000/$5.36
              75,000/$3.00
              100,000/$1.06
              148,500/$0.50
              50,000/$0.70ERIC
      H. CARLSON(2)(3)(4)
              Director
      (since Jun 11/99)
              British
      Columbia, Canada
            July
      1994 to present, President and CEO, Anthem Properties (1993) Ltd.
      (formerly Anthem Properties Corp.), a property development company; 1992
      to present, President of Kruger Capital Corp.  Mr. Carlson is
      also a director of Platinum Group Metals Ltd., West Timmins Mining Inc.
      and Kruger Capital Corp.
            1,009,800(7)
            50,000/$5.36
              75,000/$3.00
              75,000/$1.06
              75,000/$0.50
              50,000/$0.70JONATHAN
      A. RUBENSTEIN(3)(4)
              Director
      (Since Feb 26/07)
              British
      Columbia, Canada
            Mr.
      Rubenstein practiced law until 1993 and has been a mining executive since
      that time; director of Cumberland Resources Ltd., a TSX listed mining
      company with a gold deposit in Nunavut; a director of Redcorp Ventures, a
      TSX listed mining company developing the Tulsequah Chief sulphide deposit
      in British Columbia; and director of Aurelian Resources, a TSX listed
      mining company with a gold discovery in Ecuador.
            Nil
            200,000/$8.80RICHARD
      M. COLTERJOHN
              Director
      (since Oct 16/07)
              British
      Columbia, Canada
            Mr.
      Colterjohn is the President and Chief Executive Officer of Centenario
      Copper, a position he has held since March 2004. Since 2002, he has also
      served as Managing Partner at Glencoban Capital Management Inc., a
      merchant banking firm. From April 1992 to April 2002, he was Managing
      Director, Corporate Finance Dept. of UBS Bunting Warburg Inc., an
      investment dealer. Since 2002, Mr. Colterjohn has also served as a
      director of three Canadian public mining companies: Canico Resource Corp.
      (2002 – 2006), Cumberland Resources Ltd. (2003 – 2007) and Viceroy
      Exploration Ltd. (2004 – 2006).  Mr. Colterjohn is also a
      director of Centenario Copper.
            Nil
            200,000/$14.15DEREK
      C. WHITE(2)
              Director
      (since Oct 16/07)
              British
      Columbia, Canada
            Mr.
      White is presently the Executive Vice President - Corporate
      Development of Quadra Mining Limited and previously held the position
      of Quadra's CFO commencing in April 2004.  From
      January 2003 to February 2004, he held the position of CFO
      of International Vision Direct Ltd.  Mr. White holds an
      undergraduate degree in Geological Engineering and is a Chartered
      Accountant.  Mr. White is also a director of Oro Silver
      Resources Limited and Magellan Mineral Limited.
            Nil
            200,000/$14.15GORDON
      K. NEAL
              Vice
      President, Corporate Development
              British
      Columbia, Canada
            December
      1, 2003 to present, Vice-President, Corporate Development of the Company;
      from 2006 to present, a director of Zappa Resources; previously President
      of Neal MacInerney Investor Relations.  Mr. Neal is a director
      of Zappa Resources.
            Nil
            75,000/$5.36
              55,000/$2.46
              58,000/$3.00FRANK
      R. HALLAM
              CFO
              British
      Columbia, Canada
            Chief
      Financial Officer of the Company since April 30, 2003; 2002 to present,
      Chief Financial Officer and Director of Platinum Group Metals Ltd., a
      platinum focused company with a deposit interest in South Africa and
      exploration properties in Canada; 2005 to present, Director of Jerico
      Resources Inc.; 1996 to present, CFO Callinan Mines Ltd.; 1994 to 2002,
      Chief Financial Officer and Director of Tan Range Exploration Corp., a
      gold exploration company focused on East Africa; 1998 to 2004, Chief
      Financial Officer and Director of Derek Resources Corporation; previously
      Chartered Accountant with Coopers and Lybrand (now
      PricewaterhouseCoopers).  Mr. Hallam is a director of Platinum
      Group Metals Ltd., Jerico Resources Inc. and West Timmins Mining
      Inc.
            Nil
            75,000/$5.36
              100,000/$3.00
              100,000/$1.06JODY
      L. HARRIS
              Corporate
      Secretary
              British
      Columbia, Canada
            Corporate
      Secretary of the Company since May 8, 2007;  February 2006 to
      March 2007, Investor Relations Specialist of PAKIT Inc.; March 2004 to
      October 2005, Administrator/Office Manager of Silverado Gold Mines
      Ltd.
            Nil
            45,000/$9.40




Notes:




(1)      Each
director’s term of office expires at the next annual general meeting of
shareholders of the Company.




(2)      Member
of Audit Committee.




(3)      Member
of Compensation Committee.




(4)      Member
of Corporate Governance and Nomination Committee.




(5)      Includes
beneficial, direct and indirect shareholdings.




(6)      Does
not include stock options and other rights to purchase or acquire
shares.




(7)
            Of
      these shares, 916,300 shares are held by Carmax Enterprises Corporation, a
      private company owned by Mr.
Carlson.




There are
48,545,566 shares of Common Stock issued and outstanding as of the date of this
AIF.  As of March 26, 2008, directors and officers of the Company as a
group own or control approximately 2,606,500 Common Shares of the Company
representing approximately 5.4% of its issued and outstanding Common
Shares.




Cease Trade Orders,
Bankruptcies, Penalties or Sanctions




Jonathan
Rubenstein was a director of Primero Industries Inc. (“Primero”) in 1998 when it
made a voluntary assignment into bankruptcy as a result of events which occurred
prior to Mr. Rubenstein becoming a director of Primero.




Other
than as described above, during the ten years preceding the date of this AIF, no
director or executive officer of the Company has, to the knowledge of the
Company, been a director, chief executive officer or chief financial officer of
any issuer that:




(a)
            was
      the subject of a cease trade or similar order or an order that denied such
      issuer access to any exemption under securities legislation that was in
      effect for a period of more than thirty consecutive days (an “Order”)
      while the director or executive officer was acting in the capacity as
      director, chief executive officer or chief financial officer;
      or




(b)
            was
      subject to such an Order that was issued after the director or executive
      officer ceased to be a director, chief executive officer or chief
      financial officer in the company that is the subject of the Order and
      which resulted from an event that occurred while that person was acting in
      the capacity as director, chief executive officer or chief financial
      officer.




Other
than as described above, during the ten years preceding the date of this AIF, no
director or executive officer or shareholder holding a sufficient number of
shares of the Company to materially affect control of the Company has, to the
knowledge of the Company, been:




(a)
            a
      director or executive officer of any issuer that, while that person was
      acting in that capacity, or within a year of that person ceasing to act in
      that capacity, became bankrupt, made a proposal under any legislation
      relating to bankruptcy or insolvency or was subject to or instituted any
      proceedings, arrangement or compromise with creditors or had a receiver,
      receiver manager or trustee appointed to hold the assets of that issuer;
      or




(b)
            become
      bankrupt, made a proposal under any legislation relating to bankruptcy or
      insolvency, or become subject to or instituted any proceedings,
      arrangement or compromise with creditors, or had a receiver, receiver
      manager or trustee appointed to hold the assets of that
      individual.




To the
knowledge of the Company, none of the directors or executive officers or
shareholders holding a sufficient number of shares of the Company to materially
affect control of the Company has been subject to any penalties or sanctions
imposed by a court or regulatory body or entered into a settlement agreement
with any securities regulatory authority since December 31, 2000.




Conflicts of
Interest




The
Company’s directors and officers may serve as directors or officers of other
companies or have significant shareholdings in other resource companies and, to
the extent that such other companies may participate in ventures in which the
Company may participate, the directors of the Company may have a conflict of
interest in negotiating and concluding terms respecting the extent of such
participation. In the event that such a conflict of interest arises at a meeting
of the Company’s directors, a director who has such a conflict will disclose his
interest in the matter and abstain from voting for or against the approval of
such participation or such terms. From time to time several companies may
participate in the acquisition, exploration and development of natural resource
properties thereby allowing for their participation in larger programs,
permitting involvement in a greater number of programs and reducing financial
exposure in respect of any one program. It may also occur that a particular
company will assign all or a portion of its interest in a particular program to
another of these companies due to the financial position of the company making
the assignment. In accordance with the laws of British Columbia, the directors
of the Company are required to act honestly, in good faith and in the best
interests of the Company. In determining whether or not the Company will
participate in a particular program and the interest therein to be acquired by
it, the directors will primarily consider the degree of risk to which the
Company may be exposed and its financial position at that time.





The
directors and officers of the Company are aware of the existence of laws
governing the accountability of directors and officers for corporate opportunity
and requiring disclosures by the directors of conflicts of interest and the
Company will rely upon such laws in respect of any directors’ and officers’
conflicts of interest or in respect of any breaches of duty by any of its
directors and officers. All such conflicts will be disclosed by such directors
or officers in accordance with the laws of British Columbia and they shall
govern themselves in respect thereof to the best of their ability in accordance
with the obligations imposed upon them by law. The directors and officers of the
Company are not aware of any such conflicts of interests.





Code
of Ethics





The
Company has adopted a Code of Business Conduct and Ethics (the “Code”) that
applies to all of its directors, officers and employees, including the Chief
Executive Officer and Chief Financial Officer. The Code includes provisions
covering conflicts of interest, ethical conduct, compliance with applicable
government laws, rules and regulations, and accountability for adherence to the
Code. A copy of the Code is posted on the Company’s website, at www.magsilver.com.


Audit
Committee




The Audit
Committee is responsible for reviewing the Company’s financial reporting
procedures, internal controls and the performance of the Company’s external
auditors.  See Audit Committee Charter attached hereto as Schedule
“A”.




Audit
Committee Composition and Background




The Audit
Committee is comprised of Derek White (Chairman), Eric Carlson and R. Michael
Jones. All three members of the Audit Committee are independent and financially
literate, meaning they are able to read and understand the Company’s financial
statements and to understand the breadth and level of complexity of the issues
that can reasonably be expected to be raised by the Company’s financial
statements. In addition to each member’s general business experience, the
education and experience of each member of the Audit Committee that is relevant
to the performance of his responsibilities as a member of the Audit Committee
are set forth below:




Derek
White, Chartered Accountant – Mr. White has over 20 years of financial
experience in the mining and metals industry. Mr. White is
presently the Executive Vice President - Corporate Development of
Quadra Mining Limited and previously held the position as the
Quadra's CFO commencing in April 2004. From January 2003 to February
2004, he held the position of CFO of International Vision Direct
Ltd.





Eric H.
Carlson, B.Comm, Chartered Accountant - Mr. Carlson has over 19 years of real
estate investment, development and management experience and he has been the
President of Anthem Properties Corp. since July 1994. Anthem is an investment
group that specializes in the acquisition and management of Class B retail,
multi family residential and office properties in high growth markets in Canada
and the USA.





R.
Michael Jones, P.Eng. - Experience as senior executive in several public
companies managing operations, listings and capital raising since 1987. Mr.
Jones is President and CEO of Platinum Group Metals Ltd., a public exploration
company.




The Board
of Directors has determined that each of the audit committee members are an
audit committee financial expert within the meaning of the regulations
promulgated by the United States Securities and Exchange Commission and is
independent within the meaning of the American Stock Exchange Company
Guide.




Reliance
on Certain Exemptions




At no
time since the commencement of the Company’s most recently completed financial
year has the Company relied on any of the exemptions in Section 2.4, 3.2,
3.3(2), 3.4, 3.5 or 3.6 of NI 52-110, or an exemption from NI 52-110, in whole
or in part, granted under Part 8 of NI 52-110 or on section 3.8 of NI 52-110. No
non-audit services were approved pursuant to a de minimis exemption to the
pre-approval requirement.




Audit
Committee Oversight




At no
time since the commencement of the Company’s most recently completed financial
year was a recommendation of the Audit Committee to nominate or compensate an
external auditor not adopted by the Board of Directors.




Pre-Approval
Policies and Procedures




The Audit
Committee is authorized by the Board to review the performance of the Company’s
external auditors and approve in advance provision of services other than
auditing and to consider the independence of the external auditors, including
reviewing the range of services provided in the context of all consulting
services bought by the Company. The Chairman of the Audit Committee is
authorized to approve any non-audit services or additional work which the
Chairman deems as necessary and is required to notify the other members of the
Audit Committee of such non-audit or additional work.





External
Auditor Service Fees




The
aggregate fees billed by the Company’s current external auditor, Deloitte &
Touche LLP, in each of the last two fiscal years are as follows.





Year
      ended
              December
      31, 2007
            
            
            Year
      ended
              December
      31, 2006Audit
      Fees
            
            $
            118,000
            
            
            $
            75,200Audit-Related
      Fees(1)
            
            $
            31,000
            
            
            NilTax
      Fees(2)
            
            Nil
            
            
            $
            4,500All
      Other Fees(3)
            
            Nil
            
            
            NilTotal
            
            $
            149,000
            
            
            $
            79,700




Notes:




(1)
            The
      aggregate fees billed for assurance and related services that are
      reasonably related to the performance of the audit or review of our
      financial statements, which are not included under the heading “Audit
      Fees”.




(2)      The
aggregate fees billed for professional services rendered for tax compliance, tax
advice and tax planning.




(3)
            The
      aggregate fees billed for products and services other than as set out
      under the headings “Audit Fees”, “Audit Related Fees” and “Tax
      Fees”.






Compensation
Committee




The
Compensation Committee is comprised of Jonathan Rubenstein (Chairman), Eric
Carlson and R. Michael Jones. The primary objective of this committee is to
discharge the Board’s responsibilities relating to compensation and benefits of
the executive officers and directors of the Company. The Compensation Committee
Charter is herewith incorporated by reference and may be obtained under the
Company’s profile on the SEDAR website at www.sedar.com.




Corporate Governance and
Nomination Committee




The
Corporate Governance and Nomination Committee is comprised of Jonathan
Rubenstein (Chairman), Eric Carlson and R. Michael Jones. The primary objective
of this committee is to assist the Board in fulfilling its oversight
responsibilities by (a) identifying individuals qualified to become board and
board committee members, and recommending to the Board director nominees for
appointment or election to the Board, and (b) developing and recommending to the
Board corporate governance guidelines for the Company and making recommendations
to the Board with respect to corporate governance practices. The Corporate
Governance and Nomination Committee Charter is herewith incorporated by
reference and may be obtained under the Company’s profile on the SEDAR website
at www.sedar.com.




Disclosure
Committee




The
Disclosure Committee is comprised of Daniel MacInnis (Chairman), R. Michael
Jones and Frank Hallam. The primary objective of this committee is to ensure the
Company and all applicable persons meet their obligations under the provisions
of securities laws and stock exchange rules by establishing a process for the
timely disclosure of all material information, ensuring that all applicable
persons understand their obligations to preserve the confidentiality of
undisclosed material information and ensuring that all appropriate parties who
have undisclosed material information know they are prohibited from insider
trading and tipping under applicable law, stock exchange rules and this Policy.
The Disclosure Committee Charter is herewith incorporated by
reference  and may be obtained under the Company’s profile on the
SEDAR website at www.sedar.com.




LEGAL PROCEEDINGS AND
REGULATORY ACTIONS




There are
no pending or contemplated legal proceedings to which our Company is a party or
of which any of our properties is the subject.




INTEREST OF MANAGEMENT AND
OTHERS IN MATERIAL TRANSACTIONS




No
director, executive officer or principal shareholder of the Company, or any
associate or affiliate of the foregoing, has had any material interest, direct
or indirect, in any transaction within the three most recently completed
financial years or during the current financial year prior to the date of this
AIF that has materially affected or is reasonably expected to materially affect
the Company, except as otherwise disclosed in this AIF and as
follows:




Dr. Peter
Megaw, of Arizona, USA, became a member of the board of directors of the Company
on February 6, 2006. Dr. Megaw is also a principal of Minera Bugambilias, S.A.
de C.V. (“Bugambilias”) and Minera Coralillo, S.A. de C.V. (“Coralillo”). The
Company acquired the mineral claims of the Batopilas property from Bugambilias
and Bugambilias has retained a net smelter royalty interest in that property.
The Company acquired the mineral claims of the Guigui property from Coralillo
and Coralillo has retained a net smelter royalty interest in that property. Dr.
Megaw is also a principal of Minera Cascabel, S.A. de C.V. (“Cascabel”). The
Company holds an option from Cascabel to earn an interest in the mineral claims
of the Cinco de Mayo Property. Further, Cascabel has been and will continue to
be retained by the Company as a consulting geological firm compensated at
industry standard rates. For 2007, the Company accrued or paid Cascabel and
IMDEX consulting, administration and travel fees totaling $134,720 (2006 -
$141,154) and exploration costs totaling $1,312,826 (2006 - $1,049,611) under
the Field Services Agreement.




TRANSFER AGENTS AND
REGISTRARS




The
Company’s transfer agent and registrar for its Common Shares is:





Computershare Investor Services
Inc.


3rd floor –
510 Burrard Street


Vancouver, British
Columbia


Canada  V6C
3B9




MATERIAL
CONTRACTS




There are
no contracts of the Company other than contracts entered into in the ordinary
course of business of the Company, that are material to the Company and that
were entered into within the most recently completed financial year of the
Company or before the most recently completed financial year of the Company but
which are still in effect.




INTERESTS OF
EXPERTS




Names of
Experts




Deloitte
& Touche LLP, is the independent auditor of the Company within the meaning
of the Rules of Professional Conduct of the Institute of the Chartered
Accountants of British Columbia.





Clancy
Wendt, P.Geo., provides NI43-101 reports for the Company.





Stephen
W. Wetherup, BSc., P.Geo., provides NI43-101 reports for the
Company.




Interests of
Experts




The
Company’s auditors, Deloitte & Touche LLP, have prepared the audit report
attached to the Company’s audited consolidated financials statements for the
most recent year end. The Company’s auditors have reported that they are
independent of the Company in accordance with the rules of professional conduct
of the Institute of Chartered Accountants of British Columbia.





None of
the other experts listed above, or any “designated professional” of such expert,
has any registered or beneficial interest, direct or indirect, in any securities
or other property of the Company or any of its associates or
affiliates.





The
Company’s technical reports are available on the SEDAR website at www.sedar.com.




ADDITIONAL
INFORMATION







Additional
information, including details as to directors’ and officers’ remuneration,
principal holders of the Company’s shares, options to purchase Company shares
and certain other matters, is contained in the Company’s Information Circular
for the Annual General Meeting of shareholders to be held on May 9, 2008. The
Circular will be made available on SEDAR and on the Company’s website concurrent
with the delivery of the document to the Company’s shareholders.





Additional
information is provided in the Company’s 2007 Annual Report containing the
Management’s Discussion and Analysis and the Consolidated Financial Statements
for the year ended December 31, 2007.





Copies of
the above may be obtained, when available, on the Company’s website
www.magsilver.com; on the SEDAR website at www.sedar.com; or by
calling the Company’s investor relations personnel at
604-630-1399.




Schedule
“A”







MAG
SILVER CORP.


(the
“Corporation”)





AUDIT COMMITTEE
CHARTER





1.
            General




The Board
of Directors of the Corporation (the “Board”) has established an Audit Committee
(the “Committee”) to assist the Board in fulfilling its oversight
responsibilities.  The Committee will review and oversee the financial
reporting and accounting process of the Corporation, the system of internal
control and management of financial risks, the external audit process, and the
Corporation’s process for monitoring compliance with laws and regulations and
its own code of business conduct.  In performing its duties, the
Committee will maintain effective working relationships with the Board,
management, and the external auditors and monitor the independence of those
auditors.  To perform his or her role effectively, each Committee
member will obtain an understanding of the responsibilities of Committee
membership as well as the Corporation’s business, operations and
risks.




The
Corporation’s independent auditor is ultimately accountable to the Board and to
the Committee. The Board and Committee, as representatives of the Corporation’s
shareholders, have the ultimate authority and responsibility to evaluate the
independent auditor, to nominate annually the independent auditor to be proposed
for shareholder approval, to determine appropriate compensation for the
independent auditor, and where appropriate, to replace the outside
auditor.  In the course of fulfilling its specific responsibilities
hereunder, the Committee must maintain free and open communication between the
Corporation’s independent auditors, Board and Corporation
management.  The responsibilities of a member of the Committee are in
addition to such member’s duties as a member of the Board.




2.
            Members




The Board
will in each year appoint a minimum of three (3) directors as members of the
Committee.  All members of the Committee shall be non-management
directors and shall be independent within the meaning of all applicable U.S. and
Canadian securities laws and the rules of the Toronto Stock Exchange and the
American Stock Exchange, unless otherwise exempt from such
requirements.




None of
the members of the Committee may have participated in the preparation of the
financial statements of the Corporation or any current subsidiary of the
Corporation at any time during the past three years.




All
members of the Committee shall be able to read and understand fundamental
financial statements and must be financially literate within the meaning of all
applicable U.S. and Canadian securities laws or become financially literate
within a reasonable period of time following his or her
appointment.  Additionally, at least one member of the Committee shall
be financially sophisticated and shall have past employment experience in
finance or accounting, requisite professional certification in accounting, or
any other comparable experience or background which results in the individual’s
financial sophistication, which may include being or having been a chief
executive officer, chief financial officer, or other senior officer with
financial oversight responsibilities.




3.
            Duties




The
Committee will have the following duties:




·
            Gain
      an understanding of whether internal control recommendations made by
      external auditors have been implemented by
  management.




·
            Gain
      an understanding of the current areas of greatest financial risk and
      whether management is managing these
  effectively.




·
            Review
      significant accounting and reporting issues, including recent professional
      and regulatory pronouncements, and understand their impact on the
      financial statements.




·
            Review
      any legal matters which could significantly impact the financial
      statements as reported on by the Corporation’s counsel and engage outside
      independent counsel and other advisors whenever as deemed necessary by the
      Committee to carry out its duties.




·
            Review
      the Corporation’s annual and quarterly financial statements, including
      Management’s Discussion and Analysis with respect thereto, and all annual
      and interim earnings press releases, prior to public dissemination,
      including any certification, report, opinion or review rendered by the
      external auditors and determine whether they are complete and consistent
      with the information known to Committee members; determine that the
      auditors are satisfied that the financial statements have been prepared in
      accordance with generally accepted accounting
  principles.




·
            Pay
      particular attention to complex and/or unusual transactions such as those
      involving derivative instruments and consider the adequacy of disclosure
      thereof.




·
            Focus
      on judgmental areas, for example those involving valuation of assets and
      liabilities and other commitments and
  contingencies.




·
            Review
      audit issues related to the Corporation’s material associated and
      affiliated companies that may have a significant impact on the
      Corporation’s equity investment.




·
            Meet
      with management and the external auditors to review the annual financial
      statements and the results of the
audit.




·
            Evaluate
      the fairness of the interim financial statements and related disclosures
      including the associated Management’s Discussion and Analysis, and obtain
      explanations from management on
whether:




·
            actual
      financial results for the interim period varied significantly from
      budgeted or projected results;




·
            generally
      accepted accounting principles have been consistently
    applied;




·
            there
      are any actual or proposed changes in accounting or financial reporting
      practices; or




·
            there
      are any significant or unusual events or transactions which require
      disclosure and, if so, consider the adequacy of that
      disclosure.




·
            Review
      the external auditors’ proposed audit scope and approach and ensure no
      unjustifiable restriction or limitations have been placed on the
      scope.




·
            Recommend
      to the Board an external auditor to be nominated for appointment by the
      Corporation’s shareholders.  Subject to the appointment of the
      Corporation’s external auditor by the Corporation’s shareholders, the
      Committee will be directly responsible for the appointment, compensation,
      retention and oversight of the work of external auditor engaged for the
      purpose of preparing or issuing an auditor’s report or performing other
      audit, review or attest services for the Corporation, including the
      resolution of disagreements between management and the external auditor
      regarding financial reporting.  The Corporation’s external
      auditor shall report directly to the
Committee.




·
            Review
      with the Corporation’s management, on a regular basis, the performance of
      the external auditors, the terms of the external auditor’s engagement,
      accountability and experience.




·
            Pre-approve
      all non-audit services to be provided to the Corporation or its subsidiary
      entities by the external auditor.




·
            Consider
      at least annually the independence of the external auditors, including
      reviewing the range of services provided in the context of all consulting
      services obtained by the Corporation,
including:






·
            insuring
      receipt from the independent auditor of a formal written statement
      delineating all relationships between the independent auditor and the
      Company, consistent with the Independence Standards Board Standard No. 1
      and related Canadian regulatory body
standards;




·
            considering
      and discussing with the independent auditor any relationships or services,
      including non-audit services, that may impact the objectivity and
      independence of the independent auditor;
and




·
            as
      necessary, taking, or recommending that the Board take, appropriate action
      to oversee the independence of the independent
  auditor.







·
            Ensure
      that adequate procedures are in place for the review of the Corporation’s
      public disclosure of financial information extracted or derived from the
      Corporation’s financial statements, other than the public disclosure
      contained in the Corporation’s financial statements, Management’s
      Discussion and Analysis and annual and interim earnings press releases;
      and must periodically assess the adequacy of those
    procedures.




·
            Review
      any significant disagreement among management and the external auditors in
      connection with the preparation of the financial
    statements.




·
            Review
      and approve the Corporation’s hiring policies regarding partners,
      employees and former partners and employees of the present and former
      external auditors of the
Corporation.




·
            Establish
      a procedure for:




·
            the
      confidential, anonymous submission by employees of the Corporation of
      concerns regarding questionable accounting or auditing matters;
      and




·
            the
      receipt, retention and treatment of complaints received by the Corporation
      regarding accounting, internal accounting controls, or auditing
      matters.




·
            Meet
      separately with the external auditors to discuss any matters that the
      committee or auditors believe should be discussed privately in the absence
      of management.




·
            Endeavour
      to cause the receipt and discussion on a timely basis of any significant
      findings and recommendations made by the external
  auditors.




·
            Ensure
      that the Board is aware of matters which may significantly impact the
      financial condition or affairs of the
business.




·
            Review
      and oversee all related party
transactions.




·
            Perform
      other functions as requested by the
Board.




·
            If
      necessary, institute special investigations and, if appropriate, hire
      special counsel or experts to assist, and set the compensation to be paid
      to such special counsel or other
experts.




·
            Review
      and re-assess annually the adequacy of this Charter and recommend updates
      to this charter; receive approval of changes from the
    Board.




·
            With
      regard to the Corporation’s internal control procedures, the Committee is
      responsible to:




·
            review
      the appropriateness and effectiveness of the Corporation’s policies and
      business practices which impact on the financial integrity of the
      Corporation, including those related to internal auditing, insurance,
      accounting, information services and systems and financial controls,
      management reporting and risk management;
and




·
            review
      compliance under the Corporation’s business conduct and ethics policies
      and to periodically review these policies and recommend to the Board
      changes which the Committee may deem appropriate;
  and




·
            review
      any unresolved issues between management and the external auditors that
      could affect the financial reporting or internal controls of the
      Corporation; and




·
            periodically
      review the Corporation’s financial and auditing procedures and the extent
      to which recommendations made by the internal audit staff or by the
      external auditors have been
implemented.




·
            Comply
      with Rule 10A – 3(b)(2), (3), (4) and (5) under the Securities Exchange
      Act of 1934.




4.
            Chair




The
Committee will in each year appoint the Chair of the Committee from among the
members of the Committee.  In the Chair’s absence, or if the position
is vacant, the Committee may select another member as Chair. The Chair will not
have a casting vote.




5.
            Meetings




The
Committee will meet at least once every calendar quarter.  Special
meetings shall be convened as required.  Notices calling meetings
shall be sent to all members of the Committee, all Board members and the
external auditor.  The external auditor of the Corporation must be
given reasonable notice of, and has the right to appear before and to be heard
at, each meeting of the Committee.  At the request of the external
auditor, the Committee must convene a meeting of the Committee to consider any
matter that the external auditor believes should be brought to the attention of
the Board or shareholders of the Corporation.




The
Committee may invite such other persons (e.g. without limitation, the President
or Chief Financial Officer) to its meetings, as it deems
appropriate.




6.
            Quorum




A
majority of members of the Committee, present in person, by teleconferencing, or
by videoconferencing, or by any combination of the foregoing, will constitute a
quorum.




7.
            Removal and
      Vacancy




A member
may resign from the Committee, and may also be removed and replaced at any time
by the Board, and will automatically cease to be a member as soon as the member
ceases to be a director of the Corporation.  The Board will fill
vacancies in the Committee by appointment from among the directors in accordance
with Section 2 of this Charter.  Subject to quorum requirements, if a
vacancy exists on the Committee, the remaining members will exercise all of the
Committee’s powers.




8.
            Authority




The
Committee may:




·
            engage
      independent counsel and other advisors as it determines necessary to carry
      out its duties.




·
            set
      and pay the compensation for any advisors employed by the Committee;
      and




·
            communicate
      directly with the internal and external
  auditors.




The
Committee may also, within the scope of its responsibilities, seek any
information it requires from any employee and from external parties, to obtain
outside legal or professional advice, and to ensure the attendance of
Corporation officers at meetings as appropriate.




9.
            Secretary and
      Minutes




The Chair
of the Committee will appoint a member of the Committee or other person to act
as Secretary of the Committee for purposes of a meeting of the
Committee.  The minutes of the Committee meetings shall be in writing
and duly entered into the books of the Corporation, and will be circulated to
all members of the Board.




10.
            Funding




The
Corporation shall provide for appropriate funding, as determined by the
Committee, for payment of (a) compensation to any registered public accounting
firm engaged for the purposes of preparing or issuing an audit report or
performing other audit, review or attest services for the Corporation; (b)
compensation to any advisers employed by the Committee; and (c) ordinary
administrative expenses of the Committee that are necessary or appropriate in
carry out its duties.









Schedule
“B”




Glossary







The
following is a glossary of certain terms used in this AIF.




"Ag" is the elemental symbol
for silver.





“alluvium” is unconsolidated
surficial sediments deposited by water.





“alteration” usually refers to
chemical reactions in a rock mass resulting from the passage of hydrothermal
fluids.





“andesite” is volcanic rock,
low in quartz content, generally fine grained and moderately dark
coloured.





“anomalous” is a value, or
values, in which the amplitude is statistically between that of a low contrast
anomaly and a high contrast anomaly in a given data set.





“Batopilas property”, also
known as the Don Fippi Property, is described commencing on page 32 of this
AIF.





“basalt” is volcanic rock, low
in quartz content, generally fine grained and dark coloured.





“calcite” refers to calcium
carbonate mineral.  It is a common constituent of many rock types as
well as occurring in veins and alteration assemblages.





“carbonate” refers to minerals
which have the formula “X”CO3.   Calcite is the most common
carbonate mineral.  Also rocks composed dominantly of carbonate
minerals such as calcite.





“Cascabel” is Minera Cascabel,
S.A. DE C.V., a company incorporated pursuant to the laws of the Mexican
Republic.





“Cinco de Mayo” is described
commencing on page 38 of this AIF.





“Common Shares” is the Common
Shares without par value in the capital stock of the Company.





“Company” is MAG Silver Corp.,
a company under the Business Corporations Act (British Columbia).





“Conglomerate” is sedimentary
rock composed of gravel and coarser fragments.




“concession” is a defined area
for which mineral tenure has been granted by the Mexican government for a period
of 50 years to allow exploration and exploitation and may be extended for an
additional 50 years.
 “CRD” refers to Carbonate
Replacement Deposit.





“Cretaceous” is the geological
period extending from 135 million to 63 million years ago.





“CSAMT” refers to Controlled
Source Audio Magneto Tellurics.





“diorites” are medium-coloured
intrusive igneous rocks of intermediate composition.





“Exchange” refers to the
Toronto Stock Exchange.





“Exchange Act” means the United
States Securities Exchange Act of 1934;





“exploitation”isworks aimed at
preparation and development of the area comprised by the mineral deposit, as
well as work aimed at detaching and extracting the minerals products or
substances existing therein.





“exploration”isworks performed on land
aimed at identifying deposits of minerals or substances, as well as quantifying
and evaluating the economically utilizable reserves they contain.





“fault” is a fracture in rock
where there has been displacement of the two sides.





“flow” is volcanic rock
comprised of flow lava.





“fracture” refer to breaks in
a rock, usually due to intensive folding or faulting.





“g/t” refers to grams per
tonne (31.1 g/T = 1.0 troy ounce/tonne).





“gangue” are minerals
incorporated in an orebody other than those of economic interest.





“grade” refers to the
concentration of each ore metal in a rock sample, usually given as weight
percent.  Where extremely low concentrations are involved, the
concentration may be given in grams per tonne (g/t) or ounces per ton
(oz/t).  The grade of an ore deposit is calculated, often using
sophisticated statistical procedures, as an average of the grades of a very
large number of samples collected from throughout the deposit.





“greywacke” refers to
sandstone composed largely of sand-sized rock fragments.





“hydrothermal” refer to hot
fluids, usually mainly water, in the earth’s crust which may carry metals and
other compounds in solution to the site of ore deposition or wall rock
alteration.





“igneous” is a rock formed by
the cooling of molten silicate material.





“intrusive” is a rock mass
formed below the earth’s surface from magma which has intruded into a
pre-existing rock mass.





“Juanicipio property” is the
Juanicipio property described commencing on page 22 of this AIF.





“Lagartos” is Minera Los
Lagartos, S.A. DE C.V., a company incorporated pursuant to the laws of the
Mexican Republic, the principal of which is the Company.





“MAG” is MAG Silver Corp., a
company under the Business Corporations Act (British Columbia).





“magma” refers to molten rock
formed within the crust or upper mantle of the earth.





“mill” refers to a facility
for processing ore to concentrate and recover valuable minerals.





“Minera Juanicipio” is Minera
Juanicipio, S.A. DE C.V., a company incorporated pursuant to the laws of the
Mexican Republic, the principals of which are Penoles and the
Company.





“mineral reserve” is that part
of a mineral deposit which could be economically and legally extracted or
produced at the time of the reserve determination. The economically mineable
part of a measured or indicated mineral resource demonstrated by at least a
preliminary feasibility study.  The study must include adequate
information on mining, processing, metallurgical, economic and other relevant
factors that demonstrate, at the time of reporting, that economic extraction can
be justified.  A mineral reserve includes diluting materials and
allowances for losses that may occur when the material is mined.





“mineral resource” is a
concentration or occurrence of natural, solid, inorganic or fossilized organic
material in or on the Earth’s crust in such form and quantity and of such a
grade or quality that it has reasonable prospects for economic
extraction.  The location, quantity, grade, geological characteristics
and continuity of a mineral resource are known, estimated or interpreted from
specific geological evidence and knowledge. Industry Guide 7 does not provide
for the disclosure of “mineral resource estimates”.





“mineralization” usually
implies minerals of value occurring in rocks.





“monzonite” is an intermediate
intrusive rock related to granite.





“net smelter returns royalty” or
“NSR”refers to payment of a percentage of mining revenues after
deducting applicable smelter charges.





“NSAMT” is Natural Source
Audio-frequency Magneto Tellurics.





“ore” is a natural aggregate
of one or more minerals which may be mined and sold at a profit, or from which
some part may be profitably separated.





“outcrop” is an exposure of
rock at the earth’s surface.





“oz/t” refer to troy ounces
per tonne.





“Policy 2.4” refers to the
Policy of the TSX Venture Exchange entitled “Capital Pool Companies” which sets
forth the steps for listing a company on that exchange as a “capital pool
company” (which is essentially a blind pool) and the steps that company must
take, including its Qualifying Transaction, to qualify for a regular listing on
that exchange.





“porphyry” refer to rock type
with mixed crystal sizes, i.e., containing larger crystals of one or more
minerals.





“portal” is the entrance from
surface into an underground development.





“pyrite” is iron sulphide
mineral.





“Qualifying Transaction” is
the transaction conducted pursuant to Policy 2.4 of the TSX Venture Exchange
whereby the company acquired significant assets, other than cash, by way of
purchase, amalgamation, merger or arrangement with another company or by other
means and then qualified for a regular listing on that exchange.





“quartz” refers to Si02, a
common constituent of veins, especially those containing gold and silver
mineralization.





“replacement” refers to the
process whereby one mineral is chemically substituted by a later
mineral.





“rhyolite” refers to volcanic
rock high in quartz content, generally fine grained and light
coloured.





“SEC” is the Securities and
Exchange Commission of the United States of America.





“serpentinite” is a rock
composed of serpentine, typically formed from the alteration of mafic igneous
rocks.





“silicification” refers to the
replacement of the constituents of a rock by quartz.





“skarn” refers to the
alteration of carbonate rocks near an intrusion dominated by garnet and pyroxene
minerals.





“tailings” is the material
rejected from a mill after recoverable valuable minerals have been
extracted.





“Tertiary” is the geological
period extending from 63 million to 2 million years ago.





“tonne” or “T” is the Metric
ton = 1,000 kilograms or 1,000,000 grams.





“tuffs” refer to volcanic
rocks composed of ash, crystal and rock fragments ejected from a
volcano.  May become “welded” (tightly compacted and lithified) during
cooling.





“VAT” is an acronym for “Value
Added Tax” which, in Mexico, is charged on all goods and services at a rate of
15%.  Proprietors selling goods or services must collect VAT on behalf
of the government.  Goods or services purchased incur a credit for VAT
paid.  The resulting net VAT is then remitted to, or collected from
the Government of Mexico through a formalized filing process. (In Mexico it is
referred to as “IVA”).





“veinlets” are small veins,
generally measuring only a few millimetres in thickness, filling fractures in
rocks.





“veins”refer to the mineral
deposits that are found filling openings in rocks created by faults or replacing
rocks on either side of faults.





“volcaniclastic” refer to the
coarse-grained sedimentary rocks (sandstone or conglomerate) composed of
fragments of volcanic rocks.