Annual
Information Form of MAG Silver Corp.


For
the fiscal year ended December 31, 2008






























































Dated:
March 13, 2009




















Table of
Contents









Preliminary
Notes


Date of
Information


Currency and Exchange
Rates


Metric
Equivalents


Forward Looking
Statements


CORPORATE
STRUCTURE


Incorporation


Intercorporate
Relationships


GENERAL DEVELOPMENT OF THE
BUSINESS


Three Year
History


Significant
Acquisitions


DESCRIBE THE
BUSINESS


General


Risk
Factors


Companies with Asset-backed
Securities Outstanding


Companies with Mineral
Projects


DIVIDENDS


DESCRIPTION OF CAPITAL
STRUCTURE


Common
Shares


Shareholder Rights
Plan


Stock
Options


MARKET FOR
SECURITIES


Trading Price and
Volume


Prior
Sales


ESCROWED
SECURITIES


DIRECTORS AND
OFFICERS


Name, Occupation and
Security Holding


Cease Trade Orders,
Bankruptcies, Penalties or Sanctions


Conflicts of
Interest


Audit
Committee


Compensation
Committee


Corporate Governance and
Nomination Committee


Disclosure
Committee


LEGAL PROCEEDINGS AND
REGULATORY ACTIONS


INTEREST OF MANAGEMENT AND
OTHERS IN MATERIAL TRANSACTIONS


TRANSFER AGENTS AND
REGISTRARS


MATERIAL
CONTRACTS


INTERESTS OF
EXPERTS


ADDITIONAL
INFORMATION


Schedule
“A”


Schedule
“B”







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, 2008 unless otherwise
indicated.







Currency
and Exchange Rates




All
dollar amounts in this AIF are expressed in Canadian dollars unless otherwise
indicated. MAG’s 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 to
                  US
      dollars
                
                2008
                
                
                2007
                
                
                2006Rate
      at end of period
                
                $
                US0.8166
                
                
                $
                US1.0120
                
                
                $
                US0.8581Average
      rate for period
                
                $
                US0.9371
                
                
                $
                US0.9310
                
                
                $
                US0.8815High
      for period
                
                $
                US1.0289
                
                
                $
                US1.0905
                
                
                $
                US0.9099Low
      for period
                
                $
                US0.7711
                
                
                $
                US0.8437
                
                
                $
                US0.8528





The noon
rate of exchange on March 12, 2009 as reported by the Bank of Canada for the
conversion of Canadian dollars into United States dollars was Canadian $1.00
equals US$0.77.







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 (“NI 51-102”) shall bear that
definition. Other definitions are set out in National Instrument 14-101
-
Definitions.







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;





•
            risks
      relating to the Company’s ability to obtain all necessary licenses and
      permits that may be required to carry out 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 and inflationary
pressures;





•
            risks
      related to governmental regulations, including environmental
      regulations;




•
            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.





Adjacent
Property Disclosure





The staff
of the United States Securities and Exchange Commission takes the position
that mining and mineral exploration 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 does not necessarily indicate and certainly does not prove
the existence, nature or extent of mineral deposits on our
properties.





Cautionary
Note to Investors Concerning Estimates of Indicated Resources





This
press release uses the term "Indicated Resources". MAG advises investors that
although this term is recognized and required by Canadian regulations (under
National Instrument
43-101—Standards of Disclosure for Mineral Projects), the U.S. Securities
and Exchange Commission does not recognize this term. Investors are cautioned
not to assume that any part or all of mineral deposits in this category will
ever be converted into reserves.





Cautionary
Note to Investors Concerning Estimates of Inferred Resources





This AIF
uses the term "Inferred Resources". MAG advises investors that although this
term is recognized and required by Canadian regulations (under National Instrument 43-101—Standards
of Disclosure for Mineral Projects), the U.S. Securities and Exchange
Commission does not recognize this term. Investors are cautioned not to assume
that any part or all of the mineral deposits in this category will ever be
converted into reserves. In addition, "Inferred Resources" have a great amount
of uncertainty as to their existence, and economic and legal feasibility. It
cannot be assumed that all or any part of an Inferred Mineral Resource will ever
be upgraded to a higher category. Under Canadian rules, estimates of Inferred
Mineral Resources may not form the basis of feasibility or pre-feasibility
studies, or economic studies except for a Preliminary Assessment as defined
under Canadian National
Instrument 43-101. Investors are cautioned not to assume that part or all
of an Inferred Resource exists, or is economically or legally
mineable.





Technical
Information





Unless
otherwise indicated, scientific or technical information in this AIF relating to
mineral reserves or mineral resources is based on information prepared by
employees of MAG or its joint venture partners, as applicable, under the
supervision of, or has been reviewed by, Dr. Peter Megaw, who is a “Qualified
Person” as defined in National Instrument 43-101. A “Qualified Person” means an
individual who is an engineer or geoscientist with at least five years of
experience in mineral exploration, mine development or operation or mineral
project assessment, or any combination of these, has experience relevant to the
subject matter of the mineral project, and is a member in good standing of a
professional association.





Passive
Foreign Investment Company




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 for the foreseeable
future.  Consequently, this classification may 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 U.S. holders of
the Company’s Common Shares are encouraged to consult their own tax
advisers.





Please
consult the Company's public filings at www.sedar.com and
http://idea.sec.gov
for further, more detailed information concerning these matters.







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:





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 issuer” 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 (now the NYSE
Alternext US) 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 are 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”) and Fresnillo plc
(“Fresnillo”), a London Stock Exchange listed company that is controlled by
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.  Minera Juanicipio is governed by a
shareholders agreement dated October 10, 2005 (the “Shareholders Agreement”).
 Pursuant to the Shareholders Agreement each shareholder is to provide
funding to Minera Juanicipio pro rata to its interest in Minera Juanicipio, with
Fresnillo contributing 56% and MAG, through Lagartos, contributing 44%
respectively. See more detail at “Description of the Business – 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 table lists the subsidiary of the Company and a company in which MAG
holds a significant interest, together with the jurisdiction of incorporation
and the direct or indirect percentage ownership by the Company of each such
company:





Name
              Jurisdiction
      of Organization
              Percentage
      of Voting Securities Owned or ControlledMinera
      Los Lagartos, S.A. DE C.V.
              Mexican
      Republic
              100%
      (1)Minera
      Juanicipio, S.A. DE C.V.
              Mexican
      Republic
              44%
      (2)




Notes:


(1)
            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
      Lagartos.




(2)
            Owned
      by Lagartos, which in turn is owned by the
  Company.









GENERAL DEVELOPMENT OF THE
BUSINESS




Background




MAG is a
company based in Vancouver, British Columbia, Canada and is focused on the
acquisition, exploration and development of district scale projects located in
the Mexican Silver Belt.  The Company’s common shares trade on the
Toronto Stock Exchange under the symbol MAG and on the New York Stock Exchange
Alternext US (formerly AMEX) under the symbol MVG.  The Company is a
“reporting issuer” in the Provinces of British Columbia, Alberta and
Ontario.






The
Company’s two most material properties at the date of this AIF are the Company’s
44% joint venture interest in the Juanicipiopropertyand the100% owned Cinco de Mayoproperty.The 100% owned, less
advanced, Lagartos (NW and SE)propertyis
considered a principal property at this time.  Of these three, the
Juanicipio property is by far the most significant to MAG and the exploration of
this property has been the most important valuation factor for the
Company.




The
roughly 8,000 hectare Juanicipio property is located in Zacatecas State, Mexico
just outside the mining town of Fresnillo. The Juanicipio property lies 6
kilometres west from the principal production head-frame of the Fresnillo Mine
and 2.5 kilometres west from the Saucito Vein, owned by Industrias Peñoles, S.A.
de C.V. (“Peñoles”) and currently undergoing production development. 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
Peñoles.




The
Company initially acquired a 100% interest in the Juanicipio property in 2002
for a series of payments totalling $919,458 and consisting of $486,125 in cash
and $433,333 for the issue of 366,667 common shares.  From 2005 to
2007, Peñoles acquired a 56% interest in the Juanicipio property by conducting
US$5,000,000 of exploration on the property over four years and purchasing
US$1,000,000 of Common Shares of the Company at market price.




The
Cinco de Mayo property is located approximately 190 kilometres northwest of the
city of Chihuahua, in northern Chihuahua State, Mexico. Cinco de Mayo was
acquired by way of an option agreement dated February 26, 2004.  The
property is subject to a 2.5% net smelter returns royalty.  Under the
terms of the agreement, as later amended, the Company was obligated to make
scheduled cash and share payments together worth US$1,000,000 and incur
exploration expenditures totalling US$1,000,000 by July 26, 2009. To December
31, 2008 the Company has paid US$550,000 in cash, issued 165,670 common shares
at a value of $266,630 and completed approximately $10,773,036 in exploration
costs on the project. Cinco de Mayo is the most advanced of MAG’s five Carbonate
Replacement Deposit (“CRD”) style targets.




The
Company acquired the 135,000 hectare Lagartos exploration concessions by staking
in 2006.  The two claim groups, Lagartos NW and Lagartos SE, lay
northwest and southeast of the Juanicipio property, along the “Fresnillo Silver
Trend”, a large regional structural zone hosting world class Guanajuato,
Zacatecas and Fresnillo epithermal silver-gold vein districts.




Three Year
History






2006




Drilling
was re-started at Juanicipio in August 2006 on a series of holes located 1.8 km
west of discovery hole JI-05-16.  In August 2006 Peñoles and MAG
announced that surface rights to an area covering the east-west projection of
the Valdecañas Vein had been purchased for approximately
US$1.40M.  Drilling on the discovery itself resumed in October 2006
and continued into the first quarter of 2007 with four operating drill
rigs.  At December 31, 2006, Peñoles had spent US$3,360,000 on the
Juanicipio property and had completed 18,320 metres of diamond
drilling.




The
Company executed exploration programs on a number of its own 100% owned projects
in Mexico during 2006.  MAG continued to enlarge its land position at
Lagartos and elsewhere in Mexico in 2005 and 2006 by claiming strategically
located properties as they became eligible for acquisition.  MAG
initiated a drill program in January of 2006 at Lagartos and by year end had
expended $1,798,168 in exploration costs for the project area.




The
Batopilas property was of higher priority to the Company in 2006 and earlier
than it is at present.  The Company acquired a 100% interest in the
project, subject to a 4.5% Net Smelter Return royalty, in exchange for a series
of cash and share payments totalling $1.42 million.  It covers 4,500
hectares and is located deep within the famous Copper Canyon country of
south western Chihuahua State, Mexico. A ten-hole 2,500 metre drill program
was initiated at Batopilas in the fall of 2005 to test preliminary drill targets
and help refine exploration methods for the property.  MAG later
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 Vein with 1.70 metres (5.6 feet) of 2,358 grams per tonne silver (75.8
ounces per ton).




For the
year ending December 31, 2006 the Company incurred $646,029 in property
acquisition costs and $3,896,504 in exploration expenditures on its 100% owned
properties.  For the year ended December 31, 2006, the Company
incurred no costs in respect of the Juanicipio property for its 44% share of
costs because all costs for the period were paid for by Peñoles as a part of
their required US $5.0 million earn in.




On March
2, 2006 the Company closed a private placement for 245,716 common shares at a
price of $2.35 per share.   Gross proceeds to the Company totaled
$577,433.




2007




By May of
2007, Peñoles had fulfilled its 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 S.A. de C.V. (“Minera
Juanicipio”), to operate the joint venture, with the Company holding 44% of the
shares of Minera Juanicipio through its 100% owned Mexican subsidiary, Lagartos,
and Peñoles holding a 56% interest in Minera Juanicipio.  It was
agreed that Peñoles would be the operator of the project and both parties would
fund on-going and future programs in proportion to their pro rata
interests.




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 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.





During
2007, the Minera Juanicipio completed two additional land purchases totaling
USD$5,077,939 and then held uninterrupted coverage of 4.5 kilometres of the
strike projection of the Valdecañas Vein from east to west and covering a 2.5
kilometre westerly strike projection of the Juanicipio Vein.




By
December 31, 2007, the Valdecañas Vein averaged almost 5.8 metres in width with
a down dip length in excess of 400 metres and had been traced for 1,500 metres
along strike.  The average grade of 14 holes drilled by Peñoles to
December 31, 2007 (out of 17) that were within the high grade silver, gold zone
was 1,292 grams per tonne silver, 2.50 g/t gold and 8.4% combined lead and
zinc.





Work in
2007 at Batopilas included: underground topographic surveys of the old workings;
a detailed 590 line-kilometre airborne geophysical survey; a detailed stream
sediment and ridge and spur soil sampling program; and a detailed geological
re-mapping of the entire project area.  A 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 of drilling.





During
2007 the Company spent $1.56 million in exploration work on the Cinco de Mayo
property, of which $1.05 million related to drilling.




By
December 31, 2007, the Company had incurred $120,853 in exploration costs on the
Lagartos NW property and $4,220,148 in exploration costs on the Lagartos SE
property, including surface, geophysical and drilling work.





For the
year ending December 31, 2007 the Company incurred $931,891 in property
acquisition costs and $5,987,128 in exploration expenditures on its 100% owned
properties, including exploration on the Batopilas, Cinco de Mayo and Lagartos
land packages.





In
February 2007, the Company closed private placements for 2.76 million units for
gross proceeds of $20 million.  Each unit consisted of one common
share and one-half common share purchase warrant, with each whole warrant
exercisable for one common share at a price of $10.00 for a period of 12 months
expiring in February 2008.  All warrants were exercised for gross
proceeds to the Company of $13.8 million.





On
November 27, 2007 the Company closed a bought deal private placement for 3.0
million common shares of the Company at a price of $15.50 per share for gross
proceeds of $46.5 million.





The
company successfully upgraded its market exposure in 2007 by listing on the
American Stock Exchange (AMEX) under the symbol MVG (now the NYSE Alternext US)
and with its graduation from the TSX Venture Exchange to the Toronto Stock
Exchange (TSX) under the symbol MAG.





2008





For the
year ended December 31, 2008, the Company incurred $1,926,488 in property
acquisition costs and $13,336,644 in exploration expenditures on its own 100%
held properties.





For the
year ended December 31, 2008, the Company invested $8,166,747 in Minera
Juanicipio to fund its 44% share of exploration expenditures on the Juanicipio
property.A total
26,050 metres of diamond drilling was completed on the Valdecañas Vein and 2,810
metres on the Juanicipio Vein in 2008.




On June
18, 2008, the Company announced a resource estimate for the Valdecañas Vein (see
news release dated June 18, 2008). The resource estimate was prepared by
Fresnillo and audited by SRK Consulting.  A National Instrument 43-101
(“NI 43-101”) technical report was filed by the Company in support of the
estimate.  The total inferred resource estimate was 237.8 million
ounces of silver of which MAG’s 44% interest equates to 104.5 million ounces and
Peñoles 56% interest equates to 133.2 million ounces.  In addition to
the silver, the resource estimate also contained inferred resources of 480,000
ounces of gold and almost 1 billion pounds of combined lead and zinc (457,700
tonnes).





During
2008 Peñoles announced the spin-off of its silver assets into a subsidiary
company named Fresnillo.  In May 2008, Fresnillo was listed on the
London Stock Exchange, while the majority interest in the company remained under
the control and ownership of Peñoles.  Later, in September and October
2008, Fresnillo acquired in the market 9,746,193 of the issued and outstanding
shares of MAG, which together with its existing shares of MAG represents a
19.83% interest. MAG announced on October 15, 2008 that the Company had
established a Special Committee of the Board of Directors to consider “strategic
alternatives” in response to Fresnillo’s acquisition of a material interest in
MAG shares.





On
December 1, 2008 the Company was advised of the intention of Fresbal Investments
Ltd., a wholly-owned subsidiary of Fresnillo, to make an unsolicited take-over
bid for all of the outstanding shares of MAG for US$4.54 per share.





As a
result of the Fresnillo announcement and its position as an “insider” of MAG as
a result of its 19.83% shareholding, applicable securities law require that an
independent valuation of the Company be prepared under the supervision of an
Independent Committee of the board of directors of MAG prior to Fresnillo
commencing its takeover bid. MAG appointed an Independent Committee and by
year-end, TD Securities was engaged as independent valuator and Scott Wilson
Roscoe Postle Associates Inc. (“Scott Wilson RPA”) was engaged as independent
technical consultant. By the first week of January 2009, the independent
valuator was on site at Juanicipio to begin the valuation.  The
independent valuation process was ongoing until February 1, 2009, when the
Independent Committee suspended the valuation work because Fresnillo neglected
or refused to provide the valuator with critical information in the sole
possession of Fresnillo that the Independent Committee considers critical to the
completion of a reliable valuation.  As of the date of this AIF, the
valuation process remains suspended pending a review by the Ontario Securities
Commission as requested by Fresnillo.





The 2009
exploration program for the Juanicipio property includes 25,000 metres of
drilling to further define the Valdecañas Vein, to extend the Juanicipio Vein
and the newly interpreted Encino Vein and to test other prospective targets. At
the time of writing, four drills were turning on Juanicipio.





An
updated NI 43-101
compliant resource estimate was completed in late February 2009 (see press
releases dated February 24, 2009 and March 4, 2009 and see the section titled
“Juanicipio Property” below in this document).





The
Company has budgeted an aggregate $17.0 million in 2009 for expenditures related
to its 44% interest in the Juanicipio property and high-priority targets on four
of its wholly-owned properties in Mexico.  A 25,000 metre drilling
program is scheduled for Juanicipio while a further 30,000 metres of diamond
drilling is planned for the Company’s own projects.




Drilling
at Cinco de Mayo in 2008 intersected widespread and high grades of
silver/lead/zinc mineralization and exploration to date has defined a coherent
massive sulphide sheet, or manto, of at least 2,000 metres strike length that
remains open, suggesting the presence of a large system characteristic of many
of the large CRD mines in the Chihuahua Trough.





Highlights
from 2008 drilling included six holes reported on July 8, 2008, Holes 29 and 35
through 39, which extended the José Manto to an area of at least 300 metres by
400 metres and mineralization in outlying Hole 32 suggested an extension of an
additional 600 metres to the southeast. The best new intercept was Hole 08-39,
which cut 3.46 metres of 612 grams per tonne (g/t) silver (17.8 ounces per ton
(opt), 11.59% lead and 13.20% zinc: including 2.36 metres of 772 g/t silver
(22.5 opt), 13.42% lead and 16.39% zinc.





Assay
results reported on September 18, 2008 from an additional 15 diamond drill holes
(08-40 to 08-54), ten of which encountered mineralization, confirmed extension
of the Jose Manto to a strike length of at least 2,000 metres, which remains
open along strike and to the southwest. Returns were notable for high grades of
zinc and lead, along with the high grade silver; latest results also show
significant gold values, with Hole 08-48 returning 1.50 metres of 6.89 g/t (0.20
opt) gold, 370 g/t (10.8 opt) silver, 19.15% lead and 9.46% zinc. The latest
holes also contain appreciable amounts of scheelite (tungsten) bearing skarn,
suggesting proximity to the source of the mineralization.





The
Company spent a cumulative total of $10,773,036 in exploration costs at Cinco de
Mayo to December 31, 2008 (2007: $2,775,679, 2006: $1,213,474). Exploration
programs at Cinco de Mayo by the Company for 2008 were budgeted for
approximately $2.4 million. However, results warranted accelerated and expanded
programs.




Drilling
continues at Cinco de Mayo in 2009 with 3 rigs currently turning, part of a
proposed 15,000 metre drill operation to follow up on last year’s significant
intersections.  The Company is currently undertaking a preliminary
resource calculation for the project.





Work on
the Batopilas Project in 2008 was scaled back from 2007. There was no new
drilling after the spring floods in June. On May 5, 2008, MAG announced that its
2008 exploration program on its 100% owned Batopilas Native Silver District
encountered a broad zone of silver/lead and zinc mineralization in Hole BA08-21
located in the Animas area. The zone starts immediately beneath the casing at
9.02 metres down hole and extends to 70.87 metres for a total core length of
61.2 metres grading 20.5 g/t silver, 0.66% lead and 0.84% zinc.  In
addition to the Animas Hole, drill holes were also completed at the Escondido,
and Santo Domingo targets.





At
Lagartos NW, a 5,000-metre drill program was conducted early in 2008, designed
to test the depth of the alluvial cover on the eastern boundary of the claim
block. Test drilling indicated that the depth of the alluvial cover exceeds 800
metres, not at all practical to consider further exploration in this
area.  Focus then turned to Lagartos SE, the Company’s holdings cover
the eastern and western extensions of the major past producing vein sets such as
the Veta Grande and the Mala Noche Veins.





Initial
surface reconnaissance work at Lagartos SE located a series of previously worked
veins on the eastern side of the Zacatecas district and sampling returned high
grade silver. Subsequent geological and geophysical work identified six (6)
drill targets that were part of a 4,000 metre drill program which commenced in
late October 2008. As of February 2009, two drills were still turning. Results
are pending.





The
Company had spent a cumulative total of $6,535,390 in exploration costs at
Lagartos to December 31, 2008 (2007 – $4,341,001; 2006 -
$2,197,361).




Significant
Acquisitions




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




DESCRIPTION OF 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.




Employees




The
Company’s business is administered from its head office in Vancouver, British
Columbia, Canada.  At December 31, 2008, the Company had 5 full time
employees and 2 part time employees.




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 and exploitation 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 primarily 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 Rate2008
                
                
                10.43022007
                
                
                10.17842006
                
                
                9.60252005
                
                
                8.99272004
                
                
                8.6711




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




See the
discussion regarding trends in the general market below under “Economic and
political instability may affect the Company’s business”. The Company’s funding
obligations under the Company's property option agreements are set out in
“Disclosure of Contractual Obligations”. 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 to fund exploration costs on such
properties.  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 property 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.





Economic and political
instability may affect the Company’s business





Since
mid-2008 there has been a negative trend with regard to the market for many
metal commodities and related products as a result of global economic
uncertainty, reduced confidence in financial markets, bank failures and credit
availability concerns.  These macro-economic events have negatively
affected the mining and mineral exploration sectors in general.  The
Company’s market capitalization has been significantly
reduced.  Although these circumstances are expected to improve over
the longer term, they could have a negative impact upon the Company’s liquidity
and its ability to raise the capital required to execute its business plans
going forward.  As a result the Company will consider its plans and
options carefully in 2009.





The
Company has assessed the carrying values of its mineral properties as a result
of the market downturn.  Based on current and expected metals prices
and cost structures, management has determined that the values of the Company’s
mineral properties have not been impaired at this time. However, should current
market conditions and commodity prices worsen and/or persist for a prolonged
period of time, an impairment of mineral properties may be
required.





The
Company carries on its primary business activities in Mexico and to date this
jurisdiction has been stable and favourable.  However there have
recently been reports of increased political unrest, police and military
enforcement action against drug cartels and a corresponding increase in violent
crime in Mexico.  The Company’s interests have not been affected by
such events to date.   The Company’s interests could be adversely
affected by risks and uncertainties beyond its control.  These risks
and uncertainties include, but are not limited to, exchange controls, currency
fluctuations, changes in taxation laws or policies, changes in mining or
investment policies, shifts in political attitude, terrorism, hostage taking,
military repression, expropriation and nationalization, labour unrest, or the
risk of civil unrest or civil war.  Operations could also be
negatively affected by changes in various governmental regulations such as,
environmental legislation, land use, land claims of local people, water use and
mine safety legislation.





Risk
Factors




The
Company’s securities should be considered a highly speculative investment and
investors should carefully consider all of the information disclosed in the
Company’s Canadian and U.S. regulatory filings prior to making an investment in
the Company. Without limiting the foregoing, the following risk factors should
be given special consideration when evaluating an investment in the Company’s
securities.




General




1.
            The Company has a lack of cash
      flow, which may affect its ability to continue as a going
      concern.  The Company’s activities are currently funded
      from its cash and cash equivalents, which are the proceeds of previous
      equity financings.




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, employees and consultants, whose contributions to
      immediate and future operations of the Company are of central
      importance.  The Company relies on its President & CEO, Dan
      MacInnis, and its other officers, most 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, formerly an arm’s length consultant, is 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 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.




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. Most of the Company’s directors and officers do not devote
      their full time to the affairs of the Company. All of the directors and
      some of the 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.
            Minority Ownership of Minera
      Juanicipio. The terms of the Shareholders Agreement governing the
      operation of Minera Juanicipio provides effective control to Fresnillo
      over many of the activities of Minera Juanicipio since it holds a majority
      (56%) of the shares of Minera Juanicipio. While 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 Company is a
      minority shareholder of Minera Juanicipio and is dependent on Fresnillo to
      manage the affairs of Minera Juanicipio and to do so in compliance with
      the Shareholders Agreement, the Articles of Minera Juanicipio and
      applicable law.




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, may lose its effective veto power over
certain decisions and ultimately could be diluted out of Minera Juanicipio
altogether.  Fresnillo is a much larger entity with far greater access
to financial resources than the Company.




10.
            Mineral exploration is a highly
      competitive industry.  The mineral exploration 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 mineral properties on terms it considers
      to be acceptable.  The inability of the Company to acquire
      attractive mineral properties would result in difficulties in it obtaining
      future financing and profitable
operations.




11.
            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 and there are no known commercial quantities of
      minerals on such properties.  Most exploration projects do not
      result in the discovery of commercially mineable deposits of ores.
      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. The probability of an individual prospect ever having
      reserves is extremely remote. If a property does not contain any reserves,
      any funds spent on exploration of that property 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.




12.
            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 “Description of the Business –
      General - Carrying on Business in
Mexico”.




13.
            There is no guarantee that
      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.




14.
            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 “Description
      of the Business – General – Carrying on Business in Mexico – Environmental
      Regulation”.




15.
            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.




16.
            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.




17.
            None of the properties in which
      the Company has an interest has any mineral reserves.Currently,
      there are no mineral reserves for any of the properties in which the
      Company has an interest.




Risk
Factors Relating to Mineral Exploration Generally




18.
            Mineral exploration and
      development is a speculative business and most exploration projects do not
      result in the discovery of commercially mineable
      deposits.  Exploration for minerals 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. The failure to find an economic mineral deposit on
      any of the Company’s exploration concessions will have a negative effect
      on the Company.




19.
            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 negative effect on the Company’s financial
      position.




20.
            Mineral prices and
      marketability fluctuate and any decline in mineral prices may have a
      negative effect on the Company.Mineral prices,
      including gold and silver prices, have fluctuated widely in recent
      years.  The marketability and price of any minerals that may be
      acquired by the Company may 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 many other aspects of the mining
      business.  Declines in mineral prices may have a negative effect
      on the Company.





21.
            Surface
      access.  The majority of the Company’s mineral properties
      are located in remote and relatively uninhabited areas.  Some
      properties, like Juanicipio and Lagartos, are near towns and other
      habitations, but 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 residential 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 favourable terms or at all.  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 may result in
      dilution to the Company’s shareholders. Further, the Company, from time to
      time, may issue Common Shares to earn its interests in properties. Such
      property share issuances may 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.  In
      recent years, the securities markets in the United States and Canada have
      experienced a high level of price and volume volatility, and the market
      price of many companies, particularly those considered exploration or
      development stage companies, have experienced wide fluctuations in price
      which have not necessarily been related to the operating performance,
      underlying asset values or prospects of such companies. In particular, the
      per share price of the Company’s common shares on the TSX fluctuated
      between a high of $14.09 and a low of $3.52 and on the NYSE Alternext US
      (formerly the American Stock Exchange) between a high of US$14.25 and a
      low of US$3.12 within the twelve month period preceding the date of this
      Annual Information Form. There can be no assurance that contined
      fluctuations in price will not
occur.




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, or at all.  There can be no assurance that the Company
      will continue to meet the listing requirements of the TSX or the NYSE
      Alternext US 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 U.S. tax
      consequences, shareholders and prospective US holders of the Company’s
      Common Shares are 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.




30.
            The Company has outstanding
      stock options which, if exercised, could cause dilution to existing
      shareholders.At March 13, 2009, the Company had
      3,257,407 stock options issued and outstanding with a weighted average
      exercise price of $6.59 per share. Stock options are likely to be
      exercised when the market price of the Company’s common shares exceeds the
      exercise price of such stock options.  The exercise of such
      stock options and the subsequent resale of such common shares in the
      public market could adversely affect the prevailing market price and the
      Company’s ability to raise equity capital in the future at a time and
      price which it deems appropriate. The Company may also enter into
      commitments in the future which would require the issuance of additional
      common shares and the Company may grant additional share purchase warrants
      and stock options.  Any share issuances from the Company’s
      treasury will result in immediate dilution to existing shareholders
      percentage interest in the Company.






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 Minera
Juanicipio, a joint venture company owned 44% by MAG and 56% by Fresnillo, has
acquired some surface lands overlying the Valdecañas and Juanicipio
Veins.





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, Lagartos 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 semi-annual taxes and
file an annual work report. If the Company files for an extension before the
term of the concession expires an additional 50-year extension of the mining
concession 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 affecting a holding of 44% indirectly by the Company and 56% by
Fresnillo.





Claim
                                File
                                
                                Title
                                Start
      Date
                                Expiry
      Date
                                Area
                                Rights
      to Pay(Hectares)
                                Jan-09(PESOS)MINERA
      LOS LAGARTOS S.A. DE C.VZACATECAS
      PROJECTLAGARTOS  I
                                93/
                                26834
                                220667
                                9-Sep-2003
                                8-Sep-2050
                                11,206.7018
                                176,170LAGARTOS
      II
                                93/
                                26857
                                221035
                                13-Nov-2003
                                12-Nov-2050
                                3,720.0000
                                58,479LAGARTOS
      III  (REDUCCION)
                                93/
                                26865
                                221355
                                27-Jan-2004
                                26-Jan-2052
                                36,995.1738
                                189,368LAGARTOS
      IV (REDUCCION)
                                93/
                                26898
                                221805
                                26-Mar-2004
                                25-Mar-2052
                                63,184.3347
                                420,645LAGARTOS  V
                                93/
                                26951
                                222761
                                27-Aug-2004
                                26-Aug-2052
                                7,092.6638
                                AbandonedLAGARTOS  VI
                                93/
                                27344
                                228340
                                8-Nov-2006
                                7-Nov-2056
                                3,638.0752
                                27,650LAGARTOS  VII
                                93/
                                27345
                                224097
                                31-Mar-2005
                                30-Mar-2054
                                234.0000
                                AbandonedLAGARTOS  VIII
                                93/
                                27346
                                224098
                                31-Mar-2005
                                30-Mar-2054
                                540.0000
                                AbandonedLAGARTOS  9
                                93/
                                27391
                                225009
                                6-Jul-2005
                                5-Jul-2054
                                8,000.0000
                                AbandonedLAGARTOS
      X
                                93/
                                27998
                                228253
                                17-Oct-2006
                                16-Oct-2056
                                22,767.9220
                                173,037LAGARTOS
      XI
                                93/
                                27611
                                In
      progress
                                
                                363.6348LAGARTOS
      XII
                                93/
                                28006
                                228569
                                8-Dec-2006
                                7-Dec-2056
                                2,854.9938
                                21,698LAGARTOS
      XIII
                                93/
                                27927
                                228633
                                15-Dec-2006
                                14-Dec-2056
                                12.5392
                                96LAGARTOS
      XIV
                                93/
                                28056
                                228767
                                23-Jan-2007
                                22-Jan-2057
                                719.7292
                                5,470GEMINIS
      XIII
                                93/
                                27357
                                224581
                                20-May-2005
                                19-May-2005
                                86.6423
                                1,363GEMINIS
      XXIII
                                93/
                                27788
                                227962
                                15-Sep-2006
                                14-Sep-2056
                                94.3131
                                1,483CUMBRES
      I
                                93/
                                27360
                                224582
                                20-May-2005
                                19-May-2055
                                331.6280
                                5,214SAN
      MARTINITO
                                321.1/8
                                250
                                196156
                                16-Jul-1993
                                15-Jul-2043
                                12.0000
                                1,336LA
      CONSTANCIA
                                8/1.3
                                1992
                                196319
                                16-Jul-1993
                                15-Jul-2043
                                25.9648
                                2,890PAULINA
                                8/1.3
                                1157
                                217496
                                16-Jul-2002
                                15-Jul-2052
                                7.6958
                                244LA
      CAMOCHA 2
                                93/
                                27397
                                224841
                                14-Jun-2005
                                13-Jun-2055
                                8.3405
                                132LAS
      MARIAS
                                93/
                                25713
                                215229
                                14-Feb-2002
                                13-Feb-2052
                                73.5433
                                2,326SAN
      MIGUEL
                                93/
                                25598
                                215509
                                22-Feb-2002
                                21-Feb-2052
                                16.1263
                                510SAN
      FERNANDO
                                93/
                                11369
                                162437
                                12-Jun-1978
                                
                                20.6911
                                2,303AMPL.
      A SAN FERNANDO
                                93/
                                11501
                                162400
                                12-Jan-1978
                                11-Jan-2028
                                65.2211
                                7,258PREDILECTA
                                93/
                                9747
                                164960
                                3-Aug-1979
                                
                                32.0000
                                3,561EL
      GRANO DE ORO
                                93/
                                26833
                                221128
                                2-Dec-2003
                                1-Dec-2053
                                14.0000
                                221LAG
                                93/
                                27992
                                In
      progress
                                
                                2,468.7166LAG
      F-1
                                93/
                                27992
                                In
      progress
                                
                                387.2650LAG
      F-2
                                93/
                                27992
                                In
      progress
                                
                                1,813.5911LAG
      F-3
                                93/
                                27992
                                In
      progress
                                
                                6.4567LAG
      F-4
                                93/
                                27992
                                In
      progress
                                
                                8.4830LAG
      F-5
                                93/
                                27992
                                In
      progress
                                
                                1.2925LAG
      F-6
                                93/
                                27992
                                In
      progress
                                
                                8.8846LAG
      F-7
                                93/
                                27992
                                In
      progress
                                
                                19.7332LAG
      F-8
                                93/
                                27992
                                In
      progress
                                
                                3.8895LAG
      F-9
                                93/
                                27992
                                In
      progress
                                
                                67.0928LAGF-10
                                93/
                                27992
                                In
      progress
                                
                                95.6858LAG
      F-11
                                93/
                                27992
                                In
      progress
                                
                                1.3324LAG
      F-12
                                93/
                                27992
                                In
      progress
                                
                                1.0981LAG
      F-13
                                93/
                                27992
                                In
      progress
                                
                                0.9569LAG
      5
                                93/
                                28235
                                230023
                                10-Jul-2007
                                9-Jul-2057
                                8,747.6164
                                44,438TOTAL:
                                1,145,892JUANICIPIO
      PROJECTJUANICIPIO
      1
                                8/
                                1-1706
                                226339
                                13-Dec-2005
                                12-Dec-2055
                                7,679.2106
                                58,362TOTAL:
                                58,362BATOPILAS
      PROJECTDON
      FIPPI
                                1/1/
                                1358
                                222629
                                3-Aug-2004
                                2-Aug-2054
                                3,160.5780
                                49,685DON
      FIPPI FRAC. 1
                                10/
                                22430
                                In
      progress
                                
                                12.9315DON
      FIPPI 2
                                16/
                                30103
                                215474
                                22-Feb-2002
                                21-Feb-2048
                                152.0234
                                4,807DON
      FIPPI 3
                                16/
                                30953
                                215481
                                22-Feb-2002
                                21-Feb-2048
                                56.0000
                                1,771DON
      FIPPI 4
                                16/
                                30952
                                217251
                                2-Jul-2002
                                1-Jul-2048
                                10.0000
                                317SANTO
      DOMINGO
                                16/
                                29872
                                214671
                                30-Oct-2001
                                29-Oct-2046
                                26.6062
                                842SAN
      MARTIN
                                16/
                                29873
                                214672
                                30-Oct-2001
                                29-Oct-2046
                                2.1536
                                70PASTRANA
                                16/
                                31077
                                217467
                                16-Jul-2002
                                15-Jul-2048
                                82.6803
                                2,615ANEXO
      A SAN MARTIN
                                16/
                                31801
                                220044
                                3-Jun-2003
                                2-Jun-2049
                                6.7443
                                214TESCALAMA
                                16/
                                32058
                                220927
                                28-Oct-2003
                                27-Oct-2049
                                12.0000
                                189ROSALINDA
                                16/
                                32057
                                220926
                                28-Oct-2003
                                27-Oct-2049
                                25.6222
                                403TOTAL:
                                60,913GUIGUI
      PROJECTGUIGUI
                                1-1.3/
                                938
                                217493
                                16-Jul-2002
                                15-Jul-2052
                                4,009.0334
                                126,766GUIGUI
      2
                                16/
                                27991
                                219640
                                28-Mar-2003
                                27-Mar-2050
                                489.1300
                                15,467GUIGUI
      3 FRAC. 1
                                16/
                                29944
                                219648
                                28-Mar-2003
                                27-Mar-2050
                                17.0200
                                539GUIGUI
      3 FRAC. 2
                                16/
                                29944
                                219649
                                28-Mar-2003
                                27-Mar-2050
                                1.5200
                                49GUIGUI
      4
                                16/
                                30320
                                219650
                                28-Mar-2003
                                27-Mar-2050
                                3.0000
                                95EL
      FAISAN
                                1/1.3
                                1182
                                214631
                                26-Oct-2001
                                25-Oct-2051
                                16.0000
                                506LOS
      ARENALES
                                1/1.3
                                1011
                                214622
                                26-Oct-2001
                                25-Oct-2051
                                18.0000
                                570TOTAL:
                                143,992CINCO
      DE MAYO PROJECTDON
      JOSE
                                1
                                1300
                                222251
                                22-Jun-2004
                                21-Jun-2054
                                1,640.0000
                                25,781DON
      JOSE II
                                1
                                1391
                                207171
                                8-May-1998
                                7-May-2048
                                2,462.9828
                                CancelledDON
      JOSE III
                                1
                                1492
                                224331
                                26-Apr-2005
                                25-Apr-2055
                                78.7872
                                1,239DON
      JOSE III FRAC. 2
                                16/
                                24502
                                209293
                                30-Mar-1999
                                29-Mar-2049
                                32.7879
                                3,649DON
      JOSE IV        T-212524 PASO
      A
                                16/
                                24773
                                218474
                                31-Oct-2000
                                30-Oct-2050
                                348.5547
                                22,036DON
      JOSE V
                                16/
                                24789
                                212878
                                13-Feb-2001
                                12-Feb-2046
                                47.7166
                                3,017DON
      ROBERTO
                                1
                                1462
                                224252
                                22-Apr-2005
                                21-Apr-2055
                                453.4431
                                7,129CINCO
      DE MAYO
                                16/
                                31459
                                216086
                                9-Apr-2002
                                8-Apr-2048
                                65.0000
                                2,056DANIEL
                                16/
                                33396
                                229222
                                27-Mar-2007
                                26-Mar-2057
                                1,653.9137
                                12,570DANIEL
      1
                                16/
                                34715
                                229249
                                28-Mar-2007
                                27-Mar-2057
                                4.8630
                                37INDEPENDENCIA
                                16/
                                34753
                                229744
                                13-Jun-2007
                                12-Jun-2057
                                17,096.9082
                                129,937LA
      MARY
                                16/
                                35303
                                230455
                                4-Sep-2007
                                3-Sep-2057
                                12.0000
                                61LA
      AMISTAD
                                16/
                                34983
                                230454
                                4-Sep-2007
                                3-Sep-2057
                                11.4935
                                59EL
      PLOMO
                                16/
                                35374
                                230475
                                6-Sep-2007
                                5-Sep-2057
                                20.0000
                                102LA
      FORTUNA
                                16/
                                34744
                                228746
                                18-Jan-2007
                                17-Jan-2057
                                132.9008
                                1,010LA
      SINFOROSA
                                16/
                                34746
                                228747
                                18-Jan-2007
                                17-Jan-2057
                                192.5727
                                1,464EL
      CHINACATE
                                16/
                                34714
                                228723
                                17-Jan-2007
                                16-Jan-2057
                                651.9335
                                4,955TOTAL:
                                215,102SIERRA
      DE RAMIREZ PROJECTBUENOS
      AIRES
                                25/
                                31061
                                220223
                                25-Jun-2003
                                24-Jun-2050
                                4,443.4510
                                140,502BUENOS
      AIRES 2 (REDUCCION)
                                25/
                                31492
                                224623
                                25-May-2005
                                24-May-2055
                                11,044.0597
                                102,370BUENOS
      AIRES 3
                                25/
                                32816
                                228842
                                9-Feb-2007
                                8-Feb-2057
                                10.0000
                                76BUENOS
      AIRES 4
                                25/
                                32867
                                229714
                                8-Jun-2007
                                7-Jun-2057
                                62.0644
                                472LA
      MIA
                                2/1.3
                                2081
                                218361
                                5-Nov-2002
                                4-Nov-2052
                                7.9641
                                252LAS
      CUMBRES
                                9/
                                10299
                                147709
                                18-May-1967
                                17-May-2017
                                8.2731
                                921EL
      TRIUNFO
                                9/
                                5853
                                170047
                                15-Mar-1982
                                14-May-2032
                                7.8098
                                870LA
      AZTECA
                                9/
                                2125
                                167702
                                5-Dec-1980
                                4-Dec-2030
                                6.0000
                                668AMPL.
      DEL FUNDADOR
                                9/
                                12803
                                163903
                                14-Dec-1978
                                13-Dec-2028
                                11.7929
                                1,313EL
      CONSUELO
                                9/
                                9590
                                167701
                                5-Dec-1980
                                4-Dec-2030
                                12.0000
                                1,336PLATEROS
                                9/
                                56
                                177825
                                29-Apr-1986
                                28-Apr-2011
                                2.0000
                                223LA
      PUERTA
                                9/
                                10878
                                180619
                                13-Jul-1987
                                12-Jul-2037
                                3.0000
                                334SAN
      PABLO
                                9/
                                1099
                                180584
                                13-Jul-1987
                                12-Jul-2037
                                4.0000
                                446AREA
      "EL PAVO"HERCULES
                                9/
                                11876
                                164365
                                7-May-1979
                                6-May-2029
                                14.8928
                                1,658UNIFICACION
      SANTA RITA
                                321.42
                                959
                                170680
                                11-Jun-1982
                                10-Jun-2032
                                24.3516
                                2,710LA
      CIMA
                                EXT
                                87
                                75632
                                1-Jan-1961
                                31-Dec-2014
                                9.7032
                                1,080SAN
      ELOY
                                9/
                                2734
                                114713
                                10-Jun-1950
                                9-Jun-2000*
                                18.9060
                                2,104SAN
      ELIGIO
                                25/
                                2148
                                104099
                                25-Jan-1994
                                24-Jan-2011
                                3.0000
                                334EL
      TUNEL
                                25/
                                2151
                                105012
                                28-Mar-1944
                                27-Mar-2011
                                6.4504
                                718UNIFICACION
      SAN PEDRO
                                *
                                958
                                170679
                                11-Jun-1982
                                10-Jun-2032
                                48.0242
                                5,344AMPL.
      DE LA ESCUADRA
                                9/
                                459
                                82608
                                27-Jan-1936
                                26-Jan-2011
                                11.0000
                                1,224UNIFICACION
      LA GARIFA
                                *
                                960
                                170596
                                2-Jun-1982
                                1-Jun-2032
                                52.1095
                                5,799SEGUNDA
      AMPLIACION DE LA ESCUADRA
                                25/
                                1
                                83962
                                25-Jun-1936
                                24-Jun-2011
                                4.1783
                                465TERCERA
      AMPLIACION DE LA ESCUADRA
                                25/
                                1
                                88105
                                24-Jan-1937
                                25-Nov-1987*
                                22.5652
                                2,511CUARTA
      AMPLIACION DE LA ESCUADRA
                                *
                                *
                                115235
                                *
                                *
                                4.0000
                                446LA
      VIA
                                25/
                                2147
                                104098
                                25-Jan-1961
                                24-Jan-2011
                                21.0000
                                2,337LOS
      COLORADOS
                                25/
                                3161
                                115041
                                5-Jul-1950
                                4-Jul-2000
                                40.0000
                                4,451AMPLIACION
      NORTE DE VERDUN
                                25/
                                1
                                111892
                                23-Nov-1948
                                22-Nov-2011
                                4.9282
                                549SAN
      LUIS
                                7/
                                8057
                                139973
                                21-Oct-1959
                                20-Oct-2011
                                8.0000
                                891AMPLIACION
      DE VERDUN
                                2/
                                322.2-594
                                73731
                                11-May-1932
                                2-Jan-1982*
                                5.2926
                                589ARTURO
                                25/
                                2895
                                113690
                                9-Sep-1949
                                8-Sep-1999*
                                8.8462
                                985PROVIDENCIA
                                *
                                *
                                4118
                                *
                                *
                                3.0000
                                334EL
      CAMBIO
                                *
                                *
                                4996
                                *
                                *
                                13.6137
                                1,515LA
      ESCUADRA
                                *
                                *
                                81507
                                *
                                *
                                12.3351
                                1,373GUADIANA
                                *
                                *
                                98321
                                *
                                *
                                8.3278
                                927UNIFICACION
      SAN AGUSTIN
                                321.42/
                                957
                                170595
                                2-Jun-1982
                                1-Jun-2032
                                67.5088
                                7,512LA
      CHAPA
                                9/
                                1953
                                177824
                                29-Apr-1986
                                28-Apr-2036
                                20.6736
                                2,301LA
      LLAVE
                                9/
                                1952
                                103722
                                22-Dec-1943
                                21-Dec-2011
                                8.4385
                                939TOTAL:
                                298,879LA
      PICUCHA PROJECTLA
      PICUCHA
                                16/
                                32820
                                225522
                                20-Sep-2005
                                19-Sep-2011
                                1,665.0892
                                12,655EL
      APACHE
                                16/
                                25690
                                212632
                                17-Nov-2000
                                16-Nov-2050
                                61.0000
                                3,857LA
      PICUCHA 2
                                16/
                                35906
                                In
      progress
                                
                                6,937.1842TOTAL:
                                16,512LORENA
      PROJECTLA
      LORENA
                                31/
                                9397
                                229687
                                6-Jun-2007
                                5-Jun-2057
                                19,856.0470
                                150,906LORENITA
      (REDUCCION)
                                31/
                                9424
                                232085
                                13-Jun-2008
                                12-Jun-2058
                                86,034.6063
                                50,747TOTAL:
                                201,653NUEVO
      MUNDO PROJECTNUEVO
      MUNDO II
                                67/
                                21304
                                231949
                                23-May-2008
                                22-May-2058
                                3,682.2300
                                18,706NUEVO
      MUNDO II FRACCION I (REDUCCION)
                                67/
                                21304
                                231950
                                23-May-2008
                                22-May-2058
                                9,672.3490
                                40,922CAMINO
      DURO
                                93/
                                28477
                                232243
                                8-Jul-2008
                                7-Jul-2058
                                19,760.0000
                                100,381AMPL.
      NUEVO MUNDO II
                                67/
                                21318
                                In
      progressTOTAL:
                                160,009GRAND
      TOTAL:
                                2,301,314


*
Applications are in process to renew these titles.






Juanicipio
Property





The
information contained herein is prepared by the Company and contains summarized
information drawn from its own results and news releases as well as from certain
technical reports.  Readers are encouraged to read the following
technical reports and documents, from which portions of the discussions below in
this section are derived:





1.
            Filed
      on SEDAR April 2, 2003: a NI 43-101 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 NI 43-101 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.








3.
            Filed
      on SEDAR August 1, 2008: a NI 43-101 technical
      report, dated July 25, 2008, entitled “Mineral Resource Estimation,
      Valdecañas Silver-Gold Project, Zacatecas State, Mexico” prepared by
      Qualified Persons Dominic Chartier, P.Geo, Consulting Geologist, Glen
      Cole, P.Geo, Principal Resource Geologist and Jean-Francois Couture, Ph.D,
      P.Geo, Principal Geologist of SRK Consulting (CANADA) Inc. of Toronto,
      Ontario.





4.
            News
      releases dated February 24, 2009 and March 4, 2009 – Independent Resource
      Estimate, filed on SEDAR and pending NI 43-101 technical report (to be
      filed on SEDAR before April 10, 2009), prepared by Qualified Persons
      William E. Roscoe, PH.D, P.Eng. & David Ross, P.Geo, of Scott Wilson
      Roscoe Postle Associates Inc.







Introduction





The
Juanicipio property covers approximately 7,679 hectare (18,967 acres) and 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 Fresnillo.  The Juanicipio property lies 6 kilometres west of the
principal production head-frame of the Fresnillo Mine and 2.5 kilometres west of
the Saucito Vein, currently under preproduction construction as part of
Fresnillo’s regional plan.





Juanicipio: Background of a
Significant Silver Discovery





Juanicipio
is the most important project in the Company’s portfolio of
properties.  The Juanicipio property is host to a significant
discovery of a high grade silver, gold vein.  The Valdecañas Vein was
discovered in December of 2005 and continues to undergo an intensive drill
campaign to delineate its full potential. Five rigs were operating on the
Valdecañas Vein at the end of 2008 to complete a planned 28,000 metre drill
program for 2008. This program was focused on defining the Valdecañas Vein on a
100 by 100 metre grid, with the goal of moving as much of the inferred resource
as possible to an indicated resource by early 2009.





Recent
results continue to add intercepts in areas beyond previously published resource
limits and also confirm the continuity of the main vein and the mineralized zone
within the vein. The western part of the Valdecañas Vein remains open down-dip
and the eastern part remains open up-dip. Drilling also encountered good grade
and continuity in hanging wall and footwall veins intersected outside the main
Valdecañas Vein.





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.




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, which effective July 1,
2005 was granted an option to earn a 56% interest in the Juanicipio property for
conducting staged exploration expenditures totalling US$5,000,000 over four
years and purchasing US$1,000,000 of securities of the Company.




Peñoles
made a significant epithermal vein discovery at depth called the Valdecañas
vein, carrying high grade values of silver, gold, lead and zinc.  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 Fresnillo holds a 56% interest in Minera
Juanicipio.  Fresnillo is the operator of the project and both parties
fund pro-rata all exploration and development programs.




Project Description and
Location




The
Juanicipio property is located in the Fresnillo District, Zacatecas, Mexico, and
approximately 6 kilometres west of the city of Fresnillo (see Figure
1).




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.












Figure 1
- Juanicipio property, Zacatecas State (roads in black, December 31,
2008)




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.  There is now a network of dirt roads providing ready access
to most of the northeastern corner of the Juanicipio claim.




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.




By May
of, 2007, Peñoles had met all of the earn-in requirements of the
Agreement.




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 governed by a shareholders agreement dated October 10, 2005
between Lagartos and Peñoles (subsequently assigned to
Fresnillo).  Under the Shareholders Agreement each shareholder is to
provide funding to Minera Juanicipio pro rata to its interest in Minera
Juanicipio, with Peñoles (now Fresnillo) contributing 56% and MAG, through
Lagartos, contributing 44% respectively. Fresnillo has effective control 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.





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 a payment for the Company’s 44%
share of exploration costs incurred by Peñoles in the period subsequent to the
completion of their earn-in earlier in 2007. In 2008, MAG invested a further
25.08 million pesos ($2.405 million) in Minera Juanicipio.




In March
2008, Peñoles’ interest in Minera Juanicipio was acquired by Fresnillo, which
subsequently completed its initial public offering, with its common shares being
listed on the London Stock Exchange.  To the knowledge of MAG,
approximately 77% of the common shares of Fresnillo are owned by Peñoles or its
affiliates.




As at
December 31, 2008, MAG has invested a total of $9,187,983 on the Juanicipio
property and contributions to Minera Juanicipio.  A cumulative foreign
currency translation adjustment of ($1,021,236) and a net investment of
$8,166,747 have been recorded by MAG at December 31, 2008.





At
December 31, 2008 the assets of Minera Juanicipio consisted of cash and short
term investments in the amount of 18.67 million pesos ($1.65 million), value
added taxes (“IVA”) receivables in the amount of 7.74 million pesos ($0.68
million) and mineral and surface rights at a deemed value of 175.35 million
pesos ($15.52 million).  Payables to Peñoles for exploration work
amounted to 0.66 million pesos ($58,800) while shareholders equity was 201.09
million pesos ($17.80 million).




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




2008
Resource Estimate




On June
18, 2008, Minera Juanicipio announced a resource estimate for the Valdecañas
Vein (“Mineral Resource Statement, Valdecañas Silver Deposit, Zacatecas, Mexico,
SRK Consulting, December 31, 2007”).  The Company later filed a NI 43-101 technical report,
dated July 25, 2008, entitled “Mineral Resource Estimation, Valdecañas
Silver-Gold Project, Zacatecas State, Mexico” prepared by Qualified Persons
Dominic Chartier, P.Geo, Consulting Geologist, Glen Cole, P.Geo, Principal
Resource Geologist and Jean-Francois Couture, Ph.D, P.Geo, Principal Geologist
of SRK Consulting (CANADA) Inc. of Toronto, Ontario, in support of this resource
estimate.  The total inferred resource estimate on a 100% basis was
237.8 million ounces of silver.  In addition to the silver, the
resource estimate also contained inferred resources of 480,000 ounces of gold
and almost 1 billion pounds of combined lead and zinc (457,700
tonnes).




2009
Independent Resource Estimate




On
February 24, 2009 the Company announced an updated Valdecañas Vein resource
estimate which was restated on March 4, 2009 to correct an error made by the
consulting firm that prepared the earlier February 24th
estimate (as restated, that “2009 Independent Resources
Estimate”).  The 2009 Independent Resource Estimate that was prepared
by Scott Wilson Roscoe Postle Associates (“Scott Wilson RPA”) confirms
Valdecañas as a world class deposit, with the first Indicated Resource for the
Valdecañas Vein (including the Hanging Wall Vein) of 2.95 million tonnes of 879
grams per tonne (g/t) silver, 2.22 g/t gold, 2.39% lead and 4.15%
zinc.  The Inferred Resource (Valdecañas, Footwall and Hanging Wall
Veins and the Stockwork Zone) reports 7.21 million tonnes of 458 grams g/t
silver, 1.54 g/t gold, 1.89% lead and 3.14% zinc.




The
following table presents the 2009 Independent Resource Estimate announced March
4, 2009 for Minera Juanicipio’s Valdecañas, Footwall, and Hanging Wall Veins and
the Stockwork Zone.




Minera
Juanicipio is owned 44% by a subsidiary of MAG and 56% by
Fresnillo.


Resource
      Category and Zone
            Tonnes
              millions
            Ag
      g/t
            Au
      g/t
            Pb
      %
            Zn
      %
            NSR
              US$/
      tonne
            Contained
      MetalAg
      M
              oz
            Au
      K
              oz
            Pb
      M
              lbs
            Zn
      M
              lbsIndicatedValdecañas
      Vein
            2.54
            900
            2.10
            2.56
            4.42
            368
            73
            171
            144
            247Hanging
      Wall Vein
            0.41
            750
            2.94
            1.29
            2.46
            317
            10
            38
            12
            22Total
      Indicated
            2.95
            879
            2.22
            2.39
            4.15
            361
            83
            210
            155
            269InferredValdecañas
      Vein
            5.81
            523
            1.56
            2.19
            3.61
            228
            98
            292
            281
            463Footwall
      Vein
            0.48
            339
            1.43
            0.60
            0.64
            142
            5
            22
            6
            7Hanging
      Wall Vein
            0.11
            549
            0.43
            0.64
            1.48
            199
            2
            2
            2
            4Stockwork
      Zone
            0.80
            45
            1.57
            0.67
            1.39
            52
            1
            41
            12
            25Total
      Inferred
            7.21
            458
            1.54
            1.89
            3.14
            202
            106
            356
            301
            498




Notes:


(1)         CIM
Definition Standards have been followed for classification of mineral
resources.




(2)
            Mineral
      resource blocks are within wireframes constructed with a minimum true
      thickness of 1.5 metres and a minimum NSR value of US$50 per tonne, which
      is the effective cut-off. All blocks within the wireframes are reported as
      mineral resource. Approximately 2% of the indicated tonnes and 6% of the
      inferred tonnes have values less than US$50 per tonnes but are included
      for continuity. Much of the Stockwork Zone has NSR values less than US$50
      per tonne, but it is included as mineral resource because it represents
      incremental tonnage adjacent to the Valdecañas and Footwall
      Veins.




(3)
            NSR
      values are calculated in US$ using factors of $0.33 per g/t Ag, $17.04 per
      g/t Au, $4.01 per % Pb and $5.57 per % Zn. These factors are based on
      metal prices of US$12.50/oz Ag, US$800/oz Au, $0.45/lb Pb and $0.70/lb Zn
      and estimated recoveries and smelter
terms.




(4)
            The
      mineral resource estimate uses drill hole data available as of January 29,
      2009.




(5)
            Mineral
      resources are not mineral reserves and do not have demonstrated economic
      viability. All figures are rounded to reflect the relative accuracy of the
      estimates; as a result column totals may not
  add.




Scott
Wilson RPA, estimated the mineral resources for the Juanicipio property using
results of 52 diamond drill holes available as of January 29,
2009.  3D wireframe models were constructed for the main Valdecañas
Vein, the Footwall (also known as Desprendido) Vein, a newly interpreted Hanging
Wall Vein, and a newly interpreted Stockwall Zone using a minimum grade of US$50
per tonne and minimum true thickness of 1.5 metres.  For the main
Valdecañas Vein, wireframes were extended up and down dip approximately 40 to 60
metres from the nearest drill holes with greater than US$50/tonne
NSR.  A wireframe was not constructed for the Encino Vein since it is
represented by a single drill hole to date.  Silver, gold, lead and
zinc grades were interpolated into blocks with dimensions of 25 metres (along
strike) by 10 metres by 10 metres using an inverse distance cubed
algorithm.    Block tonnages were derived using average
density factors for each zone which are based on numerous specific gravity
determinations.  The factors are 2.90 t/m3for the
main Valdecañas Vein, 2.80 t/m3for the
Footwall Vein, 2.70 t/m3 for the
Hanging Wall Vein, and 2.70 t/m3 for the
Stockwork Zone.





The total
contained metals in the Indicated Resource are 83 million ounces of silver,
210,000 ounces of gold and 155 million pounds of lead and 269 million pounds of
zinc. The Inferred Resources contain an additional 106 million ounces of silver,
356,000 ounces of gold and 301 million pounds of lead and 498 million pounds of
zinc.





This
discussion uses the terms "Indicated Resources" and “Inferred Resources”. See
“Cautionary Note to Investors Concerning Estimates of Inferred Resources” and
“Cautionary Note to Investor Concerning Estimates of Indicated Resources” on
page 5 of this AIF.  Investors are cautioned not to assume
part or all of any “Indicated Resource” will ever be converted into reserves or
that part or all of an “Inferred Resource” exists, or is economically or legally
mineable.





Qualified
Person


The
mineral resources in the 2009 Independent Resource Estimate for the Juanicipio
property disclosed in this document have been estimated by Dr. William Roscoe,
P.Eng and Mr. David Ross, P.Geo., both employees of Scott Wilson RPA and
independent of MAG.  By virtue of their education and relevant
experience Dr. Roscoe and Mr. Ross are "Qualified Persons" for the purpose of
NI
43-101.  The mineral resources have been classified in
accordance with CIM Definition Standards for Mineral Resources and Mineral
Reserves (December 2005).  Dr. Roscoe, P.Eng., and Mr. Ross, P.Geo.
have read and approved the contents of this document as it pertains to the
disclosed mineral resource estimate.




Past Exploration
Programs





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).





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 approximately 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.





At the
end of 2007 the vein averaged 5.8 metres wide, with a down dip length in excess
of 400 metres and was 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 was 1,292
g/t silver, 2.50 g/t gold and 8.7 % combined lead and zinc.




Minera
Juanicipio also purchased surface rights over the northeastern corner of the
Juanicipio claim, which combined with purchases from 2006 and 2007 give
uninterrupted coverage of 4.5 kilometres of the strike projection of the
Valdecañas Vein from east to west and over 2.5 kilometres of surface rights
along the strike projection of the Juanicipio Vein.





These
land purchases became assets of Minera Juanicipio, which was established to own
and operate the Juanicipio property.





2008 Exploration Program
Results





A total
26,050 metres of diamond drilling was completed on the Valdecañas Vein and 2,810
metres on the Juanicipio Vein in 2008. The drill program continued to yield high
grade returns.





Assay
results for holes J1-07-GY and GZ were released at the end of February 2008.
These holes were on the most westerly section G and were targeted to intersect
the Valdecañas Vein near the top of the high grade gold silver
zone.  Hole GZ intersected 1.4 metres (true width) of 769 grams per
tonne (g/t) (22.4 ounces per ton (opt)) silver, 2.11 g/t gold with minimal
values of lead and zinc.  Hole GY intersected 0.7 metres of 121 g/t
(3.5 opt) silver and 0.61 g/t gold. These intersections combined to show the
high grade silver gold zone to have a vertical height of almost 500 metres (see
table below).





Mid-April
2008 the joint venture announced high grade results from drilling on the
Juanicipio Vein, Hole 18P intersecting 4,100 g/t (119.5 opt) silver over 0.60
metres, with 1.47 g/t gold, 2.02% lead and 4.07% zinc.  Hole 17P
intersected 130 g/t (3.8 opt) silver over 0.6 metres, with 0.34 g/t gold, 0.06%
lead and 0.08% zinc.  Hole 18P intersected the Juanicipio Vein 110
metres west and 80 metres vertically below Hole JI-03-01 (2.0 metres of 689 g/t
silver and 11.43 g/t gold, 40% core recovery) and 115 metres west and 45 metres
above Hole 17P. Hole 17P intersected the Juanicipio Vein on the same section as
and 110 metres vertically below Hole JI-03-01. The results of Holes 17P and 18P
confirmed the continuity and the presence of a second high grade vein on the
Juanicipio property.





On June
19, 2008 Minera Juanicipio reported further high grade silver on Valdecañas
Vein, including 1,198 g/t (34.9 opt) silver, 0.24 g/t gold, 2.75% lead and 5.15%
zinc over 4.70 metres (true width) from Hole QE. This hole began to fill in the
central portion of the eastern half of the Valdecañas Vein where there had been
a significant gap between drill intercepts. The new hole extended the high grade
“bonanza” zone to almost 400 metres east of the discovery section
“M”.





On July
16, 2008, MAG announced a deep intersection of high grade silver on Valdecañas
Vein from Hole GE of 1,179 g/t (34.4 opt) silver, 1.98 g/t gold, 3.01% lead and
2.21% zinc over 4.71 metres (true width). Hole GE is one of the deepest holes to
test the Valdecañas Vein to the west and this intersection remains open
down-dip.





At the
end of July MAG reported that Hole QF returned 578 grams per tonne (g/t) (16.8
ounces per ton (opt)) silver, 3.85 g/t gold, 5.55% lead and 6.36% zinc over 6.20
metres (true width). This included a high
grade gold intercept of 271 g/t (7.9 opt) silver, 9.13 g/t gold, 0.99% lead and
4.41% zinc over 1.96 metres (true width). Hole QF, is almost 80 metres
vertically below hole QE which returned 1,198 g/t (34.9 opt) silver, 0.21 g/t
gold, 2.75% lead and 5.15% zinc over 4.70 metres (true width). Hole OF reported
an intersection of 224 g/t (6.5 opt) silver, 1.77 g/t gold, 0.92% lead and 2.63%
zinc over 4.71 metres (true width). Included is a higher grade intercept of 349
g/t (10.2 opt) silver, 1.78 g/t gold, 0.74% lead and 3.28% zinc over 2.62 metres
(see the longitudinal section at the end of the Valdecañas
section).





All three
holes reported on July 28th, QF, QE and OF, were outside of the initial inferred
resource estimate for the Valdecañas Vein and help define the vein at depth to
the east.





MAG
announced on October 16,2008
that new assay results from drilling along the Valdecañas Vein confirmed the
anticipated decrease of high grade silver with depth and add intercepts in areas
beyond the published resource limits. Drilling continued with four drills
operating.





Holes HE
and HF cut a pair of high-grade silver and gold vein splays above the main
Valdecañas Vein in an area that shows both structural complexity and multiple
veins with distinctly different gold and silver values.





Further
high grade assays from the Valdecañas Vein were reported from holes JI-08-NE and
JI-08-RD on November 19, 2008 of 1,338 g/t (39.0 opt) silver, 3.56 g/t gold,
1.63% lead and 7.37% zinc over 3.37 metres and 842 g/t (24.5 opt) silver, 1.20
g/t gold, 2.19% lead and 6.40% zinc over 8.02 metres respectively.





Additional
information from the 2008 drill program was released in early January 2009. MAG
reported the discovery of the new high grade “Encino” Vein at Juanicipio with
assays of 1,843 g/t (53.7 opt) silver, 4.43 g/t gold, 3.54% lead and 5.96% zinc
over 3.41 metres.





The new
high grade Encino Vein appears to have been discovered as a result of detailed
drilling in the vicinity of the Valdecañas Vein.  Re-interpretation of
a previously reported intersection of high grade gold and silver in Hole
JI-06-IE, (1,843 g/t (53.7
opt) silver, 4.43 g/t gold, 3.54% lead and 5.96% zinc over a true width of 3.41
metres)showed that this is a new and separate north-dipping veinand not the down-dip
extension of the Valdecañas as previously believed. This new interpretation
indicates that JI-06-IE did not intersect the Valdecañas Vein, so the Valdecañas
Vein at this time remains open down-dip.





The final
results from the 2008 drill program, reported on January 23, 2009, provided
additional high grade intercepts on the Valdecañas Vein.  Hole
JI-08-LE2 reported an intercept of 10.2 metres (7.81 metres true width) grading
1,068 grams per tonne (g/t) (31.1 ounces per ton (opt)) silver, 1.25 g/t gold,
0.69% lead and 3.53% zinc including an internal high grade gold and silver zone
with a true width of 3.06 metres which graded 2,268 g/t (66.1 opt) silver, 2.27
g/t gold, 0.97% lead and 4.19% zinc.





These new
results continue to add intercepts in areas beyond areas included in previously
published resource estimates and also confirm the lateral and vertical
continuity of the mineralized zone within the Valdecañas Vein. Remaining
untested areas with the potential for additional new resource ounces include the
down-dip area of the western part of the Valdecañas Vein on sections G, I and F
and the up-dip area of the eastern part of the Valdecañas Vein in the vicinity
of sections R, S and T.







Figure 2
- Juanicipio property, vertical longitudinal section




Interpretation and
Conclusions





The 2008
drill campaign on the Valdecañas Vein completed over 28,000 metres of definition
drilling. This program was focused on defining the Valdecañas Vein on a 100 by
100 metre grid with the goal of moving as much of the reported inferred resource
as possible to an indicated resource by early 2009. Three rigs were
operating on the Valdecañas Vein, in December and one on the Juanicipio Vein, to
complete the metre drill campaign for 2008.





Recent
results continue to add intercepts in areas beyond previously published resource
limits and also confirm the continuity of the main vein and the bonanza zone
within the vein. The western part of the Valdecañas Vein remains open down-dip
and the eastern part remains open up-dip. Drilling also encountered good grade
and continuity in hanging wall and footwall veins intersected outside the main
Valdecañas Vein.





The joint
venture also reported that drilling resumed on the Juanicipio Vein one kilometre
south of Valdecañas. Initial drill intercepts in the Juanicipio Vein including 2
metres of 689 grams per tonne (g/t) silver and 11.4 g/t gold (Hole JI03-01) and
0.6 metres of 4,100 g/t silver and 1.4 g/t gold (Hole 18-M) have characteristics
indicating they lie above the elevation of a bonanza zone comparable to that in
the Valdecañas Vein.





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 Vein and the
Juanicipio Vein (discovered by MAG in 2003) contain significantly higher gold
grades (2-4 grams gold per tonne) than the average veins in the principal
production parts of the district which run approximately 0.05 grams gold per
tonne.





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 and 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.





At a
Technical Committee meeting of Minera Juanicipio on December 18, 2008 an initial
2009 exploration program was proposed.  This initial program totaled
$US 4.0 million for 2009 with the focus on drilling the Valdecañas Vein, the
Encino Vein, the Juanicipio Vein and other vein targets within the Juanicipio
property.  Later. on January 20, 2009, Fresnillo and MAG through a
board of directors meeting for Minera Juanicipio approved the 2009 exploration
program based on the recommendation of the Technical Committee totaling US $4.0
million and also approved a preliminary engineering budget of US
$500,000.  The Company’s 44% share of the total 2009 budget will be
US$1.98 million.  Since December 2007 until March 10, 2009 the Company
has advanced approximately US $7.3 million in to Minera Juanicipio for its 44%
share of costs.




Work Program for
2009





The
Juanicipio work program for 2009 approved by the technical committee of Minera
Juanicipio S.A. de C.V. is as follows:





Objective Strategy:Drilling will continue
to be directed to the delineation of the Valdecañas Vein.  Work will
continue to test the Juanicipio Vein located 1.0 kilometre to the south of
Valdecañas. Exploration will also focus on the new Encino Vein and other areas
in the search for additional deeply buried veins on the Juanicipio
property.  Preliminary engineering will investigate underground
development strategies and approaches.




Work Program:There will be a
minimum of 4 drills operating in 2009.




Metallurgical
sampling and testing is ongoing and results are expected in early
2009.




Sampling, Analysis &
Security of Samples





Fresnillo
is the world’s largest producer of primary silver and they follow a specific set
of QA/QC procedures.  Fresnillo 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 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.





Cinco de Mayo
Property





Readers
are encouraged to read the following technical report, from which portions of
the discussions below in this section are derived:





1.
            Filed
      on SEDAR January 6, 2009: a NI 43-101 technical
      report, dated October 15, 2008, entitled “Independent Technical Report
      Cinco de Mayo Property, Chihuahua State, Mexico” prepared by Qualified
      Persons, Brad Leonard, M.Sc., P.Geo. and Julie Selway, Ph.D, P.Geo. of
      Caracle Creek International Consulting Inc., of Sudbury,
      Ontario.




Introduction




The Cinco
de Mayo property is located approximately 190 kilometres northwest of the city
of Chihuahua, in northern Chihuahua Sate, 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 four 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 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 three holes.




MAG’s
2006 and 2007 drill program at Cinco de Mayo continued 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 was initially identified as
buried (blind) geophysical and geochemical anomalies that were consistent with
MAG’s exploration model.




In
November 2007 a drill hole (CM07-20) collared to intersect the northeast side of
a coincident 2,000 metre by 750 metre aeromagnetic low and string of weak
electromagnetic conductors cut 6.8 metres (estimated true thickness) of galena
and sphalerite-rich massive sulphides grading 254 grams per tonne (g/t) (7.4
ounces/ton (opt)) silver, 6.4% lead and 7.0% zinc at a vertical depth of 380
metres. This included a compositionally distinct interval, 2.12 metres thick,
grading 512 g/t (15.9 opt) silver, 12.15% lead and 13.10% zinc. Assays were not
received from the lab until February 2008 and were reported in a press release
dated February 7th. Hole CM07-20 is considered to be the discovery
hole.




Drilling
in 2008 intersected widespread and high grades of silver/lead/zinc
mineralization and was successful in establishing the district-scale extent and
zoning of the mineralization and demonstrating the Jose “Manto” (blanket or
sheet) is part of a large CRD system. Sufficient drilling (approximately 44,500
metres to date) has been conducted and is budgeted for 2009 to undertake a
preliminary resource calculation during the current year.





Property Description and
Location





Cinco de
Mayo is a 5,000 hectare CRD prospect located in Chihuahua State. It is
located  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 amenable
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.









Figure 3
– Cinco de Mayo property, Chihuahua State (roads in black, December 31,
2008)





Accessibility





The Cinco
de Mayo property is located approximately 190 kilometres northwest 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 between the Company,
Minera Lagartos and Minera 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.




Under the
terms of the agreement, as later amended, MAG was obligated to make scheduled
cash and share payments together worth US$1,000,000 (US$650,000 in cash and
share payments made) and incur certain exploration expenditures totalling
US$1,000,000 by July 26, 2009 (incurred).




During
the year ended December 31, 2008, the Company acquired 100% interest in certain
mining concessions internal to the Cinco de Mayo property from two separate
vendors. The Company made a one-time payment of US$350,000 for these mining
concessions.




As at
December 31, 2008 the Company had paid a total US$550,000 in cash, issued
165,670 common shares at a value of $266, 630 and completed approximately
$10,773,036 in exploration costs with respect to the Cinco de Mayo
property.




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 Minera 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 several old mines
on the property that probably produced small amounts of high-grade silver and
base metal ores.  The 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 but, with stepped-up drilling (three
drills currently turning) budgeted for early 2009, it is anticipated a
preliminary resource calculation will be completed during 2009.




Exploration Programs to
Date




Exploration
work in the alluvium covered areas is essentially “blind” and necessitates using
geophysical techniques and geological extrapolation to trace mineralization
beneath the thin (approximately 6 to 12 metres) cover.  The
mineralization is known to contain magnetic pyrrhotite and the aeromagnetic
survey has proven to be very useful.  Other high powered geophysical
methods were tested in an attempt to delineate deeper structures. Induced
polarization/apparent resistivity, of the tested ground techniques, appear to
show the most promise. Mapping of hornfels and skarn mineralization has been an
effective tool to lead us towards mineralization centres.




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
Audio-magnetotelluric (AMT) geophysical survey testing historically exploited
mineralization, geological features identified in nearby outcrop and through
cover utilizing a biogeochemical survey.





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




MAG
developed a series of drill targets by combining the geological, geochemical,
biogeochemical and geophysical data, and completing an integrated property
interpretation.




The
results from the first nine holes (3,975 metres) drilled at Cinco de Mayo in
2007 were 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 at least 3,000 metres 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 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 the discovery intercept 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. From 401.1 to 403.88m (estimated true thickness) the hole intersected 209
g/t (6.1 opt) silver, 6.15% lead and 6.55% zinc. Hole 08-23, a 50 metre offset
to the northwest, hit 0.73 metres of banded massive sulphides that graded 464
g/t (13.5 opt) silver, 13.0% lead and 13.2% zinc at a vertical depth of 382
metres. These first 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 was open in all
directions.





By
mid-summer 2008 MAG had three drill rigs turning on the project. The exploration
budget was increased in response to the successful results. By the end of 2008
drill holes CM08-22 to CM08-85 were completed. Most encountered massive sulphide
mineralization and by the end of the year a zone, now referred to as the José
Manto, was traced for over 2 kilometres along the principal northwest trending
structural corridor.  The second to last hole of the 2008 program,
holeCM08-84, cut a 2.72 metre zone grading 462 g/t (13.5 opt) silver, 10.06%
lead and 13.62% zinc within an overall 12.37 metre thick mineralized
zone.





MAG’s
exploration has defined major NW and NE structural and stratigraphic controls on
silver-lead-zinc (gold) sulphide mineralization.  Recent drilling
results reveal coherent zoning (developed for over 2 kilometres) along the
principal northwest José Manto structural corridor: from massive
silver-lead-zinc sulphide mantos to silver-gold-lead-zinc mineralized tungsten
(scheelite) bearing skarn.  The strongest skarn is associated with
felsite dikes that show distinctive brecciation, silicification and
sericitization and are overall very similar to mineralization-related felsites
in major CRDs throughout the region.  Mineralization also appears to
thicken along this trend, as does the number of individual mantos and the number
of carbonate units that are mineralized. This zoning is precisely what is
predicted by MAG’s CRD exploration model and provides strong exploration
vectoring.





The skarn
and felsite intercepts appear to cluster around the intersection of the
northwest structural corridor with the strong northeast-trending Leones Fault
that cuts across the limestones of the Sierra Santa Lucia to the
southwest.   The Leones Fault is locally marked by strong marble
and other high-temperature alteration styles indicating gradually increasing
proximity to an intrusive heat source.  Drilling is currently underway
on both ends of this structure:  on the east side to determine the
geometry of the felsite dikes and associated mineralization and alteration; and
on the west side of the range to determine if the large magnetic anomaly shown
on Mexican government regional geophysical maps marks a major magmatic
center.





Work Program for
2009




Drilling
from 2006 to 2008 intersected widespread silver/lead and zinc mineralization
along a major structure and hosted in limestones.  The majority of
holes drilled in 2008 intersected replacement style massive sulphide carrying
significant grades of silver, lead and zinc.




The
target remains a large buried Carbonate Replacement Deposit. We have confirmed
that our geological concepts and targeting methods are reliable. MAG’s ability
to test the system with large drilling step outs is testimony to the widespread
nature and potential size of this CRD system. MAG is focused on determining the
overall extent of the CRD system, so on-going exploration will attempt to track
this zoning towards the system source with a combination of drilling and
geophysics.




Drilling
is continuing in 2009, with 3 rigs drilling a proposed 15,000 metre drill
operation to follow up on the significant intersections in 2008.









Figure 4
– Cinco de Mayo property, interpreted alteration zone (December 31,
2008)







CINCO
      DE MAYO
                
                Units
                
                
                Cost
      ($)
                
                
                Total
      ($)Land
      / Payments / Tax
                
                
                x
                
                
                
                x
                
                
                
                384,016.00Geology
                
                
                250.00
                
                
                
                600.00
                
                
                
                150,000.00Geophysics/BHG
                
                
                50.00
                
                
                
                2,500.00
                
                
                
                125,000.00Geochemistry
                
                
                500.00
                
                
                
                30.00
                
                
                
                15,000.00Geophysics/INTG
                
                
                50.00
                
                
                
                800.00
                
                
                
                40,000.00Labour/
      Contract
                
                
                300.00
                
                
                
                250.00
                
                
                
                75,000.00Land
      Deals / Purchases
                
                
                1.00
                
                
                
                250,000.00
                
                
                
                250,000.00Drilling
                
                
                15,000.00
                
                
                
                185.00
                
                
                
                2,775,000.00GIS/Map/Processing
                
                
                45.00
                
                
                
                400.00
                
                
                
                18,000.00Airborne
      Geophysics
                
                
                1,000.00
                
                
                
                125.00
                
                
                
                125,000.00Miscellaneous
                
                
                25.00
                
                
                
                2,500.00
                
                
                
                62,5000.00TOTAL
                
                
                
                
                
                
                
                
                
                
                4,019,516.00




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.




Lagartos
Property





The
Company’s intention is to complete a NI 43-101 technical report on the Lagartos
Property in 2009.







Figure 1
Lagartos SE and NW Location map





Introduction





Through
acquisition and staking, MAG has secured two very large claim groups lying
northwest and southeast of the town of Fresnillo, Zacatecas State,
Mexico.  The properties flank the Juanicipio property to the northwest
and southeast.





Lagartos
NW covers the immediate northwestern projection of the geology and structure of
the Fresnillo Mining District into a broad alluvial valley punctuated by
volcanic outcrops showing high-level alteration styles and mercury showings
virtually identical to those that led to the Juanicipio discovery.





Over the
last 3 years, MAG has completed extensive regional reconnaissance mapping and
sampling in the Lagartos NW and SE claim blocks, largely to define potential
target areas, but also to “condemn” areas where potential is
limited.





Both
properties lie along the Fresnillo Silver Trend (FST), a large regional
structural zone that hosts the Guanajuato, Zacatecas and Fresnillo epithermal
silver-gold vein districts.  All of the historic deposits of the FST
were found in outcrop by indigenous people in pre-Colonial times and
aggressively exploited by the Spaniards during the 350 to 450 years after the
Conquest.  Over 60% of the FST is masked by alluvial soils and/or
young volcanic rocks and MAG hopes to repeat its Juanicipio success by applying
the expertise and knowledge garnered there to buried targets at Lagartos NW and
SE.





Accessibility





The
Lagartos SE property is located immediately north of the city of Zacatecas, in
Zacatecas State, Mexico. Access to the property is excellent. A major highway
lies on the west side of the property and secondary roads and provide access
elsewhere.





The
Lagartos NW property is located 10 km northwest of the historic silver mining
town of Fresnillo, also in the State of Zacatecas. The drive from Zacatecas to
Fresnillo is approximately 50 km on paved highway.  Most of the drive
to the property, from Fresnillo, is on paved highway with secondary roads and
tracks providing access for the last couple of kilometres.





A modern
airport is located roughly one third of the way between Zacatecas and Fresnillo.
Railway lines serve both areas.





Ownership





Both
properties are 100% owned by MAG. The 750 km2 Lagartos
SE land package surrounds the famous Zacatecas Mining District, one of the
oldest and most productive silver mining districts in the world.





Abandoning
ground is encouraged by the holding tax structure of the Mexican Mining Law,
which imposes higher rates for older claims.  The 2008 work allowed
MAG to abandon 70,149 hectares of low-potential ground in the Lagartos III, IV,
VII, VIII and 9 claims.  This reduction is calculated to save MAG
approximately 1.2 million pesos in the first semester of 2009.





History





The
Lagartos SE claims surround the Zacatecas Silver District, where a series of six
major vein swarms have produced over a billion ounces of silver since 1546 when
Juan de Tolosa, a Basque nobleman, founded a small mining camp in the
area.   MAG’s claims completely encompass the district on the
north, west and east and include the on-strike projection of most of the
district’s major vein swarms.  In addition, MAG has acquired claims
within and flanking some of the major historic producing mining
zones.





Regional
Setting





The
Lagartos SE and Lagartos NW properties comprise two large and separate claim
groups lying along a southeast to northwest mineralized silver trend centered on
Fresnillo. The properties lay along the "Fresnillo Silver Trend" a large
regional structural zone hosting the world class Guanajuato, Zacatecas, and
Fresnillo Epithermal Silver-Gold vein districts. Although all of the known
deposits were found in outcrop between 350 and 500 years ago, MAG believes that
significant epithermal silver vein systems lie covered by recent alluvial soils
that mask over 60% of the trend. It has been shown that modern exploration
technology can locate mineralization beneath this cover.





Local
Geology





MAG has
identified a number of broad hydrothermal alteration and structural zones, up to
4 kilometres long and ten's of metres wide. Within the associated alteration
halo there are quartz veins containing iron oxides and sulphides of zinc, lead
and silver. In addition there are other veins and zones characterized by iron
rich carbonates, druzy quartz, iron oxides and sulphides of lead and zinc. These
zones have returned anomalous silver values ranging from one half ounce up to
2.3 kilograms silver (67 ounces) in selected grab samples from a number of old
pit workings and low lying outcrop. These zones are also characterized by a
suite of highly anomalous metal values for arsenic, mercury and antimony. These
zones are thought to represent an upper level manifestation of a deeper
epithermal vein system very much like those found in the Zacatecas and Fresnillo
(Juanicipio) districts.





Environmental
Surveys





Environmental
surveys done on the Lagartos SE and NW properties to date are those required for
drill and road building permits. These surveys involve preparing inventories of
floral and faunal species and assessments of the impact of road building for
drilling.





Many old
workings are found in close proximity to the Lagartos SE property but the ground
held by MAG has extensive alluvial cover and little to no evidence of previous
work.





Programs
of road reclamation are conducted by MAG and 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 Reserves and
Resources





These
properties are in the early exploration phase. Not enough data has been
collected to provide reserve or resource estimates.





Program results:
2008





Lagartos
SE





Geological
and geophysical work conducted in 2008 identified six drill targets in and
around the historic Zacatecas Silver District and focused on the eastern and
western extensions of the historically important Veta Grande and Mala Noche Vein
swarms.  These are broad zones laced by multiple vein strands with
similar strike and depth of exposure, typically named for the largest vein
within the swarm.  Exploitation of these veins was relatively shallow
and the areas have not been the object of modern, focused exploration
methods.










Figure 2
Lagartos SE east side





MAG’s
exploration program on Lagartos SE includes the La Luz and Morelos SW areas
along the NW extensions of the Veta Grande and Mala Noche, respectively (see
location map above),  and Las Majadas /El Pajaro Hill and Puerto Rico
covering the southeast extensions of the Mala Noche and Veta Grande,
respectively.   Predilicta is a vein in the Veta Grande within
the historic mining area.





The first
8 months of 2008 were devoted to field mapping, sampling, target identification
and drill permitting.  Between mid-October and the end of the year,
four holes totaling 2189.95 metres were drilled in the La Luz area seeking the
extension of veins of the Veta Grande system under
alluvium.  Structural projection was based on geological and
geophysical data.  Alluvium was found to range from 150 to over 250m
thick, thickening to the southeast.  Several major fault structures
with strong alteration were encountered in the underlying bedrock, but none
contained mineralized veins.





The first
hole was begun at Las Majadas in December, 2008 on a broad stockwork zone lying
along the southeastern projection of the Malanoche vein system.  The
area is laced with numerous mineralized quartz stringers and at least 3 narrow
high-grade veins with historic production.   The hole reached 549
metres before being shut down for the holidays.  No major intercepts
were made in this portion of the hole.





Although
there has been limited success in MAG’s Lagartos SE program to date, a number of
viable targets remain to be drilled. Two examples are the extensions of the Las
Majadas and Veta Puerto Rico veins under alluvial cover. One drill rig is
expected to keep drilling in the area in 2009.




2009 Budget
Proposal





Lagartos SE EXPLORATION
                
                Units
                
                
                Cost
      ($)
                
                
                Total
      ($)Land
      / Payments / Tax
                
                
                x
                
                
                
                x
                
                
                
                224,472.67Geology
                
                
                200.00
                
                
                
                450.00
                
                
                
                90,000.00Geophysics/INTG
                
                
                50.00
                
                
                
                800.00
                
                
                
                40,000.00Geochemistry
                
                
                500.00
                
                
                
                30.00
                
                
                
                15,000.00Trenching
      / Roads
                
                
                
                
                
                
                
                
                
                
                0.00Labour/
      Contract
                
                
                150.00
                
                
                
                250.00
                
                
                
                37,500.00Drilling
                
                
                3,000.00
                
                
                
                160.00
                
                
                
                480,000.00GIS/Map/Processing
                
                
                25.00
                
                
                
                400.00
                
                
                
                10,000.00AEM
                
                
                0.00
                
                
                
                
                
                
                
                0.00Miscellaneous
                
                
                10.00
                
                
                
                2,500.00
                
                
                
                25,000.00TOTAL
                
                
                
                
                
                
                
                
                
                
                921,972.67





Project Results
2008


Lagartos
NW





Lagartos
NW is a core asset and targets extensions of the Fresnillo district and the
Juanicipio vein discoveries towards the northwest. It is host to Cerro Cacalote,
an area where SWIR/ASTER satellite imagery has identified a large area 35 km
from Juanicipio with alteration signatures similar to those observed at
Valdecañas. Narrow intercepts of gold and silver along with elevated arsenic,
mercury, antimony and tin values have been recorded in the area.





During
2008, 6 holes totaling 4611.90 metres were drilled on targets in Lagartos
northwest.  The first two, totaling 1152.9 metres, were drilled along
the eastern claim border to determine if major projected structures could be
found under alluvium in the area.  In both cases the alluvium was too
deep and the holes abandoned.  It has been interpreted that these were
drilled very close to a major regional fault that has dropped the basement block
deeper than can be realistically reached.   The remaining four
holes, totaling 3459 metres were drilled along the western and eastern flanks of
Cerro Cacalote on alteration, geochemical and structural targets.  The
first two cut an extensive breccia that carried no economic values and the
remaining two cut thick alluvium and volcanic sections.  The final
hole (LW0806) had highly elevated mercury values, indicating that it was still
very high in the epithermal alteration zoning.





Although
there has been limited success in MAG’s Lagartos NE program to date, the
strength and extent of high-level epithermal alteration and mineralization,
combined with its proximity and similarity to that seen at Juanicipio indicate
that this very large claim continues to have significant exploration
potential.  2009 work is expected to initially involve a broadly based
ground magnetic survey, focused on areas where our drilling has shown a range of
depths to alluvium (25 to 400 metres) to determine if depth to bedrock can be
reliably determined.  If this is successful, the magnetics will be
expanded to seek elevated basement blocks where alluvium is shallow and the
epithermal system may be exposed at a deeper level.   No drilling
is contemplated in advance of this survey.










Figure 3
Lagartos NW drilling map







2009 Budget
proposal


Lagartos NW EXPLORATION
              
              Units
              
              
              Cost
      ($)
              
              
              Total
      ($)Land
      / Payments / Tax
              
              
              x
              
              
              
              x
              
              
              
              210,457.67Geology
              
              
              100.00
              
              
              
              450.00
              
              
              
              45,000.00Geophysics/INTG
              
              
              50.00
              
              
              
              1,000.00
              
              
              
              50,000.00Geochemistry
              
              
              
              
              
              
              
              
              
              
              0.00Trenching
      / Roads
              
              
              
              
              
              
              
              
              
              
              0.00Labour/
      Contract
              
              
              50.00
              
              
              
              250.00
              
              
              
              12,500.00Drilling
              
              
              0.00
              
              
              
              185.00
              
              
              
              0.00GIS/Map/Processing
              
              
              20.00
              
              
              
              400.00
              
              
              
              8,000.00AEM
              
              
              0.00
              
              
              
              175.00
              
              
              
              0.00Miscellaneous
              
              
              5.00
              
              
              
              2,500.00
              
              
              
              12,500.00TOTAL
              
              
              
              
              
              
              
              
              
              
              338,457.67








Sampling, Analysis &
Security of Samples





MAG has
implemented a quality control program to ensure best practices in sampling and
analysis of drill cores. 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.





Program results:
2007





Initial
drilling of Lagartos SE in 2006 totalled 7,066 metres in 20 holes. The objective
was to test at shallow depth a number of vein and structural targets traceable
for strike lengths of 600 to 1,000 metres to determine which targets offer the
best opportunity to host significant mineralization at depth.





The best
hole intercepted 6.0 metres of 42.5 g/t silver and 0.34 g/t gold with strongly
anomalous arsenic and antimony values. Six other holes also reported anomalous
silver values with highly anomalous arsenic. This silver-gold-arsenic
combination is comparable to what is seen in the highest portions of epithermal
veins found in the Zacatecas district and Juanicipio area of the Fresnillo
district.





Program results:
2006





Work in
2006 focused on the Lagartos Northwest area on a zoned alteration centre, very
similar to that seen at Juanicipio, surrounded by alluvial cover. Biogeochemical
and ground magnetic surveys of the flanking cover areas revealed linear magnetic
anomalies parallel to the Fresnillo Silver Trend with overlapping and concentric
biogeochemical silver, lead, zinc and copper anomalies. These structures and
their associated metal anomalies can be traced for distances approaching eight
kilometres. The drill program was designed to test structural intersections and
geochemical anomalies in settings similar to those found at Juanicipio and
Fresnillo.





A
13-hole, 7,364-metre drill program was carried out on these anomalies in 2006.
All of the holes encountered strongly altered volcanic rocks under shallow
alluvial cover, and three intersected the "Guerrero Terrane" rocks that host the
veins at Fresnillo and Juanicipio. One hole, drilled through alluvial cover four
kilometres from the nearest outcrop, cut 3.5 metres grading 14 to 49 g/t (0.5 to
1.5 opt) silver.





The
Lagartos Southeast block covers the broad plain lying between Fresnillo and the
historic Zacatecas mining district. In 2006 MAG staked all of the open ground
surrounding Zacatecas and purchased numerous claims over past producing veins
within the district. This gives MAG the potential projections of the E-W
trending district veins as well as the San Gabriel vein field in the
northernmost part of the district.





Other
Properties




The
Company has several other exploration properties.  At this 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 objectives.




The
Company has identified and acquired 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. Three of these properties, CRD
prospects Salemex and Sierra Ramirez, and Lagartos SE, an epithermal vein
prospect in the vicinity of Juanicipio, will be subject to drilling programs in
2009.




None of
these properties are advanced enough to be able to identify any resource or
reserve figures.


DIVIDENDS




The
Company has neither 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
49,210,566 Common Shares were issued and outstanding and no Preferred Shares
were issued and outstanding as at March 13, 2009. All of the issued shares are
fully paid and non-assessable. Our Company does not own any of its own
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 or viewed in electronic format at www.sedar.com and at
http://idea.sec.gov.





On
February 22, 2009, the board of directors of the Company approved certain
amendments (the "Amendments") to the Rights Plan in the form of an amended and
restated shareholder rights plan agreement (the "Amended and Restated Rights
Plan").  The Amendments will not, however, take effect unless and
until they are approved by the Toronto Stock Exchange and at the Annual and
Special Meeting of Shareholders on March 24, 2009.  If the Amended and
Restated Rights Plan is not approved by the shareholders at the Annual and
Special Meeting or by the TSX, then the Rights Plan will continue in full force
and effect, unamended.





The
purpose, rationale and a description of, the Amendments are set out in the
Company's Management Information Circular dated February 23, 2009, which can be
found at www.sedar.com and http://idea.sec.gov.  The draft Amended and
Restated Rights Plan was filed on SEDAR at www.sedar.com on
February 25, 2009 is approved by the shareholders of the Company the Amended and
Restated Rights Plan will also be filed and available at www.sedar.com and
http://idea.sec.gov
after March 24, 2009.





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 and at
http://idea.sec.gov.





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 – MAGMonth
                  High
                  Low
                  VolumeFebruary,
      2009
                  7.79
                  5.46
                  2,897,059January,
      2009
                  8.00
                  5.33
                  2,300,837December,
      2008
                  6.02
                  4.93
                  1,746,537November,
      2008
                  6.04
                  4.30
                  1,486,223October,
      2008
                  6.10
                  3.95
                  6,143,549September,
      2008
                  7.86
                  3.52
                  11,561,668August,
      2008
                  10.00
                  7.40
                  2,231,243July,
      2008
                  10.49
                  8.70
                  3,238,591June,
      2008
                  11.85
                  9.65
                  1,620,360May,
      2008
                  13.17
                  10.51
                  2,200,256April,
      2008
                  13.05
                  10.54
                  3,547,335March,
      2008
                  14.97
                  12.62
                  1,726,100








New
      York Stock Exchange Alternext US (formerly the American Stock Exchange) -
      MVGMonth
              High
              Low
              VolumeFebruary,
      2009
              6.49
              4.50
              1,266,531January,
      2009
              6.50
              4.41
              1,505,691December,
      2008
              5.24
              4.00
              1,443,950November,
      2008
              4.90
              3.36
              725,375October,
      2008
              5.75
              3.12
              1,710,271September,
      2008
              7.61
              3.27
              1,832,889August,
      2008
              9.71
              7.00
              572,167July,
      2008
              10.45
              8.63
              738,825June,
      2008
              11.91
              9.50
              624,107May,
      2008
              13.14
              10.27
              761,137April,
      2008
              12.94
              10.53
              506,292March,
      2008
              15.17
              11.68
              533,577







Prior
Sales




As of
March 13, 2009, there are no securities of the Company issued but not listed on
the Toronto Stock Exchange or the NYSE Alternext US.







ESCROWED
SECURITIES







As of
March 13, 2009, 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; VP Exploration, Sargold
      Resources Corp., Sardinia, Italy, a gold exploration company from October
      2003 to February 2005; principal of D. MacInnis Exploration and Consulting
      in Reno, Nevada from July 2004 to February 2005.  Mr. MacInnis
      is also a director of MAX Resources Corp.
              75,100
              25,000/$12.91
                17,500/$10.01
                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.
              697,021
              20,000/$12.91
                15,000/$10.01
                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. since February 2000, 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; Mr. Jones is also a director of Jerico Explorations Inc. and
      Nextraction Energy Corp. (formerly Kruger Capital Corp.)
              201,502
              10,000/$12.91
                16,250/$10.01
                50,000/$5.36
                75,000/$3.00
                100,000/$1.06ERIC
      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 Anthem Ventures Capital Corp., Anthem Works Ltd. and Nextraction
      Energy Corp. (formerly Kruger Capital Corp.)
              1,125,500(7)
              10,000/$12.91
                27,500/$10.01
                50,000/$5.36
                75,000/$3.00
                75,000/$1.06JONATHAN
      A. RUBENSTEIN(3)(4)
                Director
      (Since Feb 26/07)
                British
      Columbia, Canada
              Practiced
      law until 1994 and has been a mining executive since that time; formerly a
      director of Aurelian Resources September 2006 to August 2008; formerly a
      director of Cumberland Resources Ltd. from 1983 to 2007; formerly a
      director of Redcorp Ventures, from 2000 to 2007; formerly a director, Vice
      President and Corporate Secretary of Canico Resources from 2002 to
      2005.  Mr. Rubenstein is also a director of Troon Ventures
      Ltd.
              Nil
              15,000/$12.91
                21,250/$10.01
                200,000/$8.80RICHARD
      M. COLTERJOHN
                Director
      (since Oct 16/07)
                Ontario,
      Canada
              President
      and CEO of Centenario Copper, since March 2004. Managing Partner at
      Glencoban Capital Management Inc., a merchant banking firm sincer 2002.
      Mr. Colterjohn is also a director of Centenario Copper
      Corporation.
              10,000
              7,500/$12.91
                200,000/$14.15DEREK
      C. WHITE(2)
                Director
      (since Oct 16/07)
                British
      Columbia, Canada
              Executive
      Vice President - Corporate Development of Quadra Mining Limited since
      September 2007; previously the CFO of Quadra Mining commencing
      in April 2004; formerly from January 2003 to February
      2004.  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; Magellan Mineral Limited and
      Laurentian Goldfields Ltd.
              Nil
              7,500/$12.91
                4,375/$10.01
                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.
              5,200
              29,250/$12.91
                29,469/$10.01
                75,000/$5.36
                55,000/$2.46
                55,000/$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.
              49,400
              98,750/$12.91
                74,063/$10.01
                75,000/$5.36
                100,000/$3.00JODY
      L. HARRIS
                Corporate
      Secretary
                British
      Columbia, Canada
              Corporate
      Secretary of the Company since May 8, 2007;  Investor Relations
      Specialist of PAKIT Inc. from February 2006 to March 2007;
      Administrator/Office Manager of Silverado Gold Mines Ltd. from March 2004
      to October 2005.
              Nil
              15,000/$12.91
                7,500/$10.01
                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
49,210,566 shares of Common Stock issued and outstanding as of the date of this
AIF.  As of March 13, 2009, directors and officers of the Company as a
group own or control approximately 2,163,723 Common Shares of the Company
representing approximately 4.4% of its issued and outstanding Common
Shares.
  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 rules contained in the NYSE Alternext US
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, 2008
                  
                  
                  Year
      ended
                    December
      31, 2007Audit
      Fees
                  
                  $
                  125,500
                  
                  
                  $
                  118,000Tax
      Fees(1)
                  
                  $
                  19,500
                  
                  
                  $
                  31,000Total
                  
                  $
                  145,000
                  
                  
                  $
                  149,000
  Notes:
 (1)
              The
      aggregate fees billed for professional services rendered for tax
      compliance, tax advice and tax
planning.
   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 may be obtained under the Company’s profile at www.sedar.com and at
http://idea.sec.gov.
 
 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 may be obtained under the Company’s
profile at www.sedar.com and at
http://idea.sec.gov.
  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 may be obtained under the Company’s profile at
www.sedar.com
and at http://idea.sec.gov.
 
 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 other than the
following:
 
 In
November 2008, the Company notified Fresnillo of various concerns arising under
the Shareholders Agreement which governs the Minera Juanicipio joint
venture.  One such concern is that Fresnillo is attempting to acquire
control of the Company on an unsolicited basis in breach of the provisions of
the Shareholders Agreement.  MAG has now triggered the dispute
resolution provisions of the Shareholder's Agreement with the result that, if
matters are not resolved with Fresnillo, the disputes will be referred to
arbitration.
 
 Separately,
on December 1, 2008, the Company was advised of the intention by a subsidiary of
Fresnillo plc to make an unsolicited take-over bid for all of the outstanding
shares of the Company not already owned by Fresnillo and its affiliates at a
price US$4.54 per share.  As a result of Fresnillo's share ownership,
it is considered an insider of the Company under applicable securities
laws.  Accordingly, a valuation is required to be obtained at
Fresnillo's expense under the supervision of an Independent Committee of the
Company's directors.
 
 The
independent valuation process was commenced in December 2008 with the formation
of an independent committee of directors and the hiring of TD Securities and
Scott Wilson Roscoe Postle Associates as independent valuator and independent
technical advisor, respectively.  On February 1, 2009, the Company's
Independent Committee suspended the valuation after determining that a proper
valuation could not be completed without critical information which is in the
sole possession or control of Fresnillo and which Fresnillo refused or neglected
to provide to the Company or the Independent Valuator.  Fresnillo has
since asked the Ontario Securities Commission to review this decision to suspend
the valuation and the matter is still pending.
  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 and the Salamex 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 2008, the Company accrued or
paid Cascabel and IMDEX consulting, administration and travel fees totaling
$194,590 (2007 - $134,720) and exploration costs totaling $2,504,237 (2007 -
$1,312,826) 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, other than the Shareholders Agreement dated October
10, 2008 between the Company, Peñoles and others relating to Minera
Juanicipio.
 
 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., has provided NI
43-101 reports for the Company (Batopilas Jan. 2007 and Apr.
2003)
 
 Stephen
W. Wetherup, BSc., P.Geo., has provided NI43-101 reports for the
Company.
 
 William
E. Roscoe, Ph.D, P.Eng. & David Ross, P.Geo, Scott Wilson Roscoe Postle
Associates Inc., - March 4, 2009 – Independent Resource Estimate – A National Instrument 43-101
technical report documenting the mineral resource estimate will be filed on
SEDAR before April 10, 2009.
 
 Julie
Selway, Ph.D, P.Geo. & Brad Leonard, M.Sc.,P.Geo., Caracle Creek
International Consulting Inc. (Cinco de Mayo Oct. 2008)
 
 Dominic
Chartier, P.Geo, Glen Cole, P.Geo and Jean-Francois Couture, Ph.D, P.Geo, SRK
Consulting (CANADA) Inc. (July 25 Resource Estimate Valdecañas)
 
 The
Company’s technical reports are available on the SEDAR website at www.sedar.com and on
the SEC’s IDEA website at http://idea.sec.gov/
..
 
  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.
 
 To the
knowledge of the Company, having made reasonable enquiry, 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.
   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 and Special Meeting of Shareholders to be held on March
24, 2009. The Circular is available on SEDAR, on the SEC’s IDEA website and on
the Company’s.
 
 Additional
information is provided in the Company’s consolidated financial statements and
management’s discussion and analysis for the year ended December 31, 2008, which
will be filed on the websites below on or before March 13, 2009.
 
 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; on the
SEC’s IDEA website at http://idea.sec.gov/
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
NYSE Alternext US, 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 renewed for another
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 governed by the Business Corporations Act (British
Columbia).
 
 “magma” refers to molten rock
formed within the crust or upper mantle of the earth.
 
 “manto” refers to a deposit
type that is stratabound,
irregular to rod shaped, and which occurs usually in a horizontal or near
horizontal attitude.
 
 “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 Fresnillo 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.
 
 “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.
 
 “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.