UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C.  20549




Form
10-K




ýANNUAL REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
fiscal year ended December 31,
2009.




 ̈TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
transition period from 
to  _______.




Commission
file number:  000-49725




Constitution
Mining Corp.


(Exact
name of registrant as specified in its charter)




Delaware
            
            88-0455809(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)Pasaje
      Martir Olaya 129, Oficina 1203, Centro Empresarial Jose Pardo Torre A,
      Miraflores, Lima, Peru(Address
      of principal executive
      offices)                    (Zip
      Code)Registrant’s
      telephone, including area code:    +54-1-446-6807


Securities
registered under Section 12(b) of the Exchange Act:  None.




Securities
registered under Section 12(g) of the Exchange
Act:


Common
      Stock, $0.001 par value
              Not
      Applicable(Title
      of class)
              (Name
      of each exchange on which
registered)
  Yes   ̈  No ý




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes   ̈  No ý




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.  Yes  ý  No  ̈




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (229.405 of this chapter) is not contained herein, and will be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.   ý




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large
accelerated filer  ̈                                                                                                   Accelerated
filer  ̈


Non-accelerated
filer    ̈ (Do not check if a
smaller reporting
company)                 Smaller
reporting company ý




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes   ̈  No ý




As of
June 30, 2009, the aggregate market value of the Company’s common equity held by
non-affiliates computed by reference to the closing price ($0.60)
was:   $36,131,674




The
number of shares of our common stock outstanding as of March 1, 2010
was:   78,055,985




Documents
Incorporated by Reference:  Parts of our definitive proxy statement to
be prepared and filed with the Securities and Exchange Commission not later than
120 days after December 31, 2009 are incorporated by reference into Part III of
this Form 10-K.


Table of Contents







FORM
10-K


CONSTITUTION
MINING CORP.


DECEMBER
31, 2009




Table of Contents






PagePART
    IItem
      1.          Business.
            5Item
      1A.       Risk
      Factors.
            10Item
      1B.        Unresolved Staff Comments.
            17Item
      2.          Properties.
            17Item
      3.          Legal Proceedings.
            30Item
      4.          (Removed and Reserved).
            30




PART
      II




Item
      5.          Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities.
            32Item
      6.         Selected Financial Data.
            34Item
      7.          Management’s Discussion and Analysis of Financial Condition and
      Results ofOperations.
            34Item
      7A.       Quantitative
      and Qualitative Disclosures About Market Risk.
            40Item
      8.          Financial Statements and Supplementary Data.
            40Item
      9.          Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure.
            40Item
      9A.       Controls and
      Procedures.
            40Item
      9B.        Other
      Information.
            41




PART
      III




Item
      10.         Directors, Executive Officers and Corporate
      Governance.
            42Item
      11.         Executive Compensation.
            42Item
      12.         Security Ownership of Certain Beneficial Owners and Management
 and Related  Stockholder
      Matters.
            42Item
      13.         Certain Relationships and Related Transactions, and Director
      Independence.
            42Item
      14.         Principal Accounting Fees and Services.
            42




PART
      IV




Item
      15.        Exhibits,
      Financial Statement Schedules.
            43GlossarySignature PageExhibit Index





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Cautionary
Note Regarding Forward Looking Statements




This
annual report contains forward-looking statements as that term is defined in
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended.  In some cases,
you can identify forward-looking statements by terminology such as "may,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue," "intends," and other variations of these
words or comparable words.  In addition, any statements that refer to
expectations, projections or other characterizations of events, circumstances or
trends and that do not relate to historical matters are forward-looking
statements.  These forward-looking statements are based largely on our
expectations or forecasts of future events, can be affected by inaccurate
assumptions, and are subject to various business risks and known and unknown
uncertainties, a number of which are beyond our control.  Therefore,
actual results could differ materially from the forward-looking statements
contained in this document, and readers are cautioned not to place undue
reliance on such forward-looking statements.  These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled “Risk Factors” that may
cause our or our industry’s actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.




Important
factors that may cause the actual results to differ from the forward-looking
statements, projections or other expectations include, but are not limited to,
the following:




·
            risk
      that we fail to meet the requirements of the agreement under which we
      acquired our options, including any payments or any exploration
      obligations that we have regarding these properties, which could result in
      the loss of our right to exercise the options to acquire the mineral and
      mining rights underlying these
properties;




·
            risk
      that we will not be able to complete the possible acquisition of
      additional mineral deposits pursuant to terms and conditions outlined in a
      letter of intent;




·
            risk
      that we cannot attract, retain and motivate qualified personnel,
      particularly employees, consultants and contractors for our operations in
      Peru;




·
            risks
      and uncertainties relating to the interpretation of drill results, the
      geology, grade and continuity of mineral
  deposits;




·
            results
      of initial feasibility, pre-feasibility and feasibility studies, and the
      possibility that future exploration, development or mining results will
      not be consistent with our
expectations;




·
            mining
      and development risks, including risks related to accidents, equipment
      breakdowns, labor disputes or other unanticipated difficulties with or
      interruptions in production;




·
            the
      potential for delays in exploration or development activities or the
      completion of feasibility studies;




·
            risks
      related to the inherent uncertainty of production and cost estimates and
      the potential for unexpected costs and
expenses;




·
            risks
      related to commodity price
fluctuations;




·
            the
      uncertainty of profitability based upon our history of
    losses;




·
            risks
      related to failure to obtain adequate financing on a timely basis and on
      acceptable terms for our planned exploration and development
      projects;




·
            risks
      related to environmental regulation and liability;


·
            risks
      that the amounts reserved or allocated for environmental compliance,
      reclamation, post-closure control measures, monitoring and on-going
      maintenance may not be sufficient to cover such
    costs;





·
            risks
      related to tax assessments;




·
            political
      and regulatory risks associated with mining development and exploration;
      and




·
            other
      risks and uncertainties related to our prospects, properties and business
      strategy.




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Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements.  You should not place undue reliance on these
forward-looking statements, which speak only as of the date of this
report.  Except as required by law, we do not undertake to update or
revise any of the forward-looking statements to conform these statements to
actual results, whether as a result of new information, future events or
otherwise.




As used
in this annual report, “Constitution Mining,” the “Company,” “we,” “us,” or
“our” refer to Constitution Mining Corp., unless otherwise
indicated.




If you
are not familiar with the mineral exploration  terms used in this
report, please refer to the definitions of these terms under the caption
“Glossary” at the end of Item 15 of this report.




- 4
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PART
I




ITEM 1. Business.




Corporate
History




We were
incorporated in the state of Nevada under the name Crafty Admiral Enterprises,
Ltd. on March 6, 2000.  Our original business plan was to sell classic
auto parts to classic auto owners all over the world through an Internet
site/online store; however, we were unsuccessful in implementing the online
store and were unable to afford the cost of purchasing, warehousing and shipping
the initial inventory required to get the business started.  As a
result, we ceased operations in approximately July 2002.




During
our fiscal year ended December 31, 2006, we reorganized our operations to pursue
the exploration, development, acquisition and operation of oil and gas
properties.  On June 27, 2006, we acquired a leasehold interest in a
mineral, oil and gas property located in St. Francis County, Arkansas for a cash
payment of $642,006, pursuant to an oil and gas agreement we entered into on
April 29, 2006 (the “Tombaugh Lease”).  Shortly after acquiring the
Tombaugh Lease, we suspended our exploration efforts on the property covered by
the Tombaugh Lease in order to pursue business opportunities developing nickel
deposits in Finland, Norway and Western Russia.  On January 18, 2008,
we assigned all of our right, title and interest in and to the Tombaugh Lease to
Fayetteville Oil and Gas, Inc., which agreed to assume all of our outstanding
payment obligations on the Tombaugh Lease as consideration for the
assignment.  On March 9, 2007, we changed our name to better reflect
our business to “Nordic Nickel Ltd.” pursuant to a parent/subsidiary merger with
our wholly-owned non-operating subsidiary, Nordic Nickel Ltd., which was
established for the purpose of giving effect to this name change.  We
were not successful pursuing business opportunities developing nickel deposits
in Finland, Norway and Western Russia and again sought to reorganize our
operations in November 2007.




In
November 2007, we reorganized our operations and changed our name to
“Constitution Mining Corp.” to better reflect our current focus which is the
acquisition, exploration, and potential development of mining
properties.  Since November 2007, we entered into agreements to secure
options to acquire the mineral and mining rights underlying properties located
in the Salta and Mendoza provinces of Argentina (the "Argentinean Properties")
and in northeastern Peru.  In 2009, we determined that it was in our
best interest to no longer pursue the exploration and development of the
Argentinean Properties and terminated our option agreements to acquire the
mineral and mining rights underlying these properties.  We are now
exclusively pursuing the exploration and development of our property interests
in Peru.




On
October 21, 2009, we completed a reincorporation merger from the State of Nevada
to the State of Delaware.




Our
common stock is quoted on the OTC Bulletin Board  under the symbol
“CMIN.”  We conduct our business from Pasaje Martir Olaya 129, Oficina
1203, Centro Empresarial Jose Pardo Torre A, Miraflores, Lima, Peru. Our
telephone number is  +54-1-446-6807.




Exploration
Stage Company




We are
considered an exploration or exploratory stage company because we are involved
in the examination and investigation of land that we believe may contain
valuable minerals, for the purpose of discovering the presence of ore, if any,
and its extent.  There is no assurance that a commercially viable
mineral deposit exists on the properties underlying our mineral property
interests and a great deal of further exploration will be required before a
final evaluation as to the economic and legal feasibility for our future
exploration is determined.  We have no known reserves of any type of
mineral.  To date, we have not discovered an economically viable
mineral deposit on the property underlying our mineral property interests, and
there is no assurance that we will discover one.  If we cannot acquire
or locate mineral deposits, or if it is not economical to recover any mineral
deposits that we do find, our business and operations will be materially and
adversely affected.




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Surplus
Strategy




Our
current business plan calls for investing any surplus operating capital
resulting from retained earnings into bullion accounts and does not include
holding retained earnings, if any, in cash or cash equivalents.  In
the event that commercially exploitable reserves of minerals exist on any of our
property interests and we are able to make a profit, our business plan is to
sell enough mineral reserves to satisfy all of our expenses and invest all
retained mineral reserves in bullion accounts established in Zurich,
Switzerland.  The price of precious and base metals such as gold and
silver has fluctuated widely in recent years, and is affected by numerous
factors beyond our control, including international, economic and political
trends, expectations of inflation, currency exchange fluctuations, interest
rates, global or regional consumptive patterns, speculative activities and
increased production due to new extraction developments and improved extraction
and production methods.  The effect of these factors on the price of
base and precious metals, and, therefore, the change in the value of our
retained earnings, if any, held in bullion accounts cannot accurately be
predicted and is subject to significant fluctuation.  There can be no
assurance that the value of any bullion accounts established by us in the future
to hold retained mineral reserves, if any, will not be adversely impacted by
fluctuations in the price of base and precious metals resulting in significant
losses.




Summary
of our Mineral Property Interests




A
description of each of our options to acquire the mineral and mining rights
underlying properties located in Peru and the conditions that we must meet to
exercise these options is set forth in Item 2 of this annual
report.




Effect
of Governmental Regulation on Our Business




We will
be required to comply with all regulations, rules and directives of governmental
authorities and agencies applicable to the exploration of minerals in
Peru.  The discussion that follows is a summary of the most
significant government regulations which we anticipate will impact our
operations.




Peru is
located on the western coast of South America and has a population of
approximately 28 million.  It covers a geographic area of
approximately 1.3 million square kilometres and is bordered by Bolivia, Brazil,
Chile, Colombia and Ecuador.  Lima is Peru's capital and principal
city and has a population of approximately 7 million people.




Peru has
become a leading country for mining activities.  No special taxes or
registration requirements are imposed on foreign-owned companies and foreign
investment is treated as equal to domestic capital.  Peruvian law
allows for full repatriation of capital and profits and the country’s mining
legislation provides access to mining concessions under an efficient
registration system.




Peruvian
Mining Law




Under
Peru’s Uniform Text of Mining Law (“UTM”), the right to explore for and exploit
minerals is granted by the government by way of concessions.  A
Peruvian mining concession is a property right, independent from the ownership
of surface land on which it is located.  There are no restrictions or
special requirements applicable to foreign companies or individuals regarding
the holding of mining concessions in Peru unless the concessions are within 50
kilometres of Peru's borders.  The rights granted by a mining
concession can be transferred, or sold and, in general, may be the subject of
any transaction or contract.  Mining concessions may be privately
owned and no state participation is required.




The
application for a mining concession involves the filing of documents before the
mining administrative authority.  The mining concession boundaries are
specified in the application documents, with no requirement to mark the
concession boundaries in the field since the boundaries are fixed by UTM
coordinates.  In order to conduct exploration or mining activities,
the holder of a mining concession must purchase the surface land required for
the project or reach agreement with the owner for its temporary
use.  If any of this is not possible, a legal easement may be
requested from the mining authorities, although these easements have been rarely
granted.




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Mining
concessions are irrevocable as long as their holders pay an annual fee of US $3
per hectare and reach minimum production levels within the terms set forth by
law or otherwise pay penalties, as applicable.  Non-compliance with
any of these mining obligations for two consecutive years will result in the
cancellation of the mining concession.




Pursuant
to the original legal framework in force since 1992, holders of mining
concessions are obliged to achieve a minimum production of US $100 per hectare
per year within six years following the year in which the respective mining
concession title is granted.  If this minimum production is not
reached, as of the first six months of the seventh year, the holder of the
concession shall pay a US $6 penalty per hectare per year until such production
is reached and penalties increase to US $20 in the twelfth
year.  Likewise, it is possible to avoid payment of the penalty if
evidence is submitted to the mining authorities that an amount ten times the
applicable penalty or more had been invested.




However,
this regime has been recently and partially amended providing for, among other
matters, increased minimum production levels, new terms for obtaining such
minimum production, increased penalties in case such minimum production is not
reached, and even the cancellation of mining concessions if minimum production
is not reached within certain terms.  Pursuant to this new regime, the
holder of the mining concession should achieve a minimum production of at least
one tax unit (S/. 3,500, approximately US $1,100) per hectare per year, within a
ten-year term following the year in which the mining concession title is
granted.  If such minimum production is not reached within the
referred term, the holder of the concession shall pay penalties equivalent to
10% of the tax unit.




If the
minimum production is not reached within a fifteen-year term following the
granting of the concession title, the mining concession shall be cancelled by
the mining authority, unless (i) a qualified force majeure event is evidenced to
and approved by the mining authority, or (ii) by paying the applicable penalties
and concurrently evidencing minimum investments of at least ten times the amount
of the applicable penalties; in which cases the concession may not be cancelled
up to a maximum term of five additional years.  If minimum production
is not reached within a twenty-year term following the granting of the
concession title, the concession shall inevitably be cancelled.




This
amended regime is currently applicable to all new mining concessions granted
since October 11, 2008. Regarding those mining concessions existing prior to
such date, the new term for obtaining the increased minimum production level or
otherwise pay the increased penalties pursuant to the amended regime shall be
counted as from the first business day of 2009.  Nevertheless, until
such new term for obtaining the increased minimum production level does not
expire, the minimum production level, the term for obtaining such minimum
production, the amount of the penalties and the causes for cancellation of the
mining concessions shall continue to be those provided in the original legal
framework existing since 1992.




The
amended regime shall not be applicable to (i) those concessions handed by the
Peruvian State through private investment promotion procedures, which shall
maintain the production and investment obligations contained in their respective
agreements, and/or (ii) to titleholders of concessions with mining stability
agreements in force.




Environmental
Laws




The
Peruvian Ministry of Energy and Mines ("MEM") regulates environmental affairs in
the mining sector, including establishing an environmental protection
regulations; while the Organism for Supervising Investment in Energy and Mining
verifies environmental compliance and imposes administrative sanctions, although
it is likely that in the near future this functions be assumed by the recently
created Ministry of Environment.




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Each
stage of exploration or mining requires some type of authorization or permit,
beginning with an application for an environmental permit for initial
exploration and continuing with an Environmental Impact Assessment ("EIA") for
mining, which includes public hearings.




For
permitting purposes, exploration activities in Peru are classified in two
categories:




·
            Category
      I projects:  Mining exploration activities that comprise
      any of the following:  (i) a maximum of twenty drilling
      platforms; (ii) a disturbed area of less than ten hectares considering
      drilling platforms, trenches, auxiliary facilities and access means; and,
      (iii) the construction of tunnels with a total maximum length of fifty
      meters.  Holders of these projects must submit an Environmental
      Impact Statement (“EIS”) before the MEM, which in principle, is subject to
      automatic approval upon its filing, and subject to subsequent (ex post)
      review by the latter.  Nevertheless, in any of the following
      cases, the project shall not be subject to automatic approval and shall
      necessarily obtain an express prior approval by MEM, which should be
      granted, in principle, within a term of two months since filing the EIS:
      (i) the project is located in a protected natural area or its buffer zone;
      (ii) the project is oriented to determining the existence of radioactive
      minerals; (iii) the platforms, drill holes, trenches, tunnels or other
      components would be located within certain specially environmental
      sensitive areas specified in the applicable regulations (e.g., glaciers,
      springs, water wells, groundwater wells, protection lands, primary woods,
      etc.); (iv) the project covers areas where mining environmental
      contingencies or non-environmental rehabilitated previous mining works,
      already exist.




·
            Category
      II projects:  Mining exploration activities that comprise
      any of the following: (i) more than twenty drilling platforms; (ii) a
      disturbed area of more than ten hectares considering drilling plants,
      trenches, auxiliary facilities and access means; and, (iii) the
      construction of tunnels over a total length of fifty
      meters.  These projects require an authorization that should be
      granted once the semi-detailed Environmental Impact Assessment ("EIA") is
      approved by the MEM. Such authorization should, in principle, take
      approximately four months.




Before
initiating construction or exploitation activities or the expansion of existing
operations, an EIA should be approved.  This process of authorization
involves public hearings in the place where the project is located and, in
general, should conclude within a term of 120 calendar days, although such
process can require between eight months and one year.




Holders
of mining activities performing mining exploration shall conduct remediation
works of disturbed areas, as part of the progressive closure of the
project.  Likewise, they are required to undertake the final closure
and post closure actions as set forth in the terms and conditions in the
approved environmental instrument.




If the
holder carries out mining exploration activities involving the removal of more
than 10,000 tonnes of material, or more than 1,000 tonnes of material with a
potential neutralization ("PN") over potential acidity (“PA”) relation lower
than 3 (PN/PA<3), then they shall be required to file a Mine Closure Plan
(“MCP”) along with the corresponding environmental instrument, as well as to
establish a financial guarantee to secure compliance with such MCP.




Holders
of mining exploitation activities must file a MCP before the MEM within one year
of the approval of their EIA.  The MCP must be implemented from the
beginning of the mining operation.  Semi-annual reports must be filed
evidencing compliance with the MCP.  An environmental guarantee
covering the MCP’s estimated costs is also required to be granted.




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Mining
Royalties




Peruvian
law requires that concession holders pay a mining royalty as consideration for
the extraction of mineral resources.  The mining royalty is payable
monthly on a variable cumulative rate of 1% to 3% of the value of the ore
concentrate or equivalent, calculated in accordance with price quotations in
international markets, subject to certain deductions such as indirect taxes,
insurance, freight and other specified expenses.  The mining royalty
payable is determined based on the following schedule: (i) under US $60 million
of annual sales of concentrates: 1% royalty; (ii) in excess of US $60 million
and up to US $120 million of annual sales: 2% royalty; and (iii) in excess
of US $120 million of annual sales: 3% royalty.




Competition




We are an
exploration stage mineral resource exploration company that competes with other
mineral resource exploration companies for financing and for the acquisition of
new mineral properties.  Many of the mineral resource exploration
companies with whom we compete have greater financial and technical resources
than those available to us.  Accordingly, these competitors may be
able to spend greater amounts on acquisitions of mineral properties of merit, on
exploration of their mineral properties and on development of their mineral
properties.  In addition, they may be able to afford more geological
expertise in the targeting and exploration of mineral
properties.  This competition could result in competitors having
mineral properties of greater quality and interest to prospective investors who
may finance additional exploration and development.  This competition
could adversely impact on our ability to achieve the financing necessary for us
to conduct further exploration of our mineral properties.  We will
also compete with other mineral exploration companies for financing from a
limited number of investors that are prepared to make investments in mineral
exploration companies.  The presence of competing mineral exploration
companies may impact on our ability to raise additional capital in order to fund
our exploration programs if investors are of the view that investments in
competitors are more attractive based on the merit of the mineral properties
under investigation and the price of the investment offered to
investors.  We will also be compete with other mineral companies for
available resources, including, but not limited to, professional geologists,
camp staff, mineral exploration supplies and drill rigs.




Intellectual
Property




We do not
own, either legally or beneficially, any patent or trademark.




Employees




We have
no full-time employees at the present time.  Our executive officers do
not devote their services full time to our operations.  We engage
contractors from time to time to consult with us on specific corporate affairs
or to perform specific tasks in connection with our exploration
programs.  As of December 31, 2009, we engaged approximately 21
contractors that provided work to us on a recurring basis.




Research
and Development Expenditures




We have
not incurred any research or development expenditures since our
incorporation.




Subsidiaries




Constitution
Mining SA is a subsidiary entity which was registered with the General
Inspection of Corporations in Argentina on March 4, 2008 and formed for the
purpose of acquiring and exploring natural resource properties in
Argentina.




We own a
50% interest in the issued and outstanding stock of Bacon Hill Invest Inc.
(“Bacon Hill”), a corporation incorporated under the laws of
Panama.  The remaining 50% interest in the issued and outstanding
stock of Bacon Hill is owned by Temasek Investments Inc., a company incorporated
under the laws of Panama.  Bacon Hill indirectly owns the mineral and
mineral rights to certain properties located in Peru held by its subsidiary,
Compañía Minera Marañón S.A.C.




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ITEM 1A.    Risk
Factors.




You
should carefully consider the following risk factors in evaluating our business
and us.  The factors listed below represent certain important factors
that we believe could cause our business results to differ.  These
factors are not intended to represent a complete list of the general or specific
risks that may affect us.  It should be recognized that other risks
may be significant, presently or in the future, and the risks set forth below
may affect us to a greater extent than indicated.  If any of the
following risks occur, our business, financial condition or results of
operations could be materially and adversely affected.  You should
also consider the other information included in this annual report and
subsequent quarterly reports filed with the SEC.




Risk
Factors




Risks
Associated With Our Business




Our
accountants have raised substantial doubt with respect to our ability to
continue as a going concern.




As noted
in our financial statements, we have incurred a net loss of $16,662,828 for the
period from inception on March 6, 2000 to December 31, 2009 and have no present
source of revenue.  At December 31, 2009, we had a working capital
deficiency of $14,807,730.  As of December 31, 2009, we had cash and
cash equivalents in the amount of US $205,125.  We will have to raise
additional funds to meet our currently budgeted operating requirements for the
next twelve months.




The audit
report of James Stafford, Inc., Chartered Accountants, for the fiscal year ended
December 31, 2009 and 2008 contained a paragraph that emphasizes the substantial
doubt as to our continuance as a going concern.  This is a significant
risk that we may not be able to generate and/or raise enough resources to remain
operational for an indefinite period of time.




We
own the options to acquire the mining and mineral rights underlying certain
properties and if we fail to perform the obligations necessary to exercise these
options we will lose our options and cease operations.




We hold
options to acquire the mineral and mining rights underlying certain properties
located in northeastern Peru, subject to certain conditions.  If we
fail to meet the requirements of the amended agreement under which we acquired
such options, including any payments and/or any exploration obligations that we
have regarding these properties, we may lose our right to exercise the options
to acquire the mineral and mining rights underlying these
properties.  If we do not fulfill these conditions, then our ability
to commence or continue operations could be materially limited.  In
addition, substantially all of our assets will be put into commercializing our
rights to the areas covered by these options.  Accordingly, any
adverse circumstances that affect the areas covered by these option agreements
and our rights thereto would affect us and your entire investment in shares of
our common stock.  If any of these situations were to arise, we would
need to consider alternatives, both in terms of our prospective operations and
for the financing of our activities.  Management cannot provide
assurance that we will ultimately achieve profitable operations or become
cash-flow positive, or raise additional debt and/or equity
capital.  If we are unable to raise additional capital in the near
future, we will experience liquidity problems and management expects that we
will need to curtail operations, liquidate assets, seek additional capital on
less favorable terms and/or pursue other remedial measures, including ceasing
operations.




We
have a limited operating history and have incurred losses that we expect to
continue into the future.




We have
not yet located any mineral reserve, nor are there any proven reserves on any of
the properties for which we hold options, and we have never had any revenues
from our operations.  In addition, we have a very limited operating
history upon which an evaluation of our future success or failure can be
made.  We have only recently taken steps in a plan to engage in the
acquisition of interests in exploration and development properties, and it is
too early to determine whether such steps will prove successful.  Our
business plan is in its early stages and faces numerous regulatory, practical,
legal and other obstacles.  At this early stage of our operation, we
also expect


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to face
the risks, uncertainties, expenses and difficulties frequently encountered by
companies at the start-up stage of their business development. We cannot be sure
that we will be successful in addressing these risks and uncertainties, and our
failure to do so could have a materially adverse effect on our financial
condition.




No
assurances can be given that we will be able to successfully complete the
purchase of mining rights to any properties, including the ones for which we
currently hold options.  Our ability to achieve and maintain
profitability and positive cash flow over time will be dependent upon, among
other things, our ability to (i) identify and acquire properties or interests
therein that ultimately have probable or proven mineral reserves, (ii) sell such
mining properties or interests to strategic partners or third parties or
commence the production of a mineral deposit, (iii) produce and sell minerals at
profitable margins and (iv) raise the necessary capital to operate during this
possible extended period of time.  At this stage in our development,
it cannot be predicted how much financing will be required to accomplish these
objectives.




We
have no known reserves and we may not find any mineral resources or, if we find
mineral resources, the deposits may be uneconomic or production from those
deposits may not be profitable.




Our due
diligence activities have been limited, and to a great extent, have relied upon
information provided to us by third parties.  We have not established
that any of the properties for which we hold options contain adequate amounts of
gold or other mineral reserves to make mining any of the properties economically
feasible to recover that gold or other mineral reserves, or to make a profit in
doing so.  If we do not, our business will fail.  If we
cannot find economic mineral resources or if it is not economic to recover the
mineral resources, we will have to cease operations.




We
may not have access to all of the supplies and materials we need to begin
exploration that could cause us to delay or suspend operations.




Competition
and unforeseen limited sources of supplies in the industry could result in
occasional spot shortages of supplies, such as explosives, and certain
equipment, such as bulldozers and excavators, that we might need to conduct
exploration.  We have not attempted to locate or negotiate with any
suppliers of products, equipment or materials.  We will attempt to
locate products, equipment and materials.  If we cannot find the
products and equipment we need, we will have to suspend our exploration plans
until we do find the products and equipment we need.




We
do not have enough money to complete our exploration and consequently may have
to cease or suspend our operations unless we are able to raise additional
financing.




We
presently do not have sufficient capital to exercise our options to acquire the
mineral and mining rights underlying certain property located in northeastern
Peru.  Although management believes that sources of financing are
available to complete the acquisition of these property interests over time, no
assurances can be given that these financing sources will ultimately be
sufficient or available when required.  Other forms of financing, if
available, may be on terms that are unfavorable to our
stockholders.




As we
cannot assure a lender that we will be able to successfully explore and develop
our mineral properties, we may find it difficult to raise debt financing from
traditional lending sources.  We have traditionally raised our
operating capital from sales of equity and debt securities, but there can be no
assurance that we will continue to be able to do so.  If we cannot
raise the money that we need to continue exploration of our mineral properties,
we may be forced to delay, scale back, or eliminate our exploration
activities.  If any of these were to occur, there is a substantial
risk that our business would fail.




Our
proposed acquisition of certain mining claims and leasehold interests for
exploration properties located in Nevada is subject to numerous conditions and
contingencies.




On
December 2, 2009, we entered into a letter of intent with Seabridge Gold Inc., a
Canadian corporation (“Seabridge”), to acquire all of Seabridge’s interests in
certain mining claims and leasehold interests for certain exploration properties
located in Nevada.  The parties are negotiating the final terms of a
definitive agreement.  The




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terms of
the definitive agreement being negotiated between the parties contemplates that
closing of the transaction is anticipated to occur on or about May 15,
2010.  Closing of the transaction is subject to a number of conditions
and contingences, including the following:




·
            the
      approval of the parties’ respective board of directors;
  and




·
            receipt
      of all necessary third party consents, approval and
    waivers.




We can
give no assurance that these and other conditions will ever be satisfied to
allow us to complete the proposed acquisition in accordance with the proposed
terms or at all.




In
the event that we successfully complete the proposed acquisition of certain
mining claims and leasehold interests for exploration properties located in
Nevada, the consideration payable on the closing of this transaction would have
a significant adverse impact on our resources.




On
December 2, 2009, we entered into a letter of intent with Seabridge to acquire
all of Seabridge’s interests in certain mining claims and leasehold interests
for certain exploration properties located in Nevada.  The
consideration for these exploration properties was contemplated in the letter of
intent to consist of the following:  staged cash payments totaling $3
million; a $1 million convertible debenture; and 3 million shares of our common
stock.  We have to raise additional funds to meet our currently
budgeted operating requirements for the next twelve months and presently would
be unable to meet any obligations we may incur in connection with the
contemplated acquisition of Seabridge’s interests in certain mining claims and
leasehold interests for exploration properties located in Nevada.  If
we are unable to raise additional capital in the near future, we will experience
liquidity problems and management expects that we will need to curtail
operations, liquidate assets, seek additional capital on less favorable terms
and/or pursue other remedial measures including ceasing
operations.  Even if we succeed in raising additional capital in the
near future, the consideration payable on the closing of the contemplated
transaction with Seabridge would have a significant adverse impact on our
resources and may still result in the need to curtail operations, liquidate
assets, seek additional capital on less favorable terms and/or pursue other
remedial measures including ceasing operations




Our
success is dependent upon a limited number of people.




The
ability to identify, negotiate and consummate transactions that will benefit us
is dependent upon the efforts of our management team.  The loss of the
services of any member of our management could have a material adverse effect on
us.




Our
business will be harmed if we are unable to manage growth.




Our
business may experience periods of rapid growth that will place significant
demands on our managerial, operational and financial resources.  In
order to manage this possible growth, we must continue to improve and expand our
management, operational and financial systems and controls, particularly those
related to subsidiaries that will be doing business in Peru.  We will
need to expand, train and manage our employee base and/or retain qualified
contractors.  We must carefully manage our mining exploration
activities.  No assurances can be given that we will be able to timely
and effectively meet such demands.




We
may not be able to attract and retain qualified personnel necessary for the
implementation of our business strategy and mineral exploration
programs.




Our
future success depends largely upon the continued service of board members,
executive officers and other key personnel.  Our success also depends
on our ability to continue to attract, retain and motivate qualified personnel,
particularly employees, consultants and contractors for our operations in
Peru.  Personnel represents a significant asset, and the competition
for such personnel is intense in the mineral exploration industry.  We
may have particular difficulty attracting and retaining key personnel in the
initial phases of our operations, particularly in Peru.




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Our
officers and directors may have conflicts of interest and do not devote full
time to the our operations.




Our
officers and directors may have conflicts of interest in that they are and may
become affiliated with other mining companies.  In addition, our
officers do not devote full time to our operations.  Until such time
that we can afford executive compensation commensurate with that being paid in
the marketplace, our officers will not devote their full time and attention to
our operations.  No assurances can be given as to when we will be
financially able to engage our officers on a full-time basis.




Some
of our officers and directors are located outside of the United States, you may
have no effective recourse against our us or our management for misconduct and
may not be able to enforce judgment and civil liabilities against our officers,
directors, experts and agents.




Some of
our 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 enforce within the United States any judgments
obtained against our officers or directors, including judgments predicated upon
the civil liability provisions of the securities laws of the United States or
any state thereof.




Risks
Associated With Mining




All
of our properties are in the exploration stage.  There is no assurance
that we can establish the existence of any mineral resource on any of our
properties in commercially exploitable quantities.  Until we can do
so, we cannot earn any revenues from operations and if we do not do so we will
lose all of the funds that we expend on exploration.  If we do not
discover any mineral resource in a commercially exploitable quantity, our
business will fail.




We have
not established that any of our properties contain any commercially exploitable
mineral reserve, nor can there be any assurance that we will be able to do
so.  If we do not, our business will fail.  A mineral
reserve is defined by the Securities and Exchange Commission in its Industry
Guide 7 (which can be viewed over the Internet at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7)
as that part of a mineral deposit which could be economically and legally
extracted or produced at the time of the reserve determination.  The
probability of an individual prospect ever having a “reserve” that meets the
requirements of the Securities and Exchange Commission’s Industry Guide 7 is
extremely remote; in all probability, our mineral resource property does not
contain any ‘reserve’ and any funds that we spend on exploration will probably
be lost.




Even if
we do eventually discover a mineral reserve on one or more of our properties,
there can be no assurance that we will be able to develop our properties into
producing mines and extract those resources.  Both mineral exploration
and development involve a high degree of risk and few properties that are
explored are ultimately developed into producing mines.  If we do
discover mineral resources in commercially exploitable quantities on any of our
properties, we will be required to expend substantial sums of money to establish
the extent of the resource, develop processes to extract it and develop
extraction and processing facilities and infrastructure.




The
commercial viability of an established mineral deposit will depend on a number
of factors including, by way of example, the size, grade and other attributes of
the mineral deposit, the proximity of the resource to infrastructure, such as a
smelter, roads and a point for shipping, government regulation and market
prices.  Most of these factors will be beyond our control, and any of
them could increase costs and make extraction of any identified mineral resource
unprofitable.




Mineral
operations are subject to applicable law and government regulation. Even if we
discover a mineral resource in a commercially exploitable quantity, these laws
and regulations could restrict or prohibit the exploitation of that mineral
resource.  If we cannot exploit any mineral resource that we might
discover on our properties, our business may fail.




Both
mineral exploration and extraction require permits from various foreign,
federal, state, provincial and local governmental authorities and are governed
by laws and regulations, including those with respect to prospecting, mine
development, mineral production, transport, export, taxation, labor standards,
occupational health,




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waste
disposal, toxic substances, land use, environmental protection, mine safety and
other matters.  There can be no assurance that we will be able to
obtain or maintain any of the permits required for the continued exploration of
our mineral properties or for the construction and operation of a mine on our
properties at economically viable costs.  If we cannot accomplish
these objectives, our business could fail.




We
believe that we are in compliance with all material laws and regulations that
currently apply to our activities, but there can be no assurance that we can
continue to do so.  Current laws and regulations could be amended and
we might not be able to comply with them, as amended.  Further, there
can be no assurance that we will be able to obtain or maintain all permits
necessary for our future operations, or that we will be able to obtain them on
reasonable terms.  To the extent such approvals are required and are
not obtained, we may be delayed or prohibited from proceeding with planned
exploration or development of our mineral properties.




If
we establish the existence of a mineral reserve on any of our properties, we
will require additional capital in order to develop the property into a
producing mine. If we cannot raise this additional capital, we will not be able
to exploit the reserve and our business could fail.




If we do
discover a mineral reserve on any of our properties, we will be required to
expend substantial sums of money to establish the extent of the reserve, develop
processes to extract it and develop extraction and processing facilities and
infrastructure.  Although we may derive substantial benefits from the
discovery of a reserve, there can be no assurance that it will be large enough
to justify commercial operations, nor can there be any assurance that we will be
able to raise the funds required for development on a timely
basis.  If we cannot raise the necessary capital or complete the
necessary facilities and infrastructure, our business may fail.




Because
our property interest and exploration activities in Peru are subject to
political, economic and other uncertainties, situations may arise that could
have a significantly adverse material impact on us.




Our
activities in Peru are subject to political, economic and other uncertainties,
including the risk of expropriation, nationalization, renegotiation or
nullification of existing contracts, mining licenses and permits or other
agreements, changes in laws or taxation policies, currency exchange
restrictions, changing political conditions and international monetary
fluctuations.  Future government actions concerning the economy,
taxation, or the operation and regulation of nationally important facilities
such as mines could have a significant effect on our plans and on our ability to
operate.  No assurances can be given that our plans and operations
will not be adversely affected by future developments in those jurisdictions
where we hold property interests.




Because
we presently do not carry title insurance and do not plan to secure any in the
future, we are vulnerable to loss of title.




We do not
maintain insurance against title.  Title on mineral properties and
mining rights involves certain inherent risks due to the difficulties of
determining the validity of certain claims as well as the potential for problems
arising from the frequently ambiguous conveyance history characteristic of many
mining properties.  Disputes over land ownership are common,
especially in the context of resource developments.  We cannot give
any assurance that title to such properties will not be challenged or impugned
and cannot be certain that we will have or acquire valid title to these mining
properties.  The possibility also exists that title to existing
properties or future prospective properties may be lost due to an omission in
the claim of title.  As a result, any claims against us may result in
liabilities we will not be able to afford, resulting in the failure of our
business.




Because
we are subject to various governmental regulations and environmental risks, we
may incur substantial costs to remain in compliance.




Our
activities in Peru are subject to Peruvian and local laws and regulations
regarding environmental matters, the abstraction of water, and the discharge of
mining wastes and materials.  Any significant mining operations will
have some environmental impact, including land and habitat impact, arising from
the use of land for mining and related activities, and certain impact on water
resources near the project sites, resulting from water use, rock disposal and
drainage run-off.  No assurances can be given that such environmental
issues will not cause our operations in the future to fail.




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The
Peruvian and/or local government in the jurisdictions where we currently hold
property interests could require us to remedy any negative environmental
impact.  The costs of such remediation could cause us to
fail.  Future environmental laws and regulations could impose
increased capital or operating costs on us and could restrict the development or
operation of any mines.




We have,
and will in the future, engage consultants to assist us with respect to our
operations in Peru.  We are beginning to address the various
regulatory and governmental agencies, and the rules and regulations of such
agencies, in connection with the options for the properties in
Peru.  No assurances can be given that we will be successful in our
efforts.  Further, in order for us to operate and grow our business in
Peru, we need to continually conform to the laws, rules and regulations of such
country and local jurisdiction where we operate.  It is possible that
the legal and regulatory environment pertaining to the exploration and
development of mining properties will change.  Uncertainty and new
regulations and rules could dramatically increase our cost of doing business, or
prevent us from conducting our business; both situations could cause us to
fail.




Mineral
exploration and development is subject to extraordinary operating
risks.  We do not currently insure against these risks.  In
the event of a cave-in or similar occurrence, our liabilities may exceed our
resources, which could cause our business to fail.




Mineral
exploration, development and production involves many risks which even a
combination of experience, knowledge and careful evaluation may not be able to
overcome.  Our operations will be subject to all the hazards and risks
inherent in the exploration, development and production of resources, including
liability for pollution, cave-ins or similar hazards against which we cannot
insure or against which we may elect not to insure.  Any such event
could result in work stoppages and damage to property, including damage to the
environment.  We do not currently maintain any insurance coverage
against these operating hazards.  The payment of any liabilities that
arise from any such occurrence could cause us to fail.




Mineral
prices are subject to dramatic and unpredictable fluctuations.




We expect
to derive revenues, if any, from the extraction and sale of precious and base
metals such as gold and silver.  The price of those commodities has
fluctuated widely in recent years, and is affected by numerous factors beyond
our control including international, economic and political trends, expectations
of inflation, currency exchange fluctuations, interest rates, global or regional
consumptive patterns, speculative activities and increased production due to new
extraction developments and improved extraction and production
methods.  The effect of these factors on the price of base and
precious metals, and, therefore, the economic viability of any of our
exploration projects, cannot accurately be predicted.




The
mining industry is highly competitive and there is no assurance that we will
continue to be successful in acquiring property interests.  If we
cannot continue to acquire interests in properties to explore for mineral
resources, we may be required to reduce or cease operations.




The
mineral exploration, development, and production industry is largely
unintegrated.  We compete with other exploration companies looking for
mineral resource properties.  While we compete with other exploration
companies in the effort to locate and license mineral resource properties, we
will not compete with them for the removal or sales of mineral products from our
properties if we should eventually discover the presence of them in quantities
sufficient to make production economically feasible.  Readily
available markets exist worldwide for the sale of gold and other mineral
products.  Therefore, we will likely be able to sell any gold or
mineral products that we identify and produce.




We
compete with many companies possessing greater financial resources and technical
facilities.  This competition could adversely affect our ability to
acquire suitable prospects for exploration in the future as well as our ability
to recruit and retain qualified personnel.  Accordingly, there can be
no assurance that we will acquire any interest in additional mineral resource
properties that might yield reserves or result in commercial mining
operations.




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Risks
Associated With Our Common Stock




Trading on the over-the-counter
bulletin board may be volatile and sporadic, which could depress the market
price of our common stock and make it difficult for our stockholders to resell
their shares.




Our
common stock is quoted on the over-the-counter bulletin board service of the
Financial Industry Regulatory Authority (the “OTCBB”).  Trading in
stock quoted on the OTCBB is often thin and characterized by wide fluctuations
in trading prices, due to many factors that may have little to do with our
operations or business prospects.  This volatility could depress the
market price of our common stock for reasons unrelated to operating
performance.  Moreover, the OTCBB is not a stock exchange, and trading
of securities on the OTCBB is often more sporadic than the trading of securities
listed on a quotation system like Nasdaq or a stock exchange like
Amex.  These factors may result in investors having difficulty
reselling any shares of our common stock.




Because
our common stock is quoted and traded on the OTCBB, short selling could increase
the volatility of our stock price.




Short
selling occurs when a person sells shares of stock which the person does not yet
own and promises to buy stock in the future to cover the sale.  The
general objective of the person selling the shares short is to make a profit by
buying the shares later, at a lower price, to cover the
sale.  Significant amounts of short selling, or the perception that a
significant amount of short sales could occur, could depress the market price of
our common stock. In contrast, purchases to cover a short position may have the
effect of preventing or retarding a decline in the market price of our common
stock, and together with the imposition of the penalty bid, may stabilize,
maintain or otherwise affect the market price of our common stock.  As
a result, the price of our common stock may be higher than the price that
otherwise might exist in the open market.  If these activities are
commenced, they may be discontinued at any time.  These transactions
may be effected on the OTCBB or any other available markets or
exchanges.  Such short selling if it were to occur could impact the
value of our stock in an extreme and volatile manner to the detriment of our
shareholders.




Because
the SEC imposes additional sales practice requirements on brokers who deal in
our shares that are penny stocks, some brokers may be unwilling to trade them.
This means that you may have difficulty in reselling your shares and may cause
the price of the shares to decline.




Our stock
is a penny stock.  The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines “penny stock” to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions.  Our
securities are covered by the penny stock rules, which impose additional sales
practice requirements on broker-dealers who sell to persons other than
established customers and “accredited investors”.  The term
“accredited investor” refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse.  The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document in a form prepared by the SEC which provides information
about penny stocks and the nature and level of risks in the penny stock
market.  The broker-dealer also must provide the customer with current
bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer’s
account.  The bid and offer quotations and the broker-dealer and
salesperson compensation information must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer’s confirmation.  In addition, the
penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from these rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser’s written agreement to the
transaction.  These disclosure requirements may have the effect of
reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules.  Consequently, these penny
stock rules may affect the ability of broker-dealers to trade our
securities.  We believe that the penny stock rules discourage investor
interest in, and limit the marketability of, our common stock.


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In
addition to the “penny stock” rules promulgated by the Securities and Exchange
Commission, Financial Industry Regulatory Authority (“FINRA”) has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer.  Prior to recommending speculative, low-priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s financial status,
tax status, investment objectives and other information.  Under
interpretations of these rules, FINRA believes that there is a high probability
that speculative low-priced securities will not be suitable for at least some
customers.  The FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock.




Indemnification
of officers and directors.




Our
Articles of Incorporation and Bylaws contain broad indemnification and liability
limiting provisions regarding our officers, directors and employees, including
the limitation of liability for certain violations of fiduciary
duties.  Our stockholders therefore will have only limited recourse
against the individuals.




ITEM 1B.     Unresolved Staff
Comments.




None.




ITEM 2. Properties.




Description
of our Mineral Property Interests




The
Peru Property




Our
property interests located in Peru are in the exploration
stage.  These properties are without known reserves and the proposed
plan of exploration detailed below is exploratory in nature.  These
properties are described below.




We
entered into a Mineral Right Option Agreement with Temasek Investments Inc.
(“Temasek”), a company incorporated under the laws of Panama, on
September 29, 2008 (the “Effective Date”), as amended and supplemented by
Amendment No. 1, dated May 12, 2009 (“Amendment No. 1”) and Amendment No. 2,
dated October 29, 2009 (“Amendment No. 2”) (collectively, the “Option
Agreement”), in order to acquire four separate options from Temasek, each
providing for the acquisition of a twenty-five percent interest in certain
mineral rights (the “Mineral Rights”) in certain properties in Peru, potentially
resulting in the Company's acquisition of one hundred percent of the Mineral
Rights upon exercise of all four options.  The Mineral Rights are
currently owned by Compañía Minera Marañón S.A.C. (“Minera
Marañón”).  Bacon Hill Invest Inc. (“Bacon Hill”), a corporation
incorporated under the laws of Panama, owns 999 shares of the 1,000 shares of
Minera Marañón that are issued and outstanding.  Temasek owns the
single remaining share of Minera Marañón.  The acquisition of each
twenty-five percent interest in the Mineral Rights will occur through the
transfer by Temasek to us of twenty-five percent of the outstanding shares of
Bacon Hill upon exercise of each option.


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A
description of the Mineral Rights is set forth below:




Name
            Area
              (hectares)
            Dept.
            Province
            Province
            ObservationAixa
      2
            1000
            Loreto
            Datem
      del Marañon
            MansericheAlana
      10
            900
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      11
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      12
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      13
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      14
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      15
            800
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      16
            800
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      17
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      18
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      19
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      4
            900
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      5
            700
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      6
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      7
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      8
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPAlana
      9
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Fully
      overlap Zona de Amortiguamiento ANPBianka
      5
            1000
            Loreto
            Datem
      del Marañon
            MansericheCastalia
      1
            1000
            Loreto
            Datem
      del Marañon
            MansericheCastalia
      2
            1000
            Loreto
            Datem
      del Marañon
            MansericheCastalia
      3
            500
            Loreto
            Datem
      del Marañon
            Manseriche    - 18
-
 Table of Contents
   Name
            Area

              (hectares)
            Dept.
            Province
            Province
            ObservationDelfina
      1
            900
            Amazonas
            Condorcanqui
            Nieva
            Partially
      overlap Zona de Amortiguamiento ANPDelfina
      2
            900
            Amazonas
            Condorcanqui
            Nieva
            Partially
      overlap Zona de Amortiguamiento ANPDelfina
      3
            1000
            Amazonas
            Condorcanqui
            Nieva
            Partially
      overlap Zona de Amortiguamiento ANPDelfina
      4
            700
            Amazonas
            Condorcanqui
            Nieva
            Partially
      overlap Zona de Amortiguamiento ANPDelfina
      5
            1000
            Amazonas
            Condorcanqui
            Nieva
            Partially
      overlap Zona de Amortiguamiento ANPMika
      1
            600
            Loreto
            Datem
      del Marañon
            MansericheMika
      10
            900
            Loreto
            Datem
      del Marañon
            Manseriche
            Partially
      overlap Zona de Amortiguamiento ANPMika
      2
            1000
            Loreto
            Datem
      del Marañon
            MansericheMika
      3
            900
            Loreto
            Datem
      del Marañon
            MansericheMika
      4
            1000
            Loreto
            Datem
      del Marañon
            MansericheMika
      5
            1000
            Loreto
            Datem
      del Marañon
            MansericheMika
      6
            1000
            Loreto
            Datem
      del Marañon
            MansericheMika
      7
            900
            Loreto
            Datem
      del Marañon
            MansericheMika
      8
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
            Partially
      overlap Zona de Amortiguamiento ANPMika
      9
            1000
            Loreto
            Datem
      del Marañon
            MansericheRosalba
      1
            900
            Loreto
            Datem
      del Marañon
            MansericheRosalba
      2
            900
            Loreto
            Datem
      del Marañon
            MansericheRosalba
      3
            1000
            Loreto
            Datem
      del Marañon
            MansericheRosalba
      4
            1000
            Loreto
            Datem
      del Marañon
            MansericheRosalba
      5
            1000
            Loreto
            Datem
      del Marañon
            Manseriche
      - Barranca




We
exercised the initial twenty-five percent option, which provided for the
acquisition of a twenty-five percent interest in the Mineral Rights, by paying
Temasek a total of $750,000 and issuing 2,000,000 shares of our common stock to
Temasek, on or about October 23, 2008 in accordance with the terms of the Option
Agreement.
  We
exercised the second twenty-five percent option, resulting in our acquisition of
an aggregate of a fifty percent interest in the Mineral Rights, by paying
Temasek an additional $750,000 and issuing an additional 2,500,000 shares of our
common stock to Temasek, on or about November 2, 2009 in accordance with the
terms of the Option Agreement.




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Under the
terms of the Option Agreement, we may exercise the third twenty-five percent
option, resulting in our acquisition of a seventy-five percent interest in the
Mineral Rights, after we have fulfilled the following conditions:




·
            Exercise
      of the second twenty-five percent option, resulting in our acquisition of
      a fifty percent interest in the Mineral Rights, within 13 months from the
      Effective Date  (October 29, 2009) or as soon as practicable
      thereafter, (which event occurred November 2,
  2009);




·
            Issuance
      of an additional 2,000,000 shares of our common stock to Temasek, or to an
      assignee as indicated by Temasek, within 13 months as from the Effective
      Date (October 29, 2009) or as soon as practicable thereafter (which shares
      were issued in November 2009); and




·
            Payment
      of an additional $3,000,000 to Temasek on or before March 31,
      2010.




We will
require additional financing in order to be able to exercise the third
twenty-five percent option.  There can be no assurance that we will be
successful in securing the necessary funding to exercise the third twenty-five
percent option.  Provided we are successful in securing additional
financing, we intend to exercise the third twenty-five percent option on or
before March 31, 2010.  In the event that we are unable to secure
additional financing in order to be able to exercise the third twenty-five
percent option in the time frame set forth above or secure an extension for
payment, our ownership interest in the Mineral Rights may be limited to our
current fifty percent interest.




We may
exercise the fourth twenty-five percent option, resulting in our acquisition of
a one hundred percent interest in the Mineral Rights, after fulfilling the
following conditions within eighteen months of the Effective Date (March 29,
2010):




·
            Payment
      of an additional $5,000,000 to Temasek,
and




·
            Issuance
      of an additional 4,000,000 additional shares of our common stock to
      Temasek.




We will
require additional financing in order to be able to exercise the fourth
twenty-five percent option.  There can be no assurance that we will be
successful in securing the necessary funding to exercise the fourth twenty-five
percent option.  Provided we are successful in securing additional
financing, we intend to exercise the fourth twenty-five percent option within
eighteen months of March 29, 2010.  In the event that we have
exercised the third twenty-five percent option, but are unable to secure
sufficient financing in order to be able to exercise the fourth twenty-five
percent option in the time frame set forth above, our ownership interest in the
Mineral Rights may be limited to a seventy-five percent interest, provided we
have completed the exercise of the third twenty-five percent
option.




If we are
able to fulfill the conditions set forth above, resulting in our acquisition of
a one hundred percent interest in the Mineral Rights, Temasek will hold its
single share of Minera Marañón in trust for our sole benefit and hold the share
strictly in accordance with our instructions.




In the
event that we are able to acquire a one hundred percent interest in the Mineral
Rights, Temasek would then be entitled to an annual 2.5% net returns royalty
related to the Mineral Rights.  However, if we pay Temasek $2,000,000
within ninety days of our acquisition of a one hundred percent interest in the
Mineral Rights, Temasek will only be entitled to an annual 1.0% net returns
royalty related to the Mineral Rights.


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 Table of Contents




If we
fail to exercise the third twenty-five percent option, resulting in our
continuing to hold our current fifty percent interest in the Mineral Rights but
failing to acquire a one hundred percent interest in the Mineral Rights, the
Option Agreement provides that we and Temasek will form a joint venture for the
purpose of placing the Peru Property into commercial production.  In
the event that we enter into a joint venture agreement with Temasek, our
responsibilities under the joint venture would include developing a feasible
mining project and all necessary facilities and Temasek shall retain a carried
free interest in the mining rights.  If we enter into a joint venture
with Temasek, but do not develop a feasible mining project within three years of
the Effective Date (September 29, 2011), we will be required to pay Temasek an
advance minimum mining royalty of $500,000 per year, which will be deducted from
Temasek’s net return royalty on the Mineral Rights.




Expansion
of Peru Property




On
January 25, 2010 (the “Effective Date”), we entered into a Mineral Rights Option
Agreement (the “Option Agreement”) with Temasek.  Pursuant to the
Option Agreement, we acquired three separate options from Temasek, each
providing for the acquisition of an approximately one-third interest in certain
mineral rights (the “Mineral Rights”), in certain properties in Peru (the “Peru
Property”) that abut the other property interests we already have in Peru
described above.  Pursuant to the Option Agreement, the exercise of
all three options would result in our acquisition of one hundred percent of the
Mineral Rights.  The Mineral Rights are currently owned by Minera
Saramiriza S.A.C. (“Minera Saramiriza”), a corporation incorporated under the
laws of Peru.  Woodburn Investments, Inc. (“Woodburn”), a wholly-owned
subsidiary of Temasek, owns 999 shares of the 1,000 shares of Minera Saramiriza
that are issued and outstanding.  Temasek owns the single remaining
share of Woodburn.  Our acquisition of each thirty-three percent
interest in the Mineral Rights is structured to occur through the transfer to us
of thirty-three percent of the outstanding shares of Woodburn upon the exercise
of each of the three options.




A
description of the Mineral Rights is set forth below:




Name
            Area
      (ha)
            Department
            Province
            District
            ObservationAixa
      1
            1000
            Loreto
            Datem
      del Marañon
            MansericheAlana
      1
            600
            Loreto
            Datem
      del Marañon
            Manseriche-Morona
            Overlaps
              010188704,
      010188604, 010188504Alana
      2
            600
            Loreto
            Datem
      del Marañon
            Manseriche-
      MoronaAlana
      3
            800
            Loreto
            Datem
      del Marañon
            Manseriche
            Overlaps
      010045107Casandra
      1
            1000
            Loreto
            Datem
      del Marañon
            Barranca-MansericheCasandra
      2
            1000
            Loreto
            Datem
      del Marañon
            Barranca-
      MoronaCasandra
      3
            900
            Loreto
            Datem
      del Marañon
            Barranca-
      MoronaCasandra
      4
            1000
            Loreto
            Datem
      del Marañon
            BarrancaCasandra
      5
            1000
            Loreto
            Datem
      del Marañon
            Barranca




We may
exercise the initial option to acquire a thirty-three percent interest in the
Mineral Rights by fulfilling the following conditions:




·
            Issuance
      of 500,000 shares of our common stock to Temasek within thirty (30) days
      from the Effective Date (issued March 19,
2010);




·
            Payment
      of $250,000 to Temasek within twelve months of the Effective Date;
      and




·
            Issuance
      of 1,000,000 shares of our common stock to Temasek or its designee within
      twelve months of the Effective
Date.




We may
exercise the second option to acquire the second, thirty-three percent interest
in the Mineral Rights, resulting in the acquisition of a sixty-six percent
interest in the Mineral Rights, by fulfilling the following
conditions:




·
            Exercise
      of the initial option to acquire a thirty-three percent interest in the
      Mineral Rights;




·
            Payment
      of an additional $1,000,000 to Temasek within twenty-four months of the
      Effective Date; and




·
            Issuance
      of an additional 1,000,000 shares of our common stock to Temasek or its
      designee within twenty-four months from the Effective
  Date.




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We may
exercise the third option to acquire the final, thirty-four percent interest in
the Mineral Rights, resulting in the acquisition of a one-hundred percent
interest in the Mineral Rights, by fulfilling the following
conditions:




·
            Exercise
      of the first and  second options to acquire an aggregate
      sixty-six percent interest in the Mineral
  Rights;




·
            Payment
      of an additional $2,000,000 to Temasek within thirty-six months of the
      Effective Date; and




·
            Issuance
      of an additional 2,000,000 shares of our common stock to Temasek or its
      designee within thirty-six months from the Effective
  Date.




Upon our
acquisition of a 100% interest in the Mineral Rights, Temasek is entitled to an
annual 2.5% net returns royalty.  However, if we pay Temasek an
additional $2,000,000 within ninety (90) days of its acquisition of a 100%
interest in the Mineral Rights, Temasek will only be entitled to an annual 1.0%
net returns royalty from us.




If we
exercise the second, thirty-three percent option, resulting in the acquisition
of a sixty-six percent interest in the Mineral Rights, but fail to exercise the
final option and fail to acquire a 100% interest in the Mineral Rights, we and
Temasek will form a joint venture in which we will be wholly responsible for
developing a feasible mining project and all necessary facilities and Temasek
shall retain a carried free interest in the mining rights.  If we do
not develop a feasible mining project within three years of the Effective Date,
we will be required to pay Temasek an advance minimum mining royalty of $500,000
per year, which will be deducted from Temasek's net return royalty.




Exploration
Program




Shortly
after our acquisition of the Peru property in September 2008, we commenced the
initial stages of our exploration and development program and have carried out
the following activities to date:




·
            Completed
      an initial social base line study to document all surface rights owners
      and people resident in the project
area;




·
            Implemented
      a community relations program to inform local communities of the project
      and what potential opportunities that may exist for community involvement
      in the implementation phases of the development
  program;




·
            Submitted
      a Declaración de Impacto
      Ambiental to the Ministry of Mines and Energy in Peru and received
      approval to start the exploration;




·
            Completed
      the field work for the Evaluación de Impacto
      Ambiental semidetallado which, if approved by the Peruvian Ministry
      of Mines & Energy, will allow us to undertake extensive
      drilling and bulk sampling
programs;




·
            Acquired
      churn drilling equipment for further evaluation and development of
      resources;




·
            Set-up
      an operational base in the project area in the town of
      Saramiriza;




·
            Contracted
      various consulting firms and experienced and knowledgeable individuals
      with specific skills in the exploration of alluvial deposits to assist us
      with the exploration and development of the Peru property;
    and




·
            Commissioned
      and subsequently received a preliminary master plan which indicated the
      size and scope of our projected operations and areas where more
      information is required.




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The
principle objective of our planned exploration and development program is to
bring a dredge and appropriately matched floating plant onto the property to
assist us in conducting trial mining tests which requires that we undertake the
following actions:
  ·
              Drill
      an area on the property where known mineralization exists at
      closely-spaced centers in accordance with mining industry
      standards;
  ·
              Extend
      the resource though a wider-spaced program of reconnaissance drilling so
      as to indicate the potential size of the
  deposit;


·
            Perform
      additional geotechnical and metallurgical studies to complement existing
      information in order to prepare the optimum processing route to be adopted
      in the exploitation phase; and




·
            Prepare
      scoping, prefeasibility, and full feasibility
  studies.




An
exploration base and a field laboratory have been set up in the town of
Saramiriza and we are currently reviewing the on-going exploration program given
the experience gained in the last year of operating in this difficult
terrain.




In the
first quarter of 2009, a Churn drill and ancillary equipment were purchased in
the United States and shipped to Peru.  The equipment cost
approximately $85,000 and we acquired such funds through the issuance of
securities in private equity offerings.  After the process of
importation and transport to site, the initial phase of the drilling program on
the project commenced in late July 2009.  Drilling capabilities were
increased by the purchase of a second-hand Bangka drilling rig at a cost of
$15,000.  Two addditional Bangka drill are being manufactured for delivery
in April 2010.




Gold
bearing gravels were intersected in virtually all of the twenty seven (27) holes
drilled to date with the better mineralized horizons returning values in the 60
to 200 mg/m3range
(generally, grades in excess of 60 mg/m3 are
considered economically viable) with reconnaissance holes up to 15 km apart
indicating the widespread distribution of gold throughout the Marañón
basin.




Concurrent
with the drilling, pitting has been carried out at locations where significant
gold mineralization was encountered in drilling.  Pitting on the same
site as one of the Bangka holes gave comparable gold values for the bulk sample
from the pit and the Bangka drill sample, 213 mg/m3 and
208 mg/m3
respectively, indicating that Bangka drilling appears to be an effective
evaluation method.  In addition, river bank gravel outcrops and
artisanal mine workings have been channel sampled and sedimentological studies
have been carried out.  Again, virtually all samples taken in these
programs have contained some level of gold.  Channel sampling of
exposures in artisanal workings in paleo channels indicate average grades in the
range of 120 to 350 mg/m3with
local accumulations of gold up to 550 mg/m3.




We
believe that additional drilling is required to better quantify the boundaries
of the alluvial gold mineralization and identify concentrations associated with
paleo channels.  We caution that the drill results previously reported
do not in any way indicate the presence of a commercially viable mineral
deposit.  There is no assurance that a commercially viable mineral
deposit exists on the properties underlying our mineral property interests in
Perú and a great deal of further exploration is required before a final
evaluation as to the economic and legal feasibility of future exploration is
determined.




Detailed
processing of the heavy mineral concentrates from the samples indicates a
relationship between gold values and magnetite content, the two minerals being
deposited together in “alluvial traps” (paleo channels) within the Marañón’s
immense braided river system.  The association of the gold with
magnetic minerals provides a potential means of locating concentrations of
mineralization.  During the first quarter of 2010, we completed ground
magnetic surveys over areas where mineralized gravels have been identified in
order to obtain a “magnetic fingerprint”.  Based on these results, we
are planning an aggressive  three month drill program at an estimated
cost of US$300,000  As a further aid in understanding the
sedimentological history of the Marañón river system and identifying target
areas, we are obtaining Palsar Synthetic Aperture Radar imagery. This radar
based satellite technology penetrates vegetation cover and is superior to
multispectral satellite imagery in providing detailed surface morphology,
essential when interpreting paleo river systems.




In the
fourth quarter of 2009, we retained the services of an internationally
recognized alluvial expert to direct and monitor the on-going exploration
program, review results and ensure procedures conform to industry
standards.




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We have
developed and outline above the initial stages of an extensive plan of
exploration with the principal objective of determining whether minerals that
exists on the property are of sufficient quantity to support commercial
production.  We have commenced our planned exploration program, but
must secure additional financing in the near future in order to be able to
sustain any drilling activity or we will be forced to cease our exploration and
development program.


In
addition to the foregoing, we intend to carry out the geophysical evaluation of
the property and plan to continue drilling and test pitting for a period of at
least 18 months.  If we are unable to secure additional financing in
the near future, we will be unable to sustain any drilling activity and be
forced to cease our exploration and development program.  Our plans
currently anticipate that an additional two hundred (200) holes will be drilled
to a depth of 50m at 100m centers in the area of known mineralization, with a
view toward developing a reserve.  The objective of this drilling is
to define resources of sufficient size to sustain a fleet of high capacity
dredges and floating plants in the future.  Bulk samples collected by
excavating small pits and shafts will be required for metallurgical testing as
well as to confirm drill results.  At the same time, mine development
planning, process design, and other engineering studies will be conducted with a
view to completing a feasibility study within a twenty-four month
period.  Permitting is anticipated to be initiated as early in the
exploration and development cycle as possible, so that trial or pilot dredging
can be started as soon as feasibility has been established.




Our
current cash on hand is insufficient to complete any of the activities set forth
in our planned exploration program.  If we are unable to secure
additional financing in the near future, we will be forced to cease our
exploration and development program.  Provided that we are able to
secure additional financing, we anticipate that we will incur the following
costs for the next twelve months:




Activity
            
            $USDPROJECT
      COSTS:Property-related
      costs
            
            
            148,800Environmental/Social
      permits
            
            
            593,100Exploration
            
            
            1,015,094Field
      costs
            
            
            263,708Travel
      expenses
            
            
            154,160Community
      Relations
            
            
            211,429Administration
      on site
            
            
            69,857Personnel
            
            
            439,674ADMINISTRATION
            
            
            268,480EQUIPMENT
      PURCHASE
            
            
            334,000TOTAL
            
            $
            3,498,302




Location
and Access




At this
time, the Gold Sands Project in Peru is our principal project.  It
comprises an area of 46,100 ha
(461 square kilometers) along the interface of the Andean chain and the
Amazon foreland basin in northeastern Peru.  We have established land
positions in two out of the three alluvial camps that exist in this area (the
Alegría, Condorcanqui, and Manseriche Alluvial Camps).  Of these, the
Manseriche Camp is the largest.  These camps straddle the boundary of
the Loreto (eastern) and Amazonas (western) departments of Northeastern Peru
approximately 350 kilometers from the regional center of Iquitos (population
400,000) which lies on the Amazon River.  Both Iquitos to the east, as
well as Tarapoto to the south are served with daily flights from
Lima.  The project area can be reached from either of these towns by
charter flights while supplies and heavy equipment can be barged in from either
Yurimaguas (on the Rio Huallaga) or Iquitos, or trucked in from Bagua on a fair
weather road to the village of Saramiriza located in the center of the
Manseriche Alluvial Camp along the southwestern bank of the Rio Marañón, roughly
in the center of the project area.  We have established a logistics
and administration base and field laboratory in the village of Saramiriza
located in the center of the Manseriche field on the southeastern bank of the
Rio Marañón.




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The
following map shows the general location of the Mineral Rights we initially
acquired:





- 25
-
 Table of Contents


The
following map shows the general location of the mineral rights that abut the
Mineral Rights depicted above which we acquired to expand our property interests
in Peru:





- 26
-
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Previous
Exploration History




A
description of the work carried out on the property which comprises the Mineral
Rights since its discovery is as follows:




Year
            Description
      of Prior Exploration Work1940s
            A
      German company operated a 10 meter dragline some 10 kilometers downstream
      from Saramiriza at Puerto Elisa.  This company left as a
      consequence of World War II.1979-80
            Cia
      Panasa exploited the El Banco Island, 14 kilometers northwest from
      Saramiriza.  Heavy earth moving equipment was used with positive
      results.1983
            A
      group of Canadians operated a small suction dredge south of Saramiriza
      near the oil pipeline.  They retired for technical and judicial
      reasons resulting from their proximity to the pipeline.1989
            Mutiferros
      SA, a Brazilian company, introduced four suction dredges, but discovered
      that suction dredges were inappropriate.1990-92
            Cia
      Monica de Iquitos drilled off a 1000 ha lease and proved-up grades of some
      300mg/m3 to a depth of 32 meters.  They were unable to finance
      the project, and the lease was abandoned. This lease was subsequently
      picked-up by Lomas del Marañón SA in 1995.1994
            Matsag
      Minerals, a company controlled by Glencor of Switzerland, acquired a
      number of leases near Puerto Elisa covering a large abandoned meander
      where the river had straightened its course subsequent to
      1954.  They installed a three-foot bucket line dredge which was
      intended as a bulk sampling tool, although no drilling was
      done.  These leases were subsequently acquired by Lomas del
      Marañón.1995-97
            Lomas
      del Marañón installed a good camp and operated a floating backhoe/ washing
      plant which was operated despite a poorly designed treatment plant of
      sluices which gave low recoveries.1998
            IHC
      Meerwede of Holland undertook preliminary metallurgical test work and
      engineering studies.1999-2000
            Brazilian
      private interests, under the technical direction of an experienced and
      well regarded alluvial engineer Peter Rich, established viability and
      attempted to get the project financed in Canada. This work was then
      checked by a Russian consulting company, Sojuzkarta, which used a ten inch
      rotary helicoid drill to check holes down to 18 meters.  In
      addition, they took bulk samples by backhoe.  Their drill
      results as well as those from the collection of 85 m3 bulk samples were
      used to estimate a grade of 295 mg/m3 using a finess of 850 for correction
      to pure gold.  This number is considered to be an underestimate
      as recovery was done utilizing 12 m X 0.7m sluices with jute carpets which
      would not have been effective for the recovery of fine
      gold.  Due to the low gold price at the time, as well as the
      conservative approach adopted by major mining companies, the project
      failed to get traction.2007-08
            Temasek
      Investments Inc, reacting to recommendations originally made by Peter
      Rich, consolidated the project area by staking additional ground in the
      Alegria, Condorcanqui, and Manseriche Alluvial Camps.




Geology
and Mineralization




According
to reports of the Ministry of Mines & Energy (MEM), Peru annually produces
some six million ounces of gold.  Of this, nearly fifty
percent  is derived from Peru’s largest gold mine, Yanacocha
(Newmont), and close to ten percent comes from the alluvial workings in the
Madre de Dios river system.  Alluvial production in Peru has recently
risen from about 200000 oz Au in 1991 to over 500000 oz Au in 2005.




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Although
Peru has numerous small alluvial gold occurrences, it is generally agreed that
there are only four major alluvial gold fields: Marañón-Santiago, Iquitos,
Ucayali, and Madre de Dios.  Large scale alluvial gold deposits tend
to form in environments associated with convergent plate boundaries,
particularly at the interface between fold belts and foreland
basins.  In addition, a necessary requirement for the development of
such gold deposits is a metaliferous (gold-rich) hinterland and a river system
that can transfer gold from the zone of production in the upper reaches of the
drainage basin, along the main trunk of the river system (zone of transfer) to
the zone of deposition, usually where the river profile flattens-out at the
limit between the highlands and alluvial plains.




In the
case of the Manseriche Alluvial Camp, the Marañón and Santiago rivers rise from
peak elevations of 2900 meters and 3500 meters respectively, and travel a
distance of some 900 kilometers before converging at the Manseriche Gorge which
lies at an elevation of 170 m asl.  From there, the Marañón (and later
the Amazon) must travel another 4000 kilometers before reaching the Atlantic
Ocean.  With respect to a metalliferous hinterland, the
Marañón-Santiago drainage basin is home to some of the largest gold deposits and
gold mining operations in the world.  These include Newmont’s
Yanacocha (40 m oz Au), Goldfield’s Cerro Corona (which currently produce 350000
oz Au per annum), and Aurelian’s Fruta del Norte deposit (14 m oz
Au).




While the
geology of the project area has no effect on the gold mineralization other than
the morphological control of the Rio Marañón, it is the sequence of geological
events which has importance in the formation of the “gold sands” in the
Manseriche Camp.




The age
of most of the gold mineralization in the highlands of the Marañón-Santiago
river system is tertiary, and specifically Miocene.  However,
Eocene-aged tectonism resulted in the formation of the eastern foothills of the
Andes which effectively formed a barrier directing all erosion from the
hinterland towards a basin on the western side of the Manseriche
Gorge.  Glacial erosion of the gold deposits in the hinterland
resulted in tills and moraines which were subsequently concentrated in
glacio-fluvial deposits by melting ice and intense rains in interglacial periods
of which a number have been identified in Peru.  These sediments were
retained by the eastern fold belt of anticlines.




What may
have been a key event was the Pajacuas thrust event during the Pliocene Era,
which led to the breaching of the closed basin and the subsequent formation of
the Manseriche Gorge.  This released the gold-rich glacio-fluvial
sediments to be reconcentrated and deposited in the Rio Marañón flood plain east
of the Gorge.




The
sequence of constant erosion, glacio-fluvial concentration, fluvial transport,
collection in an intermediate (or series of intermediate) basin(s), and final
alluvial concentration in the Rio Marañón flood plain, provided the mixing and
concentration which accounts for the regular gold values in the sands and
gravels as indicated by the report compiled by Cia Monica de
Iquitos.




Termination
of Assignment Agreements for Argentinean Properties




On
December 12, 2007, we entered into an assignment agreement with Proyectos
Mineros S.A. (“PMSA”) (formerly Recursos Maricunga S.A.) to acquire PMSA’s right
to explore and an option to purchase certain mineral rights on properties known
as the Atena Gold Project located in the Salta Province of Argentina (the “Atena
Property”).  Effective March 17, 2008, we entered into an assignment
agreement with PMSA, whereby PMSA assigned to us PMSA’s right to explore and an
option to purchase a 90% interest in the mineral rights of three mining
properties referred to as “Amira”, “Amira Norte” and “Esparta II”, located in
the Province of Salta, Argentina (the “Amira-Esparta Properties”).  On
January 8, 2008, we entered into an assignment agreement with PMSA to acquire
PMSA’s right to explore and option to purchase certain mineral rights on
properties known as the Cerro Amarillo Property located in the Departamento
Malargue, Province of Mendoza, Argentina (the “Cerro Amarillo
Property”).  We collectively refer to the Atena, Amira-Esparta and
Cerro Amarillo Properties as the “Argentinean Properties.”




In light
of the current economic environment, our management, in the second quarter of
fiscal 2009, determined that it was necessary to reassess the Company’s current
direction and proposed plans for exploration.  In connection with this
review, we announced that we were suspending our exploration program on the
Argentinean Properties for at least the remainder of 2009 and would allocate our
resources exclusively to pursue the exploration and development of our property
interests in northeastern Peru.




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We
continued to monitor the current economic environment globally and within
Argentina and noted an increasing trend toward instability within
Argentina.  Rising and excessive inflation rates in Argentina
significantly increased the costs of our proposed operations in Argentina beyond
our initial expectations.  After further evaluation, we noted that
Argentinean governmental bodies were pursing policies and regulations which
would have adversely impacted our planned operations in
Argentina.  The existence of a working capital deficiency added
support to our conclusion that it is presently not the best allocation of our
resources to conduct exploration activities in two different
countries.  For the foregoing reasons, we determined it to be in our
best interest to seek to dispose of our interests in the Argentinean Properties
as soon as practicable so as to prevent any default on any of these underlying
option agreements.




We
reviewed our available alternatives and canvassed a number of qualified parties
in an attempt to dispose of our interests in the Argentinean properties for
value.  As a result of our inability to locate an interested party to
enter into a transaction to dispose of our interests in the Argentinean
Properties for value, we determined to terminate each of the assignment
agreements under which we held the option to acquire the mineral and mining
rights underlying these Argentinean properties.  We determined that
terminating these assignment agreements at this time was in our best interests
in order to avoid incurring any additional obligations under each of the
respective assignment agreements.  In November 2009, we sent each of
the notice of termination letters.  The termination of the assignment
agreement relating to Atena and Amira-Esparta Properties was effective
immediately and the termination date of the assignment agreement relating to the
Cerro Amarillo Property was effective thirty days following the date of the
termination notice.




As a
result of our termination of each of the assignment agreements under which we
held the option to acquire the mineral and mining rights underlying properties
located in the Salta and Mendoza provinces of Argentina, our rights under these
agreements reverted back to the assignor and we are not be entitled to recover
any of the consideration we have paid, which is an aggregate of 4,100,000 shares
of our common stock and $70,000 in cash.  Proyectos Mineros S.A.
(“PMSA”) (formerly Recursos Maricunga S.A.) is the assignor for each of the
properties located in the Salta and Mendoza provinces of
Argentina.  Dr. Willem Fuchter, who served as our Chief Executive
Officer and member of our board of directors from January 10, 2008 until his
resignation from both positions on September 25, 2009, is the president and
director of PMSA and holds a 50% ownership interest in the voting securities of
PMSA.




Letter
of Intent




On
December 2, 2009, we entered into a letter of intent with Seabridge Gold Inc., a
Canadian corporation (“Seabridge”), to acquire all of Seabridge’s interests in
certain mining claims and leasehold interests for exploration properties located
in Nevada.  The properties subject to the contemplated transaction
comprise interests in 2,141 claims in Nevada covering more than 30 exploration
projects with known gold occurrences.  Most of the claims are situated
in Nevada's prolific Walker Lane gold belt.  Closing of the
transaction, which was anticipated to occur on or about January 31, 2010, is
subject to satisfactory completion of both parties’ due diligence, regulatory
approval and the execution of a binding definitive agreement.




On
February 24, 2010, we extended the letter of intent we entered into with
Seabridge in recognition that final documentation and legal due diligence for
the transaction has not yet been completed.  The parties are
negotiating the final terms of a definitive agreement.  The terms of
the definitive agreement being negotiated between the parties contemplates that
closing of the transaction is anticipated to occur on or about May 15,
2010.  Closing of the transaction is subject to a number of conditions
and contingences, including the following:




Based on
the letter of intent, the purchase price for the exploration properties is
anticipated to consist of three elements: (1) staged cash payments totaling
$3,000,000; (2) a $1,000,000 million convertible debenture; and (3) 3,000,000
shares of our common stock.




The
letter of intent and the subsequent extension contemplates that $3,000,000 in
cash would be payable as follows:  $200,000 payable immediately upon
execution of the letter of intent; $800,000 payable upon the closing of the sale
of the exploration properties; $1,000,000 payable on April 30, 2010 and the
final $1,000,000 would be payable pursuant to the terms of a secured promissory
note due on the first anniversary of the closing, of the transaction, with
accrued interest at 8% per year.




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The
letter of intent contemplates that the $1,000,000, two-year secured convertible
debenture would be due on the second anniversary of the closing of the
transaction and would accrue interest at 8% per year, payable
quarterly.  The debenture would be redeemable by us at any time prior
to maturity upon payment of $1,250,000.  If not redeemed, the
debenture and any accrued interest are convertible by Seabridge into common
shares of our common stock at $1.00 per share.  Our obligations as
contemplated under the promissory note and the debenture would be secured by the
exploration properties purchased in the transaction.




The
letter of intent contemplates that 3,000,000 shares of our common stock would be
issued in two separate tranches.  The first tranche, consisting of
1,000,000 shares, would be issued on the closing of the sale of the
properties.  The second tranche, consisting of 2,000,000 shares, would
be issued, but held in escrow until the third anniversary of the closing or
until confirmation that the properties host a measured and indicated gold
resource of 1 million ounces or more, whichever occurs first.




Closing
of the transaction, which is anticipated to now occur on or about May 15, 2010,
is subject to a number of conditions and contingences, including the
following:




·
            the
      negotiation of a definitive merger agreement on terms acceptable to both
      parties;




·
            the
      approval of the parties’ respective board of directors;
  and




·
            receipt
      of all necessary third party consents, approval and
    waivers.




We are in
the process of negotiating towards the successful completion of the proposed
acquisition, but we can give you no assurance that these and other conditions
will ever be satisfied to allow us to complete the proposed
acquisition.




ITEM 3. Legal
Proceedings.




None.




ITEM 4. (Removed
and Reserved).




Executive
Officers of the Registrant




Name
            Age
            OfficersMichael
      Stocker
            41
            Dr.
      Michael Stocker has served as our President, Chief Executive Officer, and
      Principal Executive Officer since January 2010.  Dr. Stocker
      also served as Chairman of our board of directors from October 2008 to
      January 2010.  Dr. Stocker holds an MBA, and a PhD in Impact
      Analysis for Small and Medium Sized Company Development Programs from the
      University of Saint Gallen, Switzerland.  He also holds an MBA
      from the Community of European Management Schools, EVADE University,
      Barcelona, Spain.  Between 1992 and 1995, Dr. Stocker was
      responsible for the development of methodologies and the execution of
      impact analysis in Latin America for FUNDES International, a private
      organization for the sustainable development of small and medium sized
      companies in Latin America.  Between 1995 and 1997, he was
      Regional Manager of PROPEL, a private eco-efficient technologies
      consulting firm in Latin America, with headquarters in Bogotá,
      Colombia.  From 1997 to 2000, he worked as Senior Consultant for
      the Boston Consulting Group (BCG), in its offices in Mexico, Spain and
      Switzerland.  His main focus was on the development of Knowledge
      Management (KM) strategies, e-business, and effective financial programs
      for several Fortune 500 companies.  Starting October, 2000, Dr.
      Stocker became international e-business and KM manager for FUNDES
      International in Chile.  He was in charge of KM, e-business
      strategy, and set-up and implementation of all technology-related
      projects..




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As
      leader of the Transference Unit, Michael was also responsible for the
      implementation of all projects outside of Latin America, including the
      transfer of knowledge from CFIs to PDFs.  In January, 2004, Dr.
      Stocker became founding manager of The Stocker Group, in Santiago, Chile,
      as a result of a management buy out of the FUNDES International
      Consulting’s e-business team.  The Stocker Group is present in
      11 countries in Latin America, and works for various international clients
      such as ONUDI, the Swiss Government (SECO), the World Bank, USAID, IDB ,
      FUNDES and AVINAKenneth
      Phillippe
            56
            Kenneth
      Phillippe has served as our Chief Financial Officer, Secretary and
      Treasurer since May 14, 2009 and previously served as our Secretary,
      Treasurer, Chief Financial Officer and Principal Accounting Officer from
      December 13, 2007 to August 20, 2008.  Mr. Phillippe is a
      Chartered Accountant with over 25 years experience working with public
      companies in the capacities of director, officer, financial advisor or
      consultant.  Mr. Phillippe obtained a Bachelor of Commerce
      degree from the University of British Columbia in 1976.  He
      articled with Thorne Riddell (now KPMG) and obtained his professional
      accounting designation in 1981. In 1982, Mr. Phillippe established his own
      accounting practice.  Between February 2000 and August 2005, he
      served in various positions including director, officer and chair of the
      audit committee of MDX Medical Inc., a Vancouver-based medical device
      company.  Between January and December 2006, Mr. Phillippe
      served as Chief Financial Officer of Columbia Goldfields Ltd., a junior
      gold mining company that is a reporting company under the Exchange
      Act.  Since March 2006, Mr. Phillippe has served as Chief
      Financial Officer of Exchequer Resource Corp. (TSX-V (NEX)). Since October
      2006, Mr. Phillippe has served as Chief Financial Officer and Secretary of
      Bold Ventures Inc., which was listed on the TSX-V on October 29,
      2007.  In addition, Mr. Phillippe served as the Secretary,
      Treasurer, Chief Financial Officer and Principal Accounting Officer of
      Amazon Goldsands Ltd. (f/k/a FinMetal Mining Ltd.), a reporting company
      under the Exchange Act, from October 2006 to September 2008.  Mr.
      Phillippe has served as Chief Financial Officer, Director and Secretary of
      Discovery Ventures Inc. (TSX-DVN.V), which was listed on the TSX-V on
      October 30, 2009.  Since March 10, 2009, Mr. Phillippe has
      served as the Chief Financial Officer of Advanced Proteome Therapeutics
      Corp. (TSX-APC.V).Gary
      Artmont
            59
            Mr.
      Artmont has served on our board of directors since September
      2007.  Mr. Artmont previously served as our President, Chief
      Executive Officer and Principal Executive Officer from September 2007 to
      January 2008 and September 2009 to January 2009.  Mr.
      Artmont has served as our Vice President of Exploration since
      January 2010 and previously held this position from March 2007 until
      September 2007.  In the late 1990s, as Indonesian-based chief
      geologist for Freeport-McMoRan, Mr. Artmont was responsible for the
      management and coordination of a large helicopter-supported regional
      reconnaissance program.  His duties included coordinating 600
      field staff, 55 geologists and 7 contracting groups, budget formulation
      and data evaluation.  During his tenure, in excess of 120,000
      meters of drilling was completed on 17 prospect areas.  In the
      mid-2000s, Mr. Artmont evaluated acquisition opportunities in Eastern
      Europe, South America, Southeast Asia and Mongolia.  His work
      focused on a wide range of commodities including copper, iron, coal and
      nickel.  During his career, Mr. Artmont has conducted over
      150 site visits to producing mines located throughout the
      world.  Mr. Artmont was a director of Pac Rim (PRL) from
      2000 to 2006.


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PART
II




ITEM 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.




Market
Prices




Our
common stock is currently quoted on the OTCBB under the symbol
“CMIN.”




The
following table sets forth the range of high and low bid quotations for our
common stock for each of the periods indicated as reported by the
OTCBB.  These quotations below reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.




Fiscal
      Year Ended December 31, 2009High
      Bid
            Low
      BidFiscal Quarter
      Ended:March
      31, 2009
            $1.20
            $0.25June
      30, 2009
            $0.89
            $0.31September
      30, 2009
            $1.91
            $0.55December
      31, 2009
            $1.76
            $0.85Fiscal
      Year Ended December 31, 2008High
      Bid
            Low
      BidFiscal Quarter
      Ended:March
      31, 2008
            $1.33
            $0.71June
      30, 2008
            $1.3499
            $0.91September
      30, 2008
            $1.64
            $0.96December
      31, 2008
            $1.25
            $0.67




Holders
of Common Stock




As of
February 15, 2009, we had approximately three hundred and seven (307) holders of
record of our common stock and several other stockholders hold shares in street
name.  In many instances, a record holder is a broker or other entity
holding shares in street name for one or more customers who beneficially own the
shares.




Dividend
Policy




To date,
we have not declared or paid cash dividends on our shares of common
stock.  The holders of our common stock will be entitled to
non-cumulative dividends on the shares of common stock, when and as declared by
our board of directors, in its discretion.  We intend to retain all
future earnings, if any, for our business and do not anticipate paying cash
dividends in the foreseeable future.




Any
future determination to pay cash dividends will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements, general business conditions and such other
factors as our board of directors may deem relevant.




Securities
Authorized for Issuance under Equity Compensation Plans




Our board
of directors adopted the 2007 Stock Incentive Plan (the “Stock Incentive Plan”)
on August 3, 2007.  The Board approved an amendment of the Stock
Incentive Plan and shareholder approval of the amended Stock Incentive Plan that
increased the number of shares of common stock issuable under the Stock
Incentive Plan from 10,000,000 to 20,000,000 was received at the 2009 annual
shareholder meeting.  Grants of 6,075,000 options have been made under
the Stock Incentive Plan and remain outstanding as of December 31,
2009.  As of December 31, 2009, 13,925,000 shares remain
available under the Stock Incentive Plan for future equity
grants.


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The Stock
Incentive Plan authorizes us to grant awards in the form of shares of common
stock, including unrestricted shares of common stock; options to purchase shares
of common stock; stock appreciation rights or similar rights with a fixed or
variable price related to the fair market value of the shares of common stock
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions; any other security with the value derived from the value of
the shares of common stock, such as restricted stock and restricted stock units;
deferred stock units; dividend equivalent rights; or any combination of the
foregoing.  Our Compensation Committee administers the Plan by making
recommendations to the board or determinations regarding the persons to whom
awards should be granted and the amount, terms, conditions and restrictions of
the awards.




The Plan
allows for the grant of incentive stock options, non-qualified stock options and
restricted stock awards.  The exercise price of any option shall be
determined at the time the option is granted by the Compensation
Committee.  However, the exercise price may generally not be less than
100 percent of the fair market value of the shares of common stock on the date
of the grant. Each option expires on the date determined by the Compensation
Committee, but not later than ten years after the grant date.  The
Compensation Committee may determine in its discretion whether any option shall
be subject to vesting and the terms and conditions of any such
vesting.  The Stock Incentive Plan also provides for the immediate
vesting of options, as well as authorizes the Compensation Committee to cancel
outstanding options or to make adjustments to the transfer restrictions on those
options in the event of certain changes in corporate control of the
company.  Awards, including options, made under the Stock Incentive
Plan are not assignable and also subject to any restrictions and conditions
imposed by the Compensation Committee.




The
following table sets forth certain information regarding the Stock Incentive
Plan as of December 31, 2009:




Plan
      category
            
            Number of securities to
      be
              issued
      upon exercise of
              outstanding
      options,
              warrants
      and rights
              
              (a)
            
            Weighted-average
      exercise
              price
      of outstanding options,
              warrants
      and rights
              
              (b)
            
            Number
      of securities
              remaining available
      for
              future
      issuance under
              equity
      compensation plans
              (excluding
      securities
              reflected
      in column (a))
              
              (c)Equity
      compensation plans approved by stockholders
            
            6,075,000
            
            
            $0.85
            
            13,925,000Equity
      compensation plans not approved by stockholders 1
            
            -
            
            
            -
            
            -Total
            
            6,075,000
            
            
            $0.85
            
            13,925,000




1
            The
      Stock Incentive Plan, as amended, was approved by our board of directors
      and shareholders and authorizes us to grant up to 20,000,000 shares under
      its terms and conditions.




Recent
Issuances of Unregistered Securities




On or
about December 1, 2009, we sold a total of 33,462 units at $0.65 per Unit (the
"Units") to two investors.  Each unit consisted of one (1) share of
common stock, par value $0.001, and one (1) common stock purchase warrant (the
“Warrant”) to purchase one (1) share of our common stock, exercisable commencing
six months from the date of issuance and terminating one year from the date of
issuance.  As a result, we issued a total of 33,462 shares of common
stock and warrants to purchase 33,462 shares of common stock in connection with
these sales of securities.  The exercise price for the Warrant is
priced at $1.00 per share.  We received gross proceeds of $21,750 from
the sale of these securities.  No registration rights were granted to
either investor.




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These
securities were offered and sold in reliance on the following exemptions from
registration under the Securities Act of 1933, as amended (the "Securities
Act"): (a) Section 4(2) of the Securities Act or Regulation D
promulgated thereunder, and (b) Regulation S promulgated under the
Securities Act.  In connection with these sales of securities, we
relied on each of the investors' written representations that they were not a
"U.S. person" as that term is defined in Rule 902(k) of Regulation S under the
Securities Act and were acquiring the securities for investment only and not
with a view toward resale or distribution.  We requested our stock
transfer agent to affix appropriate restricted legends to the stock certificate
issued to each investor.  Each investor was given adequate access to
sufficient information about us to make an informed investment
decision.  Neither we nor anyone acting on our behalf offered or sold
these Units by any form of general solicitation or general
advertising.




ITEM
6.        Selected
Financial Data.




Not
applicable.




ITEM 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.






The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes included elsewhere in this
annual report on Form 10-K.  This discussion contains forward-looking
statements reflecting our current expectations, estimates and assumptions
concerning events and financial trends that may affect our future operating
results or financial position.  Actual results and the timing of
events may differ materially from those contained in these forward-looking
statements due to a number of factors, including those discussed in the sections
entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking
Statements” appearing elsewhere in this annual report on Form 10-K.




Recent
Developments for the Company




Overview




We were
incorporated in the state of Nevada under the name Crafty Admiral Enterprises,
Ltd. on March 6, 2000.  Our original business plan was to sell classic
auto parts to classic auto owners all over the world through an Internet
site/online store; however, we were unsuccessful in implementing the online
store and were unable to afford the cost of purchasing, warehousing and shipping
the initial inventory required to get the business started.  As a
result, we ceased operations in approximately July 2002.




During
our fiscal year ended December 31, 2006, we reorganized our operations to pursue
the exploration, development, acquisition and operation of oil and gas
properties.  On June 27, 2006, we acquired a leasehold interest in a
mineral, oil and gas property located in St. Francis County, Arkansas for a cash
payment of $642,006, pursuant to an oil and gas agreement we entered into on
April 29, 2006 (the “Tombaugh Lease”).  Shortly after acquiring the
Tombaugh Lease, we suspended our exploration efforts on the property covered by
the Tombaugh Lease in order to pursue business opportunities developing nickel
deposits in Finland, Norway and Western Russia.  On January 18, 2008,
we assigned all of our right, title and interest in and to the Tombaugh Lease to
Fayetteville Oil and Gas, Inc., which agreed to assume all of our outstanding
payment obligations on the Tombaugh Lease as consideration for the
assignment.  On March 9, 2007, we changed our name to better reflect
our business to “Nordic Nickel Ltd.” pursuant to a parent/subsidiary merger with
our wholly-owned non-operating subsidiary, Nordic Nickel Ltd., which was
established for the purpose of giving effect to this name change.  We
were not successful pursuing business opportunities developing nickel deposits
in Finland, Norway and Western Russia and again sought to reorganize our
operations in November 2007.




In
November 2007, we reorganized our operations and changed our name to
“Constitution Mining Corp.” to better reflect our current focus which is the
acquisition, exploration, and potential development of mining
properties.  Since November 2007, we entered into agreements to secure
options to acquire the mineral and mining


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rights to
the Argentinean Properties and in northeastern Peru.  In 2009, we
determined that it was in our best interest to no longer pursue the exploration
and development of the Argentinean Properties and terminated our option
agreements to acquire the mineral and mining rights underlying these
properties.  We are now exclusively pursuing the exploration and
development of our property interests in Peru.




We are an
exploration stage company and there is no assurance that commercially
exploitable reserves of gold or other minerals exist on any of our property
interests.  In the event that commercially exploitable reserves of
gold or other minerals exist on any of our property interests, we cannot
guarantee that we will make a profit.  If we cannot acquire or locate
mineral deposits, or if it is not economical to recover the mineral deposits,
our business and operations will be materially and adversely
affected.




On
October 21, 2009, we completed a reincorporation merger from the State of Nevada
to the State of Delaware.




For
the Years Ended December 31, 2009 and 2008




Revenues




We have
not generated any revenues from operations since our inception.




Operating
Expenses




We
incurred operating expenses in the amount of $14,743,959 for the year ended
December 31, 2009, as compared to operating expenses of $5,479,705 for the year
ended December 31, 2008.  The substantial increase in our operating
expenses for the year ended December 31, 2009, as compared to the year ended
December 31, 2008, is primarily attributable to increased exploration costs and
stock based compensation together with a write down of mineral property
acquisition costs during the reporting period.  The write down of
mineral property acquisition costs during the reporting period in the amount of
$4,339,330 primarily related to the termination  of our options to
acquire the mineral and mineral rights to the Argentinean
Properties.  During fiscal 2009, we have exercised the second
twenty-five percent option, resulting in our acquisition of an aggregate of a
fifty percent interest the mineral and mining rights underlying certain
properties located in Northeastern Peru.  We have incurred significant
expenditures during the year ended December 31, 2009 in connection with the
exploration and associated administrative costs required to support our
operations.  In 2009, we disposed of the Argentinean Properties, and
are pursuing exploration and development exclusively on our properties in
Peru.  In addition, we have entered into a letter of intent in
relation to acquiring mineral and mining rights underlying certain properties
located in Nevada.




We
incurred exploration costs of $2,810,496 for the year ended December 31, 2009,
and exploration costs of $924,961 during the year ended December 31,
2008.  Exploration costs incurred during the year ended
December 31, 2009 related to the initial phases of the exploration programs
on the Peru Property, whereas exploration costs incurred during the year ended
December 31, 2008 related to the initial phases of our exploration programs
on the Atena Project and Cerro Amarillo Property.  We incurred
professional fees of $986,356 for the year ended December 31, 2009, compared to
professional fees of $909,483 for the year ended December 31,
2008.  Professional fees, which primarily include legal and accounting
expenses, increased because our legal and accounting needs increased as a result
of increase exploration and financing activities.  We
reported  stock-based compensation of $4,461,838 for the year ended
December 31, 2009, compared to $2,033,607 for the year ended December 31,
2008.  This increase is attributable to an increase in the number of
stock options issued to employees and non-employees during the year ended
December 21, 2009.  We reported management fees of $291,367 for the
year ended December 31, 2009, compared to $346,583 for the year ended December
31, 2008.  The decrease in management fee and stock-based compensation
is attributable to a change in management in the year ended December 31,
2009.  We incurred investor relations expenses of $1,326,379 for the
year ended December 31, 2009, compared to $668,992 for the year ended December
31, 2008.  This increase in investor relations costs during the year
ended December 31, 2009, as compared to the prior year, is attributable to
expenditures associated with increasing awareness of our current and future
operations.


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Other
Items




We
received other income of $162,945 during the year ended December 31, 2009, as
compared to other income of $174,872 for the year ended December 31,
2008.  The decrease in other income is attributable to a gain of
$307,115 attributable to our assignment of all of our right, title and interest
in and to a leasehold interest in an oil and gas property located in St. Francis
County, Arkansas to an assignee who agreed to assume all of our outstanding
payment obligations as consideration for the assignment in 2008.




During
the year ended December 31, 2009, our provision for potential legal claims was
$135,000, as compared to December 31, 2008, where potential legal claims of
$(200,000) related to a legal proceeding disclosed in our prior annual report on
Form 10-K.  The change in provision for legal claims for the year
ended December 31, 2009, as compared to December 31, 2008, is attributable to us
entering into a settlement agreement of potential legal claims during 2009 in an
amount which was $135,000 less than the provision amount for potential legal
claims of $200,000 which we recorded in 2008.




Net
Loss




As a
result of the above, for the year ended December 31, 2009 we reported a net loss
of $9,749,164, as compared to a net loss of $5,304,833 for the year ended
December 31, 2008.  The increase in our net loss was primarily
attributable to increased operating expenses incurred in connection with the
acquisition of our mineral property rights in Northeastern Peru, related
exploration expenditures incurred during the reporting period, the associated
administrative costs required to support our operations and the write down of
mineral property acquisition costs relating to our termination of option
agreements to acquire the Argentinean Properties.




Basic
and Diluted Loss per Share




As a
result of the above, the basic and diluted loss per common share was $0.152 and
$0.100 for the years ended December 31, 2009 and 2008,
respectively.




Liquidity
and Capital Resources




At
December 31, 2009, we had cash and cash equivalents of $205,125 (December 31,
2008 - $66,580) and working capital deficit of $1,480,730 (December 31, 2008 -
$162,440).





During the twelve month period following the date of this report, we anticipate
that we will not generate any revenue.  Our proposed plan of
exploration anticipates that we will incur exploration related expenditures of
$3,500,000 over the next twelve months.  We anticipate spending
approximately $200,000 in ongoing general and administrative expenses per month
for the next twelve months, for a total anticipated expenditure of $2,400,000
over the next twelve months.  The general and administrative expenses
for the year will consist primarily of professional fees for the audit and legal
work relating to our regulatory filings throughout the year, as well as transfer
agent fees and general office expenses.  Our current cash on hand is
insufficient to be able to make our planned exploration expenditures and to pay
for our general administrative expenses over the next twelve
months.  Accordingly, we must obtain additional financing in order to
continue our plan of operations during and beyond the next twelve months. We
believe that debt financing will not be an alternative for funding additional
phases of exploration as we do not have limited tangible assets to secure any
debt financing.  We anticipate that additional funding will be in the
form of equity financing from the sale of our common stock.  We are
currently seeking additional funding in the form of equity financing from the
sale of our common stock, but cannot provide investors with any assurance that
we will be able to raise sufficient funding from the sale of our common stock to
fund our complete exploration program.  In the absence of such
financing, we will not be able to pursue our exploration program and maintain
our mineral property interests in good standing.  If we do not fulfill
the terms of any of these option agreements according to our business plan, then
our ability to commence or continue operations could be materially
limited.  We also may be forced to abandon our mineral property
interests.   If we are unable to raise additional capital in the
near future, we will experience liquidity problems and management expects that
we will need to curtail operations, liquidate assets, seek additional capital on
less favorable terms and/or pursue other remedial measures.  We may
consider entering into a


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joint
venture arrangement to provide the required funding to explore the properties
underlying our mineral property interests.  We have not undertaken any
efforts to locate a joint venture participant.  Even if we determine
to pursue a joint venture participant, there is no assurance that any third
party would enter into a joint venture agreement with us in order to fund
exploration of the properties underlying our mineral property
interests.  If we enter into a joint venture arrangement, we would
likely have to assign a percentage of our interest in our mineral property
interests to the joint venture participant.




Cash
Used in Operating Activities




Operating
activities for the year ended December 31, 2009 and 2008 used cash of $5,361,659
and $3,279,958 respectively, which reflect our recurring operating
losses.  Our net losses of $9,749,164 and $5,304,833 for years ended
December 31, 2009 and 2008, respectively, were the primary reasons for our
negative operating cash flow in both years.




Cash
Used in Investing Activities




For the
year ended December 31, 2009, we used $1,199,790 in investing activities, as
compared to $1,139,983 used in investing activities during the year ended
December 31, 2008.  For the year ended December 31, 2009, we purchased
$89,560 in equipment and expended $1,110,230 in connection with the acquisition
of mineral property interests, as compared to the year ended December 31, 2008,
in which we purchased $125,030 in equipment, expended $64,693 for website
development costs and expended $950,260 in connection with the acquisition of
mineral property interests.




Cash
from Financing Activities




As we
have had no revenues since inception, we have financed our operations primarily
by using existing capital reserves and through private placements of our common
stock.  Net cash flows provided by financing activities for the year
ended December 31, 2009 was $6,699,994, as compared to $4,431,879 for the year
ended December 31, 2008.  An increase in the cash flow provided by
financing activities was primarily due to $6,615,069 we received as net proceeds
from the issuance of common stock and warrants and $70,000 in share
subscriptions received in advance during the reporting period.




Off
Balance Sheet Arrangements




We do not
have any off-balance sheet debt nor did we have any transactions, arrangements,
obligations (including contingent obligations) or other relationships with any
unconsolidated entities or other persons that may have material current or
future effect on financial conditions, changes in the financial conditions,
results of operations, liquidity, capital expenditures, capital resources, or
significant components of revenue or expenses.




Going
Concern




We have
incurred net losses for the period from inception on March 6, 2000 to December
31, 2009 of $16,434,682 and have no source of revenue.  The continuity
of our future operations is dependent on our ability to obtain financing and
upon future acquisition, exploration and development of profitable operations
from our mineral properties.  These conditions raise substantial doubt
about our ability to continue as a going concern.




Critical
Accounting Policies




In
December 2001, the SEC requested that all registrants list their most “critical
accounting polices” in the Management Discussion and Analysis.  The
SEC indicated that a “critical accounting policy” is one which is both important
to the portrayal of a company’s financial condition and results, and requires
management’s most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.  We believe the following critical accounting estimates
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements:


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Mineral
property costs




Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased.  At the end of each fiscal quarter end, we assess the
carrying costs for impairment.  If proven and probable reserves are
established for a property and it has been determined that a mineral property
can be economically developed, costs will be amortized using the
units-of-production method over the estimated life of the probable
reserve.




Mineral
property exploration costs are expensed as incurred.




Estimated
future removal and site restoration costs, when determinable are provided over
the life of proven reserves on a units-of-production basis.  Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards.  Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.




As of the
date of the consolidated financial statements, we have not established any
proven or probable reserves on its mineral properties and incurred only
acquisition and exploration costs.




Although
we have taken steps to verify title to mineral properties in which we have an
interest, according to the usual industry standards for the stage of exploration
of such properties, these procedures do not guarantee the Company’s
title.  Such properties may be subject to prior agreements or
transfers and title may be affected by undetected defects.




Equipment




Equipment
is recorded at cost and amortization is provided over its estimated economic
life at 30% or on a straight line basis over its economic life.




Website
development costs




The costs
of computer software developed or obtained for internal use, during the
preliminary project phase, as defined under ASC 350-40, “Internal-Use Software”, will
be expensed as incurred.  The costs of website development during the
planning stage, as defined under ASC 350-50, “Website Development Costs”,
will also be expensed as incurred.




Computer
software, website development incurred during the application and infrastructure
development stage, including external direct costs of materials and services
consumed in developing the software and creating graphics and website content,
will be capitalized and amortized over the estimated useful life, beginning when
the software is ready for use and after all substantial testing is completed and
the website is operational.




Segments
of an enterprise and related information




ASC 280,
“Segment Reporting”
establishes guidance for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public.  It also establishes standards for disclosures
regarding products and services, geographic areas and major
customers.  ASC 280 defines operating segments as components of a
company about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.  We have evaluated
this Codification and does not believe it is applicable at this
time.




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Start-up
expenses




We have
adopted ASC 720-15, “Start-Up
Costs”, which requires that costs associated with start-up activities be
expensed as incurred.  Accordingly, start-up costs associated with our
formation have been included in our expenses for the period from the date of
inception on 6 March 2000 to 31 December 2009.




Stock-Based
Compensation




Effective
1 January 2006, we adopted the provisions of ASC 718, “Compensation – Stock
Compensation”, which establishes accounting for equity instruments
exchanged for employee services. Under the provisions of ASC 718, stock-based
compensation cost is measured at the grant date, based on the calculated fair
value of the award, and is recognized as an expense over the employees’
requisite service period (generally the vesting period of the equity
grant).  We adopted ASC 718 using the modified prospective method,
which requires us to record compensation expense over the vesting period for all
awards granted after the date of adoption, and for the unvested portion of
previously granted awards that remain outstanding at the date of
adoption.  Accordingly, financial statements for the periods prior to
1 January 2006 have not been restated to reflect the fair value method of
expensing share-based compensation.  Adoption of ASC 718 does not change
the way we account for share-based payments to non-employees, with guidance
provided by ASC 505-50, “Equity-Based Payments to
Non-Employees”.




Foreign
Currency Translation




Our
functional and reporting currency is U.S. dollars.  Our consolidated
financial statements are translated to U.S. dollars in accordance with ASC 830,
“Foreign Currency
Matters”.  Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date.  Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income.  We have not, to the date of these
consolidated financial statements, entered into derivative instruments to offset
the impact of foreign currency fluctuations.




Use
of estimates




The
preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenditures during the reporting period.  Actual results
could differ from these estimates.




Comparative
figures




Certain
comparative figures have been adjusted to conform to the current year’s
presentation.




Recent
Accounting Pronouncements




In June
2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
167, “Amendments to FASB
Interpretation No. 46(R)”.  SFAS No. 167, which amends ASC
810-10, “Consolidation”, prescribes a
qualitative model for identifying whether a company has a controlling financial
interest in a variable interest entity (“VIE”) and eliminates the quantitative
model.  The new model identifies two primary characteristics of a
controlling financial interest: (1) provides a company with the power to direct
significant activities of the VIE, and (2) obligates a company to absorb losses
of and/or provides rights to receive benefits from the VIE.  SFAS 167
requires a company to reassess on an ongoing basis whether it holds a
controlling financial interest in a VIE.  A company that holds a
controlling financial interest is deemed to be the primary beneficiary of the
VIE and is required to consolidate the VIE.  SFAS No. 167, which is
referenced in ASC 105-10-65, has not yet been adopted into the Codification and
remains authoritative.  SFAS No. 167 is effective 1 January
2010.  We do not expect that the adoption of SFAS No. 167 will have a
material impact on ourconsolidated financial statements.


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In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfer of Financial
Assets – an amendment of FASB Statement”.  SFAS No. 166 removes
the concept of a qualifying special-purpose entity from ASC 860-10, “Transfers and Servicing”, and
removes the exception from applying ASC 810-10, “Consolidation”.  This
statements also clarifies the requirements for isolation and limitations on
portions of financial assets that are eligible for sale
accounting.  SFAS No. 166, which is referenced in ASC 105-10-65, has
not yet been adopted into the Codification and remains
authoritative.  This statement is effective 1 January
2010.  We do not expect that the adoption of SFAS No. 166 will have a
material impact on ourconsolidated financial statements.




In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Fair Value Measurement and
Disclosure (Topic 820) – Measuring Liabilities at Fair Value”, which
provides valuation techniques to measure fair value in circumstances in which a
quoted price in an active market for the identical liability is not
available.  The guidance provided in this update is effective 1
January 2010.  We do not expect that the adoption of this guidance
will have a material impact on our consolidated financial
statements.




International
Financial Reporting Standards




In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board.  Under the proposed
roadmap, we would be required to prepare consolidated financial statements in
accordance with IFRS in fiscal year 2014, including comparative information also
prepared under IFRS for fiscal 2013 and 2012.  We are currently
assessing the potential impact of IFRS on our consolidated financial statements
and will continue to follow the proposed roadmap for future
developments.




ITEM 7A.       Quantitative and
Qualitative Disclosures About Market Risk.




Not
applicable




ITEM 8. Financial Statements and Supplementary Data.




The
financial statements are listed in Part IV Item 15 of this annual
report on Form 10-K and are incorporated by reference in this
Item 8.




ITEM 9. Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.




None.




ITEM 9A.   Controls and
Procedures.




Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures




Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934.  Based on their evaluation as of
December 31, 2009, the end of the period covered by this annual report on
Form 10-K, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures were
effective at a reasonable assurance level to ensure that the information
required to be disclosed in reports filed or submitted under the Securities
Exchange Act of 1934, including this annual report, were recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and was accumulated and communicated to management, including our
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.


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Management's
Report on Internal Control Over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting.  Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:




·
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;




·
            Provide
      reasonable assurance that the transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally
      accepted accounting principles, and that receipts and expenditures of the
      Company are being made only in accordance with authorizations of
      management and directors of the Company;
and




·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company's assets that
      could have a material effect on the financial
  statements.




All
internal control systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.  Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements.  Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.




In
connection with the filing of our annual report on Form 10-K, our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009.  In making this assessment,
our management used the criteria set forth by Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control—Integrated
Framework.  Based on our assessment using those criteria,
management believes that, as of December 31, 2009, our internal control
over financial reporting is effective based on those criteria.




This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and exchange Commission that permit us to provide only management’s report in
this annual report.




Changes
in Internal Control Over Financial Reporting




There
have been no changes in our internal controls over financial reporting during
the quarter ended December 31, 2009, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.




ITEM 9B.       Other
Information.




None.




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PART
III




ITEM 10. Directors,
Executive Officers and Corporate Governance.




The
information required by Item 10 concerning directors, corporate governance and
executive officers of the Company is incorporated herein by reference to the
information set forth in our definitive proxy statement for the 2010 Annual
Meeting of Stockholders under the headings “Election of Directors” and
“Executive Officers”, respectively, which proxy statement we expect to file with
the Securities and Exchange Commission within 120 days after the end of our
fiscal year ended December 31, 2009 (the “Proxy
Statement”).




The
information concerning compliance with Section 16(a) of the Exchange Act is
incorporated herein by reference to the information set forth in our Proxy
Statement under the heading “Section 16(a) Beneficial Ownership
Reporting.”




The
information concerning significant employees and family relationships is
incorporated herein by reference to the information set forth in our Proxy
Statement under the heading “Family Relationships.”




The
information concerning our code of ethics is incorporated herein by reference to
the information set forth in our Proxy Statement under the heading “Code of
Ethics and Conduct.”




ITEM 11. Executive
Compensation.




The
information required by Item 11 concerning executive compensation is
incorporated herein by reference to the information set forth in our Proxy
Statement under the heading “Executive Compensation.”




The
information required by Item 11 concerning compensation of directors is
incorporated herein by reference to the information set forth in our Proxy
Statement under the heading “Compensation of Directors.”




ITEM 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.




The
information required by Item 12 concerning security ownership of certain
beneficial owners and management is incorporated herein by reference to the
information set forth in our Proxy Statement under the heading “Security
Ownership of Certain Beneficial Owners and Management and related Stockholder
Matters.”




ITEM 13. Certain
Relationships and Related Transactions, and Director
Independence.




The
information required by Item 13 concerning certain relationships and related
party transactions and director independence is incorporated herein by reference
to the information set forth in our Proxy Statement under the headings “Certain
Relationships and Related Person Transactions” and “Director
Independence.”




ITEM 14. Principal
Accounting Fees and Services.




The
information required by Item 14 is incorporated by reference to the
information in our Proxy Statement under the headings “Ratification of
Appointment of Independent Registered Public Accounting Firm” and “Audit
Committee.”




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PART
IV




ITEM 15. Exhibits,
Financial Statement Schedules.




(a)(1)




Index
      to Financial Statements
            
            Page
      (s)Report
      of Independent Registered Public Accounting Firm
            
            F-1Financial
      Statements:Consolidated
      Balance Sheets - December 31, 2009 and 2008
            
            F-2Consolidated
      Statements of Loss and Comprehensive Loss for the Years Ended
      December 31, 2009 and 2008 and from Inception on March 6, 2000 to
      December 31, 2009
            
            F-3Consolidated
      Statements of Changes in Stockholders’ Equity from Inception on March 6,
      2000 to December 31, 2009
            
            F-4Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008 and from Inception on March 6, 2000 to December 31,
    2009
            
            F-5Notes
      to Consolidated Financial Statements
            
            F-6




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 Table of Contents


James
Stafford
 James
Stafford
 Chartered
Accountants
 Suite 350
– 1111 Melville Street
 Vancouver,
British Columbia
 Canada
V6E 3V6
 Telephone
+1 604 669 0711
 Facsimile
+1 604 669 0754
 *
Incorporated professional, James Stafford, Inc.
 Report
of Independent Registered Public Accounting Firm
 
 
 To
the Board of Directors and Stockholders of
 Constitution
Mining Corp.
 (An
Exploration Stage Company)
 
 We have
audited the consolidated balance sheets of Constitution Mining Corp.(An
Exploration Stage Company) (the “Company”) as at 31 December 2009 and 2008, and
the related consolidated statements of loss and comprehensive loss, cash flows
and changes in stockholders’ equity for the years ended 31 December 2009, 2008
and 2007.  These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America).  Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of 31
December 2009 and 2008 and the results of its operations, its cash flows and its
changes in stockholders’ equity for the years ended 31 December 2009, 2008 and
2007 in conformity with accounting principles generally accepted in the United
States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 1
to the consolidated financial statements, conditions exist which raise
substantial doubt about the Company’s ability to continue as a going concern
unless it is able to generate sufficient cash flows to meet its obligations and
sustain its operations.  Management’s plans in regard to these matters
are also described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 
 /s/ James
Stafford
 James Stafford
 Chartered
Accountants
  
 26
February 2010, except as to Note 18 which is as of 26 March 2010.







F -
1
 Table of Contents





Constitution
Mining Corp.


(An
Exploration Stage Company)


Consolidated
Balance Sheets
 (Expressed
in U.S. Dollars)
 As at 31 December





2009
            
            
            2008$
            
            
            
            $AssetsCurrentCash
      and cash equivalents
            
            
            205,125
            
            
            
            66,580Amounts
      receivable (Note 5)
            
            
            125,352
            
            
            
            60,000Prepaid
      expense
            
            
            22,724
            
            
            
            271,250353,201
            
            
            
            397,830Property and equipment(Note 6)
            
            
            150,758
            
            
            
            102,049Website development cost(Note 7)
            
            
            25,731
            
            
            
            47,295Mineral property costs(Note 8)
            
            
            19,900,368
            
            
            
            5,120,26020,430,058
            
            
            
            5,667,434LiabilitiesCurrentAccounts
      payable and accrued liabilities (Note 9)
            
            
            867,027
            
            
            
            547,891Due
      to related parties (Note 10)
            
            
            966,904
            
            
            
            12,3791,833,931
            
            
            
            560,270Future income tax liabilities(Note 14)
            
            
            752,220
            
            
            
            -2,586,151
            
            
            
            560,270Stockholders’
      equityCapital stock (Note
      12)Authorized300,000,000
      common shares, par value $0.001 and50,000,000
      preferred shares, par value $0.001Issued
      and outstanding31
      December 2009 – 78,055,985 common shares, par value $0.00131
      December 2008 – 58,469,456 common shares, par value $0.001
            
            
            78,056
            
            
            
            58,469Share subscriptions received in
      advance(Note 12)
            
            
            70,000
            
            
            
            -Additional
      paid in capital
            
            
            25,336,424
            
            
            
            7,945,496Warrants(Note
      12)
            
            
            3,572,255
            
            
            
            3,976,863Deficit,
      accumulated during the exploration stage
            
            
            (16,622,828
            )
            
            
            (6,873,664
            )12,433,907
            
            
            
            5,107,164Non-controlling
      interest
            
            
            5,410,000
            
            
            
            -17,843,907
            
            
            
            5,107,16420,430,058
            
            
            
            5,667,434





Nature, Basis of
Presentation and Continuance of Operations ), Commitments Subsequent Events






F -
2
 Table of Contents





Constitution
Mining Corp.


(An
Exploration Stage Company)


Consolidated
Statements of Loss and Comprehensive Loss
 (Expressed in U.S.
Dollars)




For
      the
              period
      from
              the
      date of
              inception
      on 6
              March
      2000
              to
      31
              December
              2009
              (Unaudited)
            
            
            For
      the year
              ended
      31
              December
              2009
            
            
            For
      the year
              ended
      31
              December
              2008
            
            
            For
      the year
              ended
      31
              December
              2007$
            
            
            
            $
            
            
            
            $
            
            
            
            $ExpensesAmortization
      expense (Notes 6 and 7)
            
            
            275,049
            
            
            
            74,168
            
            
            
            40,379
            
            
            
            32,100Default
      on oil and gas deposit
            
            
            25,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Exploration
      costs (Note 8)
            
            
            3,735,457
            
            
            
            2,810,496
            
            
            
            924,961
            
            
            
            -Interest
            
            
            165,327
            
            
            
            38,802
            
            
            
            -
            
            
            
            74,770Investor
      relations
            
            
            2,095,097
            
            
            
            1,326,379
            
            
            
            668,992
            
            
            
            99,726Management
      fees (Note 11)
            
            
            782,450
            
            
            
            291,367
            
            
            
            346,583
            
            
            
            132,500Office
      and miscellaneous
            
            
            434,383
            
            
            
            196,225
            
            
            
            212,290
            
            
            
            8,608Professional
      fees
            
            
            2,191,925
            
            
            
            986,356
            
            
            
            909,483
            
            
            
            182,793Rent  (Note
      11)
            
            
            165,330
            
            
            
            60,525
            
            
            
            89,722
            
            
            
            12,683Stock-based
      compensation (Note 13)
            
            
            7,120,480
            
            
            
            4,461,838
            
            
            
            2,033,607
            
            
            
            625,035Travel
            
            
            439,436
            
            
            
            131,862
            
            
            
            253,688
            
            
            
            53,886Write-down
      of mineral property acquisition costs (Note 8)
            
            
            4,339,330
            
            
            
            4,339,330
            
            
            
            -
            
            
            
            -Write-down
      of property and equipment (Note 6)
            
            
            26,611
            
            
            
            26,611
            
            
            
            -
            
            
            
            -Net
      operating loss before other items
            
            
            (21,795,875
            )
            
            
            (14,743,959
            )
            
            
            (5,479,705
            )
            
            
            (1,222,101
            )Other
      itemsForeign
      exchange income (loss)
            
            
            26,287
            
            
            
            27,941
            
            
            
            393
            
            
            
            (2,047
            )Gain
      on sale of oil and gas property (Notes 4 and 15)
            
            
            307,115
            
            
            
            -
            
            
            
            307,115
            
            
            
            -Interest
      income
            
            
            12,795
            
            
            
            4
            
            
            
            7,364
            
            
            
            5,427Provision
      for potential legal claims (Note 9)
            
            
            (65,000
            )
            
            
            135,000
            
            
            
            (200,000
            )
            
            
            -Project
      management fees
            
            
            60,000
            
            
            
            -
            
            
            
            60,000
            
            
            
            -341,197
            
            
            
            162,945
            
            
            
            174,872
            
            
            
            3,380Net
      operating loss before income taxes
            
            
            (21,454,678
            )
            
            
            (14,581,014
            )
            
            
            (5,304,833
            )
            
            
            (1,218,721
            )Future income tax recovery(Note 14)
            
            
            4,831,850
            
            
            
            4,831,850
            
            
            
            -
            
            
            
            -Net
      loss and comprehensive loss for the period
            
            
            (16,622,828
            )
            
            
            (9,749,164
            )
            
            
            (5,304,833
            )
            
            
            (1,218,721
            )Basic
      and diluted loss per common share
            
            
            
            
            
            
            (0.152
            )
            
            
            (0.100
            )
            
            
            (0.025
            )Weighted
      average number of common shares used in per share
    calculations
            
            
            
            64,212,477
            
            
            
            52,812,105
            
            
            
            47,875,502






F -
3
 Table of Contents




Constitution
Mining Corp.


(An
Exploration Stage Company)


Consolidated
Statements of Changes in Stockholders’ Equity


(Expressed
in U.S. Dollars)


For
the years ended 31 December 2009, 2008 and 2007 (Audited), and


For the period from the
date of inception on 6 March 2000 to 31 December 2009 (Unaudited)




Number
      of
              shares
      issued
            Share
      capital
            Additional
      paid-in capital
            Share
              subscriptions
      received in
              advance
            Warrants
            Deficit,
              accumulated
              during
      the
              exploration
      stage
            Non-
              controlling
              interest
            Total
              stockholders’
              equity$
            
            $
            
            $
            $
            
            $
            
            $
            
            $Balance
      at 6 March 2000 (inception)Common
      shares issued – cash
            
            2,000,000
            
            2,000
            
            1,000
            -
            -
            
            -
            
            -
            
            3,000Net
      loss for the period
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (2,291)
            
            -
            
            (2,291)Balance
      at 31 December 2000
            
            2,000,000
            
            2,000
            
            1,000
            -
            -
            
            (2,291)
            
            -
            
            709Common
      shares issued – cash
            
            5,000,000
            
            5,000
            
            42,000
            -
            -
            
            -
            
            -
            
            47,000Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (10,571)
            
            -
            
            (10,571)Balance
      at 31 December 2001
            
            7,000,000
            
            7,000
            
            43,000
            
            -
            
            (12,862)
            
            -
            
            37,138Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (12,097)
            
            -
            
            (12,097)Balance
      at 31 December 2002
            
            7,000,000
            
            7,000
            
            43,000
            -
            -
            
            (24,959)
            
            -
            
            25,041Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (11,019)
            
            -
            
            (11,019)Balance
      at 31 December 2003
            
            7,000,000
            
            7,000
            
            43,000
            -
            -
            
            (35,978)
            
            -
            
            14,0223
      for 1 forward split
            
            14,000,000
            
            14,000
            
            (14,000)
            -
            -
            
            -
            
            -
            
            -Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (6,451)
            
            -
            
            (6,451)Balance
      at 31 December
              2004
            
            21,000,000
            
            21,000
            
            29,000
            -
            -
            
            (42,429)
            
            -
            
            7,571or 1
      forward split
            
            21,000,000
            
            21,000
            
            (21,000)
            -
            -
            
            -
            
            -
            
            -Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (18,338)
            
            -
            
            (18,338)Balance
      at 31 December 2005
            
            42,000,000
            
            42,000
            
            8,000
            -
            -
            
            (60,767)
            
            -
            
            (10,767)Common
      shares issued –  cash
            
            4,000,000
            
            4,000
            
            76,000
            -
            -
            
            -
            
            -
            
            80,000Contributions
      to capital by related party – expenses (Notes 11 and 15)
            
            -
            
            -
            
            14,400
            -
            -
            
            -
            
            -
            
            14,400Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (289,343)
            
            -
            
            (289,343)Balance
      at 31 December 2006
            
            46,000,000
            
            46,000
            
            98,400
            -
            -
            
            (350,110)
            
            -
            
            (205,710)Contributions
      to capital by related party – expenses (Notes 11 and 15)
            
            -
            
            -
            
            600
            -
            -
            
            -
            
            -
            
            600Common
      shares issued –  debt
            1,145,300
            
            1,145
            
            21,761
            -
            -
            
            -
            
            -
            
            22,906Common
      shares issued –  cash
            1,437,000
            
            1,437
            
            501,513
            -
            -
            
            -
            
            -
            
            502,950Stock-based
      compensation (Note 13)
            -
            
            -
            
            625,035
            -
            -
            
            -
            
            -
            
            625,035Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (1,218,721)
            
            -
            
            (1,218,721)Balance
      at 31 December 2007
            
            48,582,300
            
            48,582
            
            1,247,309
            -
            -
            
            (1,568,831)
            
            -
            
            (272,940)Common
      shares issued –  mineral properties (Notes 8, 12 and
      15)
            3,800,000
            
            3,800
            
            4,166,200
            -
            -
            
            -
            
            -
            
            4,170,000Common
      shares issued –  cash (Note 11)
            6,016,511
            
            6,016
            
            4,706,272
            -
            -
            
            -
            
            -
            
            4,712,288Common
      shares issued –  services (Notes 12 and 15)
            
            70,645
            
            71
            
            49,380
            -
            -
            
            -
            
            -
            
            49,451Value
      assigned to warrants (Note 12)
            -
            
            -
            
            (3,739,570)
            -
            3,739,570
            
            -
            
            -
            
            -Share
      issuance costs
            
            -
            
            -
            
            (517,702)
            -
            237,293
            
            -
            
            -
            
            (280,409)Stock-based
      compensation (Note 13)
            -
            
            -
            
            2,033,607
            -
            -
            
            -
            
            -
            
            2,033,607Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (5,304,833)
            
            -
            
            (5,304,833)Balance
      at 31 December 2008
            
            58,469,456
            
            58,469
            
            7,945,496
            -
            3,976,863
            
            (6,873,664)
            
            -
            
            5,107,164Common
      shares issued –  mineral properties (Notes 8, 12 and
      15)
            
            2,300,000
            
            2,300
            
            1,676,700
            -
            -
            
            -
            
            -
            
            1,679,000Common
      shares issued –  cash (Note 12)
            12,786,529
            
            12,787
            
            6,812,536
            -
            -
            
            -
            
            -
            
            6,825,323Value
      assigned to warrants (Note 12)
            -
            
            -
            
            (3,309,467)
            -
            3,309,467
            
            
            
            -
            
            -Warrants
      expired (Note 12)
            
            -
            
            -
            
            3,739,570
            -
            (3,739,570)
            
            -
            
            -
            
            -Agent
      compensation warrants expired    (Note
    12)
            -
            
            -
            
            237,293
            -
            (237,293)
            
            -
            
            -
            
            -Share
      issuance costs
            -
            
            -
            
            (473,042)
            -
            262,788
            
            -
            
            -
            
            (210,254)Share
      subscription received in advance (Note 12)
            -
            
            -
            
            -
            70,000
            -
            
            -
            
            -
            
            70,000Business
      acquisition (Notes 8, 12, 15 and 17)
            4,500,000
            
            4,500
            
            4,245,500
            -
            -
            
            -
            
            5,410,000
            
            9,660,000Stock-based
      compensation (Note 13)
            -
            
            -
            
            4,461,838
            -
            -
            
            -
            
            -
            
            4,461,838Net
      loss for the year
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (9,749,164)
            
            -
            
            (9,749,164)Balance
      at 31 December 2009
            
            78,055,985
            
            78,056
            
            25,336,424
            
            70,000
            
            3,572,255
            
            (16,622,828)
            
            5,410,000
            
            17,843,907






F -
4
 Table of Contents


Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Consolidated
Statements of Cash Flows
 (Expressed in U.S.
Dollars)
 For
      the period
                  from
      the date of
                  inception
      on 6
                  March
      2000 to 31
                  December
      2009
                  (Unaudited)
                
                
                For
      the
                  year
      ended
                  31
                  December
                  2009
                
                
                For
      the
                  year
      ended
                  31
                  December
                  2008
                
                
                For
      the
                  year
      ended
                  31
                  December
                  2007$
                
                
                
                $
                
                
                
                $
                
                
                
                $Cash
      flows used in operating activitiesNet
      loss for the period
                
                
                (16,622,828
                )
                
                
                (9,749,164
                )
                
                
                (5,304,833
                )
                
                
                (1,218,721
                )Adjustments
      to reconcile loss to net cash used by operating activitiesAccrued
      interest
                
                
                126,525
                
                
                
                -
                
                
                
                -
                
                
                
                74,770Amortization
      (Notes 6 and 7)
                
                
                275,049
                
                
                
                74,168
                
                
                
                40,379
                
                
                
                32,100Contributions
      to capital by related party  expenses
                
                
                15,000
                
                
                
                -
                
                
                
                -
                
                
                
                600Future income tax
      recovery
                
                
                (4,831,850
                )
                
                
                (4,831,850
                )
                
                
                -
                
                
                
                -Shares
      issued for services (Notes 12 and 15)
                
                
                24,199
                
                
                
                -
                
                
                
                24,199
                
                
                
                -Warrants
      issued for services (Notes 12 and 15)
                
                
                25,252
                
                
                
                -
                
                
                
                25,252
                
                
                
                -Gain
      on sale of oil & gas property (Notes 4 and 15)
                
                
                (307,115
                )
                
                
                -
                
                
                
                (307,115
                )
                
                
                -Stock-based
      compensation (Note 13)
                
                
                7,120,480
                
                
                
                4,461,838
                
                
                
                2,033,607
                
                
                
                625,035Write-down of mineral property
      acquisition costs (Note 8)
                
                
                4,339,330
                
                
                
                4,339,330
                
                
                
                -
                
                
                
                -Write-down of property and
      equipment (Note 6)
                
                
                26,611
                
                
                
                26,611
                
                
                
                -
                
                
                
                -Changes
      in operating assets and liabilities(Increase)
      decrease in prepaid expenses
                
                
                (22,724
                )
                
                
                248,526
                
                
                
                (221,542
                )
                
                
                (49,708
                )Increase
      in amounts receivable
                
                
                (91,075
                )
                
                
                (31,075
                )
                
                
                (56,000
                )
                
                
                (4,000
                )Increase
      in accounts payable and accrued liabilities
                
                
                383,981
                
                
                
                (163,910
                )
                
                
                485,104
                
                
                
                55,054Increase
      in due to related parties
                
                
                263,867
                
                
                
                263,867
                
                
                
                -
                
                
                
                -(9,275,298
                )
                
                
                (5,361,659
                )
                
                
                (3,279,958
                )
                
                
                (475,780
                )Cash
      flows used in investing activitiesAcquisition
      of mineral property interest (Note 8)
                
                
                (560,582
                )
                
                
                (360,322
                )
                
                
                (200,260
                )
                
                
                -Business
      acquisition, net of cash received (Note 17)
                
                
                (1,499,908
                )
                
                
                (749,908
                )
                
                
                (750,000
                )
                
                
                -Purchase
      of equipment (Note 6)
                
                
                (214,590
                )
                
                
                (89,560
                )
                
                
                (125,030
                )
                
                
                -Website
      development costs (Note 7)
                
                
                (64,693
                )
                
                
                -
                
                
                
                (64,693
                )
                
                
                -Purchase
      of oil and gas property (Note 4)
                
                
                (642,006
                )
                
                
                -
                
                
                
                -
                
                
                
                -(2,981,779
                )
                
                
                (1,199,790
                )
                
                
                (1,139,983
                )
                
                
                -Cash
      flows from financing activitiesIssuance
      of common shares, net of share issue costs (Note 12)
                
                
                4,650,861
                
                
                
                3,305,602
                
                
                
                692,309
                
                
                
                502,950Increase
      in due to related parties
                
                
                27,304
                
                
                
                14,925
                
                
                
                991
                
                
                
                9,090Issuance
      of warrants (Note 12)
                
                
                7,049,037
                
                
                
                3,309,467
                
                
                
                3,739,570
                
                
                
                -Convertible
      debentures
                
                
                665,000
                
                
                
                -
                
                
                
                -
                
                
                
                -Share
      subscriptions received in advance (Note 12)
                
                
                70,000
                
                
                
                70,000
                
                
                
                -
                
                
                
                -12,462,202
                
                
                
                6,699,994
                
                
                
                4,431,879
                
                
                
                502,950Increase
      in cash and cash equivalents
                
                
                205,125
                
                
                
                138,545
                
                
                
                11,938
                
                
                
                27,170Cash
      and cash equivalents, beginning of period
                
                
                -
                
                
                
                66,580
                
                
                
                54,642
                
                
                
                27,472Cash
      and cash equivalents, end of period
                
                
                205,125
                
                
                
                205,125
                
                
                
                66,580
                
                
                
                54,642
 Supplemental Disclosures with Respect
of Cash Flows(Note 15)
  The
accompanying notes are an integral part of these consolidated financial
statements.
 F -
5
 Table of Contents
 
 Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009




1.
            Nature, Basis of
      Presentation and Continuance of
Operations




Constitution
Mining Corp. (the “Company”) was incorporated in the State of Nevada under the
name “Crafty Admiral Enterprises, Ltd.” on 6 March 2000. On 9 March 2007, the
Company changed their name to “Nordic Nickel Ltd.”. The Company changed their
name pursuant to a parent/subsidiary merger between the Company (as Crafty
Admiral Enterprises, Ltd.) and its wholly-owned non-operating subsidiary, Nordic
Nickel Ltd., which was established for the purpose of giving effect to this name
change. On 15 November 2007, the Company changed its name to “Constitution
Mining Corp.”. The Company changed their name pursuant to a parent/subsidiary
merger between the Company (as Nordic Nickel Ltd.) and its wholly-owned
non-operating subsidiary, Constitution Mining Corp., which was established for
the purpose of giving effect to this name change. On 21 October 2009, the
Company reincorporated in the State of Delaware. The Company is in the
exploration stage as its operations principally involve the examination and
investigation of land that may contain valuable minerals, for the purpose of
discovering the presence of ore, if any, and its extent.




The
Company is an exploration stage enterprise, as defined in Accounting Standards
Codification (the “Codification” or “ASC”) 915-10, “Development Stage Entities”.
The Company is devoting all of its present efforts in securing and establishing
a new business, and its planned principle operations have not commenced, and,
accordingly, no revenue has been derived during the organization
period.




The
consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) applicable to exploration stage enterprises, and are expressed
in U.S. dollars.  The Company’s fiscal year end is 31
December.




The
accompanying consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiary, Constitution Mining Argentina SA, a
company incorporated under the laws of Argentina, since its date of
incorporation on 4 March 2008.   The Company also follows ASC
810-10 and fully consolidates the assets, liabilities, revenues and expenses of
Bacon Hill Invest Inc. (“Bacon Hill”), a company incorporated under the law of
Panama.  The Company owns a 50% interest in Bacon Hill.  It
recognizes the other owner’s equity under the heading noncontrolling
interest.




The
Company’s consolidated financial statements as at 31 December 2009 and for the
year then ended have been prepared on a going concern basis, which contemplates
the realization of assets and the settlement of liabilities and commitments in
the normal course of business.  The Company had a loss of $9,749,164
for the year ended 31 December 2009 (31 December 2008 – $5,304,833) and has
working capital deficit of $1,480,730 at 31 December 2009 (31 December 2008 –
$162,440).




Management
cannot provide assurance that the Company will ultimately achieve profitable
operations or become cash flow positive, or raise additional debt and/or equity
capital.  Management believes that the Company’s capital resources
should be adequate to continue operating and maintaining its business strategy
during the fiscal year ending 31 December 2010.  However, if the
Company is unable to raise additional capital in the near future, due to the
Company’s liquidity problems, management expects that the Company will need to
curtail operations, liquidate assets, seek additional capital on less favorable
terms and/or pursue other remedial measures.  These consolidated
financial statements do not include any adjustments related to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.





F -
6
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


On 27
June 2006, the Company acquired a 100% interest in an oil and gas property lease
located in St. Francis County, Arkansas (the “Tombaugh Lease”) for cash payment
of $642,006 (Note 4).   In 2007, the Company shifted its focus from
oil and gas sector to mineral exploration.




Although
management is currently implementing its business plan, and seeking additional
sources of equity or debt financing and or a partner, there is no assurance
these activities will be successful.  This raises substantial doubt about
the ability of the Company to continue as a going concern.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.




2.
            Changes
      in Accounting Policies




The
Accounting Standards Codification




In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principle – a
replacement of FASB Statement No. 162”.  The Codification
reorganized existing U.S. accounting and reporting standards issued by the FASB
and other related private sector standard setter into a single source of
authoritative accounting principles arranged by topic.  The
Codification supersedes all existing U.S. accounting standards; all other
accounting literature not included in the Codification (other than Securities
and Exchange Commission guidance for publicly-traded companies) is considered
non-authoritative.  The Codification was effective on a prospective
basis for interim and annual reporting periods ending after 15 September
2009.  The adoption of the Codification changed the Company’s
references GAAP accounting standards but did not impact the Company’s results of
operations, financial position or liquidity.




Subsequent
Events




In May
2009, the FASB issued new guidance for accounting for subsequent
events.  The new guidance, which is now part of ASC 855, “Subsequent Events” is
intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date, but before financial statements
are issued or are available to be issued.  It requires the disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date.  This disclosure should alert all users of
financial statements that an entity has not evaluated subsequent events after
that date in the set of financial statements being presented.  The new
guidance was effective on a prospective basis for interim or annual reporting
periods ending after 15 June 2009.  The adoption of this guidance did
not have a material impact on the Company’s consolidated financial
statements.







F -
7
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Convertible
Debt




In May
2008, the FASB issued new guidance for accounting for convertible debt
instruments that may be settled in cash.  The new guidance, which is
now part of ASC 470-20, “Debt
with Conversion and Other Options” requires the liability and equity
components to be separately accounted for in a manner that will reflect the
entity’s nonconvertible debt borrowing rate.  The Company will
allocate a portion of the proceeds received from the issuance of convertible
notes between a liability and equity component by determining the fair value of
the liability component using the Company’s nonconvertible debt borrowing
rate.  The difference between the proceeds of the notes and the fair
value of the liability component will be recorded as a discount on the debt with
a corresponding offset to paid-in capital.  The resulting discount
will be accreted by recording additional non-cash interest expense over the
expected life of the convertible notes using the effective interest rate
method.  The new guidance was to be applied retrospectively to all
periods presented upon those fiscal years.  The adoption of this
guidance did not have a material impact on the Company’s consolidated financial
statements.




Useful
Life of an Intangible Assets




In April
2008, the FASB issued new guidance for determining the useful life of an
intangible assets.  The new guidance, which is now part of ASC 350,
“Intangibles – Goodwill and
Other”.  In determining the useful life of intangible assets,
ASC 350 removes the requirement to consider whether an intangible asset can be
renewed without substantial cost of material modifications to the existing terms
and conditions and, instead, requires an entity to consider its own historical
experience in renewing similar arrangements.  ASC 350 also requires
expanded disclosure related to the determination of intangible asset useful
lives.  The new guidance was effective for financial statements issued
for fiscal years beginning after 15 December 2008.  The adoption of
this guidance did not have a material impact on the Company’s consolidated
financial statements.




Derivative
Instruments and Hedging Activities




In March
2008, the FASB issued new guidance on the disclosure of derivative instruments
and hedging activities.  The new guidance, which is now part of ASC
815, “Derivatives and Hedging
Activities” requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value
amounts of, and gains and losses on, derivative instruments, and disclosures
about credit-risk-related contingent features in derivative
agreements.  The new guidance was effective prospectively for
financial statements issued for fiscal years beginning after 15 November 2008,
with early application encouraged.  The adoption of this guidance did
not have a significant impact on the Company’s consolidated financial
statements.







F -
8
 Table of Contents


Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Business
Combinations




In
December 2007, the FASB issued revised guidance for accounting for business
combinations.  The revised guidance, which is now part of ASC 805,
“Business Combination”
requires the fair value measurement of assts acquired, liabilities assumed and
any noncontrolling interest in the acquiree, at the acquisition date with
limited exceptions.  Previously, a cost allocation approach was used
to allocate the cost of the acquisition based on the estimated fair value of the
individual assets acquired and liabilities assumed.  The cost
allocation approach treated acquisition-related costs and restructuring costs
that the acquirer expected to incur as a liability on the acquisition date, as
part of the cost of the acquisition.  Under the revised guidance,
those costs are recognized in the consolidated statement of income separately
from the business combination.  The revised guidance applies to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after 15 December
2008.    The adoption of this guidance did not have a
material impact on the Company’s consolidated financial statements.




Noncontrolling
Interests in Consolidated Financial Statements.




In
December 2007, the FASB issued new guidance for accounting for noncontrolling
interests.  The new guidance, which is now part of ASC 810, “Consolidation” establishes
accounting and reporting standards for ownership interests in subsidiaries held
by parties other than the parent, the amount of consolidated net income
attributable and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated.  The new guidance also establishes
disclosure requirements that clearly identify and distinguishes between the
interests of the parent and the interests of the noncontrolling
owners.  The new guidance was effective for fiscal years beginning
after 15 December 2008.  The adoption of this guidance did not have a
material effect on the Company’s results of operations, financial position or
cash flows.




3.
            Significant
      Accounting Policies




The
following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements.




Principles
of consolidation




All
inter-company balances and transactions have been eliminated in these
consolidated financial statements.




Cash
and cash equivalents




Cash and
cash equivalents include highly liquid investments with original maturities of
three months or less.







F -
9
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Financial
instruments




The
carrying value of cash and cash equivalents, amounts receivable, accounts
payable and accrued liabilities and amounts due to related parties approximates
their fair value because of the short maturity of these
instruments.  The Company’s operations are in the U.S., Argentina and
Peru and virtually all of its assets and liabilities are giving rise to
significant exposure to market risks from changes in foreign currency
rates.  The Company’s financial risk is the risk that arises from
fluctuations in foreign exchange rates and the degree of volatility of these
rates.  Currently, the Company does not use derivative instruments to
reduce its exposure to foreign currency risk.




Derivative
financial instruments




The
Company has not, to the date of these consolidated financial statements, entered
into derivative instruments to offset the impact of foreign currency
fluctuations.




Income
taxes




Deferred
income taxes are reported for timing differences between items of income or
expense reported in the financial statements and those reported for income tax
purposes in accordance with ASC 740, “Income Taxes”, which requires
the use of the asset/liability method of accounting for income
taxes.  Deferred income taxes and tax benefits are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and for tax losses and credit
carry-forwards.  Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled.  The Company provides for deferred taxes for the estimated
future tax effects attributable to temporary differences and carry-forwards when
realization is more likely than not.




Basic
and diluted net loss per share




The
Company computes net income (loss) per share in accordance with ASC 260 “Earnings per
Share”.  ASC 260 requires presentation of both basic and
diluted earnings per share (“EPS”) on the face of the income
statement.  Basic EPS is computed by dividing net income (loss)
available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period.  Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period
using the treasury stock method and convertible preferred stock using the
if-converted method.  In computing diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options or warrants.  Diluted EPS
excluded all dilutive potential shares if their effect is
anti-dilutive.




Comprehensive
loss




ASC 220,
“Comprehensive Income”,
establishes standards for the reporting and display of comprehensive loss and
its components in the financial statements.  As at 31 December 2009,
the Company has no items that represent a comprehensive loss and, therefore, has
not included a schedule of comprehensive loss in the consolidated financial
statements.







F -
10
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Mineral
property costs




Mineral
property acquisition costs are initially capitalized as tangible assets when
purchased. At the end of each fiscal quarter end, the Company assesses the
carrying costs for impairment.  If proven and probable reserves are
established for a property and it has been determined that a mineral property
can be economically developed, costs will be amortized using the
units-of-production method over the estimated life of the probable
reserve.




Mineral
property exploration costs are expensed as incurred.




Estimated
future removal and site restoration costs, when determinable are provided over
the life of proven reserves on a units-of-production basis.  Costs,
which include production equipment removal and environmental remediation, are
estimated each period by management based on current regulations, actual
expenses incurred, and technology and industry standards.  Any charge
is included in exploration expense or the provision for depletion and
depreciation during the period and the actual restoration expenditures are
charged to the accumulated provision amounts as incurred.




As of the
date of these consolidated financial statements, the Company has not established
any proven or probable reserves on its mineral properties and incurred only
acquisition and exploration costs.




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




Equipment






Equipment
is recorded at cost and amortization is provided over its estimated economic
life at 30% or on a straight line basis over its economic life.




Website
development costs




The costs
of computer software developed or obtained for internal use, during the
preliminary project phase, as defined under ASC 350-40, “Internal-Use Software”, will
be expensed as incurred.  The costs of website development during the
planning stage, as defined under ASC 350-50, “Website Development Costs”,
will also be expensed as incurred.




Computer
software, website development incurred during the application and infrastructure
development stage, including external direct costs of materials and services
consumed in developing the software and creating graphics and website content,
will be capitalized and amortized over the estimated useful life, beginning when
the software is ready for use and after all substantial testing is completed and
the website is operational.







F -
11
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Segments
of an enterprise and related information




ASC 280,
“Segment Reporting”establishes guidance for the
way that public companies report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the
public.  It also establishes standards for disclosures regarding
products and services, geographic areas and major customers.  ASC 280
defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance.  The Company has evaluated this Codification and does not
believe it is applicable at this time.




Start-up
expenses




The
Company has adopted ASC 720-15, “Start-Up Costs”, which
requires that costs associated with start-up activities be expensed as
incurred.  Accordingly, start-up costs associated with the Company’s
formation have been included in the Company’s expenses for the period from the
date of inception on 6 March 2000 to 31 December 2009.




Foreign
currency translation




The
Company’s functional and reporting currency is U.S. dollars.  The
consolidated financial statements of the Company are translated to U.S. dollars
in accordance with ASC 830, “Foreign Currency
Matters”.  Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rate prevailing at the
balance sheet date.  Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income.  The Company has not, to the date of
these consolidated financial statements, entered into derivative instruments to
offset the impact of foreign currency fluctuations.




Use
of estimates




The
preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenditures during the reporting period.  Actual results
could differ from these estimates.




Comparative
figures




Certain
comparative figures have been adjusted to conform to the current year’s
presentation.







F -
12
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Stock-based
compensation




Effective
1 January 2006, the Company adopted the provisions of ASC 718, “Compensation – Stock
Compensation”, which establishes accounting for equity instruments
exchanged for employee services. Under the provisions of ASC 718, stock-based
compensation cost is measured at the grant date, based on the calculated fair
value of the award, and is recognized as an expense over the employees’
requisite service period (generally the vesting period of the equity grant). The
Company adopted ASC 718 using the modified prospective method, which requires
the Company to record compensation expense over the vesting period for all
awards granted after the date of adoption, and for the unvested portion of
previously granted awards that remain outstanding at the date of adoption.
 Accordingly, financial statements for the periods prior to 1 January 2006
have not been restated to reflect the fair value method of expensing share-based
compensation.  Adoption of ASC 718 does not change the way the Company
accounts for share-based payments to non-employees, with guidance provided by
ASC 505-50, “Equity-Based
Payments to Non-Employees”.




Recent
accounting pronouncements




In June
2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
167, “Amendments to FASB
Interpretation No. 46(R)”.  SFAS No. 167, which amends ASC
810-10, “Consolidation”, prescribes a
qualitative model for identifying whether a company has a controlling financial
interest in a variable interest entity (“VIE”) and eliminates the quantitative
model.  The new model identifies two primary characteristics of a
controlling financial interest: (1) provides a company with the power to direct
significant activities of the VIE, and (2) obligates a company to absorb losses
of and/or provides rights to receive benefits from the VIE.  SFAS 167
requires a company to reassess on an ongoing basis whether it holds a
controlling financial interest in a VIE.  A company that holds a
controlling financial interest is deemed to be the primary beneficiary of the
VIE and is required to consolidate the VIE.  SFAS No. 167, which is
referenced in ASC 105-10-65, has not yet been adopted into the Codification and
remains authoritative.  SFAS No. 167 is effective 1 January
2010.  The Company does not expect that the adoption of SFAS No. 167
will have a material impact on its consolidated financial
statements.




In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfer of Financial
Assets – an amendment of FASB Statement”.  SFAS No. 166 removes
the concept of a qualifying special-purpose entity from ASC 860-10, “Transfers and Servicing”, and
removes the exception from applying ASC 810-10, “Consolidation”. This
statements also clarifies the requirements for isolation and limitations on
portions of financial assets that are eligible for sale
accounting.  SFAS No. 166, which is referenced in ASC 105-10-65, has
not yet been adopted into the Codification and remains
authoritative.  This statement is effective 1 January
2010.  The Company does not expect that the adoption of SFAS No. 166
will have a material impact on its consolidated financial
statements.




In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Fair Value Measurement and
Disclosure (Topic 820) – Measuring Liabilities at Fair Value”, which
provides valuation techniques to measure fair value in circumstances in which a
quoted price in an active market for the identical liability is not
available.  The guidance provided in this update is effective 1
January 2010.  The Company does not expect that the adoption of this
guidance will have a material impact on its consolidated financial
statements.







F -
13
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


International
Financial Reporting Standards




In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board.  Under the proposed
roadmap, the Company would be required to prepare consolidated financial
statements in accordance with IFRS in fiscal year 2014, including comparative
information also prepared under IFRS for fiscal 2013 and 2012.  The
Company is currently assessing the potential impact of IFRS on its consolidated
financial statements and will continue to follow the proposed roadmap for future
developments.




4.
            Unproven Oil and Gas
      Exploration Property




Tombaugh
Farms Property – St. Francis County, Arkansas




On 27
June 2006, the Company acquired a 100% interest in a mineral, oil and gas
property lease located in St. Francis County, Arkansas (the “Tombaugh Lease”)
for an up front cash payment of $642,006.  The lease is for a period
of five years and is subject to a 19% royalty on oil and other liquid
hydrocarbons produced, saved and sold, and can be extended at the option of the
Company for an additional five years on the same terms.  By agreements
effective 18 January 2008, the Company assigned all of its rights, title and
interest in the Tombaugh Lease with a book value of $481,504 to a purchaser in
consideration for the purchaser assuming the Company’s outstanding payment
obligations of $788,619 related to its convertible debentures. The Company
recorded a gain of $307,115 upon completion of this transaction (Note
15).




Balance
      at 31 December
              2009
            
            
            Balance
      at 31 December
              2008$
            
            
            
            $Unproven
      oil and gas properties consist of the following:Undeveloped
      properties
            
            
            -
            
            
            
            -




The
following sets forth costs incurred for oil and gas property acquisition and
development activities, whether capitalized or expensed.




During
      the year
              ended
      31
              December
              2009
            
            
            During
      the year
              ended
      31
              December
              2008$
            
            
            
            $Acquisition
      – unproved
            
            
            -
            
            
            
            481,504Disposal
      through assignment of rights
            
            
            -
            
            
            
            (481,504
            )Amortization
            
            
            -
            
            
            
            --
            
            
            
            -







F -
14
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


5.
            Amounts
      Receivable




Amounts
receivable are non-interest bearing, unsecured and have settlement dates within
one year.




6.
            Property
      and Equipment




Net
      Book ValueCost
            
            
            Accumulated
              amortization
            
            
            31
      December 2009
            
            
            31
      December 2008$
            
            
            
            $
            
            
            
            $
            
            
            
            $Equipment
            
            
            213,898
            
            
            
            63,141
            
            
            
            150,757
            
            
            
            102,049




During
the year ended 31 December 2009, total additions to property and equipment were
$127,923 (31 December 2008 - $125,030) being $89,560 related to direct purchase
and $38,363 related to acquisition of Minera Maranon S.A.C.




During
the year ended 31 December 2009, total write-down of property and equipment were
$26,611 (31 December 2008 - $Nil) (Note 15).




7.
            Website
      Development Cost




Net
      Book ValueCost
            
            
            Accumulated
              amortization
            
            
            31
      December 2009
            
            
            31
      December 2008$
            
            
            
            $
            
            
            
            $
            
            
            
            $Website
      development
            
            
            64,693
            
            
            
            38,962
            
            
            
            25,731
            
            
            
            47,295




During
the year ended 31 December 2009, total additions to website development were
$Nil (31 December 2008 - $64,693).




8.
            Mineral
      Property Costs




Seabridge
Gold Claims




Effective
2 December 2009, the Company entered into a written Letter of Intent with
Seabridge Gold Inc. (“Seabridge”) for the exclusive option to acquire a 100%
interest in certain mining claims and leasehold interests in Nevada (the
“Seabridge Claims”). The Company has until 15 January 2010 (extended to 15 March
2010) to conduct its due diligence (completed) and then, to proceed to enter
into a more formal option agreement with Seabridge. Until then, the Letter of
Intent remains binding between the parties (Notes 16 and 18).




Under the
terms of the Letter of Intent, in order to exercise the Seabridge Claims, the
Company upon signing of the Letter of Intent, must pay Seabridge $200,000 (paid)
which will be credited against the $1,000,000 payable as defined
below.





F -
15
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009





Upon
competition the transfer of title to the Seabridge Claims scheduled for 31 March
2010 (the “Closing Date”) or as soon as possible thereafter, the Company
must:




a.
            Pay
      $1,000,000, against which the $200,000 (paid) delivered upon signing the
      Letter of Intent will be credited, and the remaining $800,000 will be
      paid;


b.
            Issue
      1,000,000 restricted common shares of the
  Company;


c.
            Issue
      a secured promissory note  in the principal amount of $1,000,000
      bearing interest at 8% per annum, payable in full on or before the first
      anniversary of the Closing Date and secured the Seabridge Claims;
      and


d.
            Issue
      a transferable convertible secured debenture in the principal amount of
      $1,000,000 maturing on the second anniversary of the Closing Date and
      bearing interest at a rate of 8% per year, payable quarterly, with
      principal and accrued interest convertible by Seabridge within 30 days of
      maturity into share of common stock at $1.00 per share, redeemable in
      full, not in part, by the Company at any time upon payment of 125% of the
      principal and accrued interest outstanding at the time of security
      redemption.




On or
before 30 April 2010, the Company must:




a.
            Pay
      $1,000,000; and


b.
            Issue
      2,000,000 restricted common shares, which will be held in escrow and
      released 36  months
      following   issuance.




If the
payment of $1,000,000 and the issuance of 2,000,000 restricted common shares of
the Company, required on or before 30 April 2010, is not completed by 1 May
2010, the Company will then have to transfer all the Seabridge Claims back to
Seabridge (Note 18).




The
Company has not conducted exploration activities during the year on this
property.




Peruvian
Gold Sands




On 29
September 2008, the Company entered into a Mineral Right option agreement with
Temasek Investments Inc. (“Temasek”) to acquire mining properties totalling 382
km2 in
Northeastern Peru (the “Peruvian Agreement”).  Pursuant to this
Peruvian Agreement, the company acquired four separate options from Temasek,
each providing for the acquisition of a 25% interest in certain mining
properties (the “Peruvian Gold Sands”).  The Peruvian Gold Sands are
owned by Minera Maranon S.A.C (“Maranon”).  Bacon Hill, a wholly-owned
subsidiary of Temasek, owns 999 shares of 1,000 shares of Maranon that are
issued and outstanding.  Temasek owns the single remaining share of
Maranon.  The acquisition of each 25% interest in the Peruvian Gold
Sands will occur through the transfer to the Company of 25% of the outstanding
shares of Bacon Hill.




The
Company may exercise the initial 25% option by fulfilling the following
conditions:




a.
            Pay
      a non-refundable $375,000 on the date the Peruvian Agreement is executed
      (paid);


b.
            Issue
      2,000,000 common shares within 5 business days (issued and valued at $1.01
      per common share) (Notes 12 and 15);
and


c.
            Pay
      an additional $375,000 prior to 28 December 2008
  (paid).







F -
16
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


The
Company entered into an amending agreement dated 12 May 2009 (the “Peruvian
Amendment”) and a second amending agreement dated 29 October 2009 (the “Second
Peruvian Amendment”) with Temasek.  Under the Second Peruvian
Amendment, the Company may now exercise the second 25% option resulting in the
acquisition of a 50% interest in the Mineral Rights by fulfilling the following
conditions as set out in the Second Peruvian Amendment:




a.
            Exercise
      and complete the initial 25% option by 29 March 2009
      (completed);


b.
            Issue
      an additional 2,000,000 common shares by 29 March 2009 (issued and valued
      at $0.65 per common share) (Notes 12 and
15);


c.
            Pay
      an additional $750,000 by 29 October 2009 or as soon as practicable
      thereafter (paid); and


d.
            Issue
      an additional 500,000 common shares by 29 October 2009 or as soon as
      practicable thereafter (issued and valued at $1.18 per common share)
      (Notes 12 and 15).




The
Company may exercise the third 25% option by fulfilling the following
conditions:




a.
            Exercise
      and complete the initial and second 25% options by 29 October 2009
      (completed);


b.
            Issue
      an additional 2,000,000 common shares by 29 October 2009 or as soon as
      practicable thereafter (issued and valued at  $1.18 per common
      share) (Notes 12 and 15); and


c.
            Pay
      an additional $3,000,000 by 31 March
2010.




The
Company may exercise the final 25% option by fulfilling the following conditions
by 29 March 2010:




a.
            Exercise
      and complete the initial, second and third 25%
  options;


b.
            Pay
      an additional $5,000,000; and


c.
            Issue
      an additional 4,000,000 common
shares.




The
property is subject to a 2.5% net returns royalty that the Company can reduce to
1.0% upon payment of a further $2,000,000 within 90 days of the exercise and
completion of the final 25% option (Note 16).




Expenditures
related to the Peruvian Gold Sands for the year ended 31 December 2009 consist
of business development and project generation of $4,138 (31 December 2008 -
$35), camp costs and field supplies of $55,933 (31 December 2008 - $214),
drilling of $182,182 (31 December 2008 - $Nil), mapping of $349 (31 December
2008 - $Nil), rental of $50,689 (31 December 2008 - $Nil), sampling of $14,411
(31 December 2008 – $Nil), taxes and permitting of $17,999 (31 December 2008 -
$23,562), transportation and fuel of $525,222 (31 December 2008 - $61,634), and
wages, consulting and management fees of $1,865,972 (31 December 2008 –
$156,440).







F -
17
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Atena
Gold Project




On 12
December 2007, the Company entered into an assignment agreement (the “Atena
Agreement”) to acquire the right to explore and option to purchase the 3,676
hectare Atena Gold Project located in the Salta Province of
Argentina.   Pursuant to the Atena Agreement, the Company was
required to issue 500,000 common shares (issued and valued at $0.70 per common
share) and pay $60,000 (paid). The Company could have acquired 100% of the
option if it incurred a minimum of $3,740,000 in work commitment expenditures on
the property and issue 7,000,000 common shares according to the following
schedule (Notes 12 and 15):




a.
            $240,000
      in expenditures (incurred) plus a further issuance of 1,000,000 common
      shares (issued and valued at $1.59 per common share) on or before 15 March
      2008;


b.
            a
      further $500,000 in expenditures plus a further issuance of 2,000,000
      common  shares on or before 15 March 2009 (issued and valued at
      $0.73 per common share);


c.
            a
      further $1,000,000 in expenditures plus a further issuance of 4,000,000
      common shares on or before 15 March 2010;
and


d.
            a
      further $2,000,000 in expenditures on or before 15 March
    2011.




The
Company entered into an amending agreement dated 5 May 2009 (the “Atena
Amendment”) with Proyectos Mineros S.A. (“PMSA”).  Under the Atena
Amendment, the $500,000 in expenditures originally required to be made by the
Company on the Atena Gold Project property by 15 March 2009 was waived upon the
issuance of the 2,000,000 common shares (issued) of the Company as required
under the Atena Agreement.





The
option is subject to a 1% net smelter returns royalty.




Expenditures
related to the Atena Gold Project for the year ended 31 December 2009 consist of
business development and project generation of $108 (31 December 2008 - $Nil),
camp costs and field supplies of $8,800 (31 December 2008 - $48,211),
geochemical of $1,460 (31 December 2008 - $51,161), geology and engineering of
$Nil (31 December 2008 - $8,123), geophysics of $6,388 (31 December 2008 -
$1,903), mapping $29,260 (31 December 2008 - $Nil), taxes and permitting of
$8,385 (31 December 2008 - $14,909), transportation and fuel of $18,156 (31
December 2008 - $94,528), trenching of $9,414 (31 December 2008 - $12,725), and
wages, consulting and management fees of $9,265 (31 December 2008 -
$114,609).




During
the year ended 31 December 2009, the Company announced that it was terminating
its exploration program on the Atena Gold Project and would allocate its
resources exclusively to pursue the exploration and development of their
property interests in Northeastern Peru, the Peruvian Agreement.




During
the year ended 31 December 2009, the Company recorded a provision for write-down
of mineral property costs of $3,530,260 related to the Atena property (Note
15).







F -
18
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Cerro
Amarillo Property




On 8
January 2008, the Company entered into an assignment agreement (the “Cerro
Amarillo Agreement”) to explore and option the 14,221 hectare Cerro Amarillo
Property located in the Province of Mendoza, Argentina with a company related to
the Company by way of a director and shareholder in common.  Pursuant
to the terms of the Cerro Amarillo Agreement, the Company issued 300,000 common
shares (issued and valued at $0.70 per common share) and pay $10,000
(paid).  The Company could have acquired a 100% of the option if it
incurred a minimum of $450,000 in work commitment expenditures on the property
and issues 2,100,000 common shares according to the following schedule (Notes 12
and 15):




a.
            $200,000
      in expenditures plus a further issuance of 300,000 common shares on
      or before 8 January 2009 (issued and valued at $0.73 per common
      share);


b.
            a
      further $250,000 in expenditures plus a further issuance of 600,000 common
      shares on or before 8 January 2010;


c.
            a
      further issuance of 600,000 common shares on or before 8 January 2011;
      and


d.
            a
      further issuance of 600,000 common shares on or before 8 January
      2012.




The
Company entered into an amending agreement dated 5 May 2009 (the “Cerro Amarillo
Amendment”) with PMSA.  Under the Cerro Amarillo Amendment, the
$200,000 in expenditures originally required to be made by the Company on the
Cerro Amarillo property by 8 January 2009 was waived upon the issuance of the
300,000 common shares (issued and valued at $0.73 per common share) of the
Company as required under the Cerro Amarillo Agreement.




To
exercise the option the company is required to issue a further 3,000,000 common
shares.  The option is subject to a 1% net smelter returns
royalty.




The
Company has not conducted exploration activities during the year on this
property.




The
Company was also responsible for certain payments under the agreement between
the underlying titleholder of the mineral property rights and  PMSA
(the “Cerro Amarillo Agreement”).  In order for the Company to keep
its interest in good standing and to exercise the option to acquire a 100%
interest in the Cerro Amarillo property, the Company had to make the following
payments to the underlying titleholder and incur a minimum of $250,000 in work
commitment expenditures on the property, as set forth in the Cerro Amarillo
Agreement:
 
 a.
              Pay
      $20,000 by 28 February 2008 (paid);
 b.
              Pay
      additional $40,000 by 1 June 2008
(paid);
 c.
              Pay
      additional $50,000 by 1 December 2008 (paid $25,000; $25,000 accrued as at
      31 December 2009);
 d.
              Pay
      additional $60,000 by 1 June 2009 (accrued as at 31 December
      2009);
 e.
              Pay
      additional $100,000 by 1 December
2009;
 f.
              Pay
      additional $150,000 by 1 December
2010;
 g.
              Pay
      additional $200,000 by 1 December 2011;
and
 h.
              Pay
      additional $250,000 by 1 June 2012.
 i.
              Incur
      $50,000 in exploration expenditures on or before 1 December 2008
      (incurred);
 j.
              Incur
      additional $200,000 in exploration expenditures on or before 1 December
      2009 (incurred; $125,070 included in accounts
  payable);


During
the year ended 31 December 2009, the Company announced that it was terminating
their exploration program on the Cerro Amarillo Property and would allocate its
resources exclusively to pursue the exploration and development of its property
interests in northeastern Peru, the Peruvian Agreement.
  Expenditures
related to the Cerro Amarillo Property for the year ended 31 December 2009
consist of camp costs and field supplies of $Nil (31 December 2008 - $7,589),
geochemical of $Nil (31 December 2008 - $1,903), geology and engineering of $Nil
(31 December 2008 - $345), taxes and permitting of $Nil (31 December 2008 -
$12,973), transportation and fuel of $Nil (31 December 2008 - $35,544), and
wages, consulting and management fees of $Nil (31 December 2008 -
$66,576).
  During
the year ended 31 December 2009, the Company recorded a provision for write-down
of mineral property costs of $734,070 related to the Cerro Amarillo property
(Note 15).





F -
19
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Amira,
Amira Norte and Esparta II




On 17
March 2008, the Company entered into an assignment agreement with PMSA (the
“Amira Agreement”), a company related to the Company by way of a director and
shareholder in common. Under the Agreement,  PMSA assigned to the
Company PMSA’s right to explore and option to purchase a 90% interest in three
mining properties referred to as “Amira”, “Amira Norte” and “Esparta II”
(collectively, the “Properties”), which are located in the Province of Salta,
Argentina. In order for the Company to keep its interest in good standing and to
exercise the option to acquire a 90% interest in the Properties, the Company
must make the following payments to the Titleholder, as set forth in the Amira
Agreement (Note 18):




a.   
US$75,000 by 19 January 2009;


b.   
a further US$150,000 by 19 January 2010;


c.   
a further US$200,000 by 19 January 2011; and


d .   
further US$1,000,000 by 19 January 2012, by means of which final payment the
Option to acquire a 90%


interest
in the Properties will have been automatically exercised.




The
Company entered into an amending  assignment agreement dated 5 May
2009 (the “Amira Amendment”)  with Silvia Rodriguez, owner of the
Properties, whereby the payment originally due on 19 January 2009 under the
Amira Agreement was due as follows:




a. US$25,000
on or by the end on 30 June 2009 (not paid but accrued as at 31 December 2009);
and


b. US$50,000
on or before by the end of 30 September 2009 (not paid but accrrued as at 31
December 2009).




Expenditures
related to the Amira, Amira Norte and Esparta II Properties for the year ended
31 December 2009 consist of business development and project generation of $38
(31 December 2008 - $18,125), camp costs and field supplies of $Nil (31 December
2008 - $13,065), geochemical of $2,073 (31 December 2008 - $Nil) property
assessment of $Nil (31 December 2008 - $6,428), transportation and fuel of $203
(31 December 2008 - $74,374), and wages, consulting and management fees of $51
(31 December 2008 - $99,985).




During
the year ended 31 December 2009, the Company announced that it was terminating
its exploration program on the Properties and would allocate its resources
exclusively to pursue the exploration and development of its property interests
in Northeastern Peru, the Peruvian Agreement.





During
the year ended 31 December 2009, the Company recorded a provision for write-down
of mineral property costs of $75,000 related to the Amira
Agreement.




9.
            Accounts
      Payable and Accrued Liabilities




Accounts
payable and accrued liabilities are non-interest bearing, unsecured and have
settlement dates within one year.




Included
in accounts payable and accrued liabilities at 31 December 2009 is $45,000 and
$20,000 (31 December 2008 - $200,000) related to settlement of potential legal
claims on incidents arising from the mineral property interests and the related
legal fees, respectively.





F -
20
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


10.
            Due to Related
      Parties




As at 31
December 2009, the amount due to related parties consists of $27,304 (31
December 2008 - $12,379) payable to directors and former directors of the
Company and $939,600 (31 December 2008 - $Nil) payable to companies controlled
by shareholders and directors of Maranon.  This balance is
non-interest bearing, unsecured, and has no fixed terms of
repayment.




11.
            Related
      Party Transactions




During
the year ended 31 December 2009, the Company paid or accrued management and
consulting fees of $291,366 (31 December 2008 - $346,583) to directors and
officers of the Company and companies controlled by directors and
officer.




During
the year ended 31 December 2009, director and shareholder of the Company made
contributions to capital for management fees and rent of $Nil (31 December 2008
- $Nil, cumulative - $12,000) and $Nil (31 December 2008 - $Nil, cumulative -
$3,000) respectively.  This amount has been recorded as an increase in
expenditures and an increase in additional paid-in capital (Note
15).




12.
            Capital
      Stock




Authorized




The total
authorized capital consists of:




·
            300,000,000
      of common shares with par value of
$0.001


·
            50,000,000
      of preferred shares with par value of
$0.001




Issued
and outstanding




As at 31
December 2009, the total issued and outstanding capital stock is 78,055,985
common shares with a par value of $0.001 per common share.




On 1
December 2009, the Company issued 7,533,462 units at a price of $0.65 per unit
for total proceeds of $4,686,496, net of issue costs of $210,254. Each unit
consist of one common share and one share purchase warrant. Each share purchase
warrant entitles the holder to purchase an additional common share at the price
of $1.00 up to 1 December 2010, commencing 1 June 2010.




On 1
December 2009, the Company issued 315,775 agent compensation warrants for
services rendered by a private placement agent.  Each share purchase
warrant entitles the holder to purchase one common share at a price of $1.00 up
to 1 December 2010, commencing 1 June 2010 (Note 15).




On 2
November 2009, the Company issued 2,500,000 common shares valued at $1.18 per
common share pursuant to the Peruvian Gold Sands assignment agreement (Notes 8
and 15).







F -
21
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


On 2
September 2009, the Company issued 923,428 units at a price of $0.35 per unit
for total proceeds of $323,200. Each unit consist of one common share and one
share purchase warrant. Each share purchase warrant entitles the holder to
purchase an additional common share at the price of $0.70 up to 2 September
2011, commencing 2 March 2010.




On 14
August 2009, a total of 5,007,300 previously outstanding share purchase warrants
expired.




On 14
August 2009, a total of 350,511 previously outstanding agent compensation
warrants expired.




On 9 July
2009, the Company issued 4,129,639 units at a price of $0.35 per unit for total
proceeds of $1,445,373. Each unit consist of one common share and one share
purchase warrant. Each share purchase warrant entitles the holder to purchase an
additional common share at the price of $0.70 up to 9 July 2011, commencing 9
January 2010.




On 29
June 2009, the Company issued 2,000,000 common shares valued at $0.65 per common
share pursuant to the Peruvian Gold Sands assignment agreement (Notes 8 and
15).




On 2 June
2009, the Company issued 2,000,000 common shares valued at $0.73 per common
share pursuant to the Atena Agreement (Notes 8 and 15).




On 2 June
2009, the Company issued 300,000 common shares valued at $0.73 per common share
pursuant to the Cerro Amarillo Agreement (Notes 8 and 15).




On 17
April 2009, the Company issued 200,000 units at a price of $0.80 per unit for
proceeds of $160,000. Each unit consists of one common share and one share
purchase warrant. Each share purchase warrant entitles the holder to purchase an
additional common share at a price of $0.70 up to 17 April 2010, commencing 17
October 2009.




On 7
April 2009, a total of 1,009,211 previously outstanding share purchase warrants
were cancelled.




On 7
April 2009, a total of 70,645 previously outstanding agent compensation warrants
were cancelled.




During
the year ended 31 December 2008, the company issued 2,000,000 common shares
valued at $1.01 per common share in pursuant to the Peruvian Gold Sands
assignment agreement (Notes 8 and 15).




During
the year ended 31 December 2008, the Company issued 350,511 agent compensation
warrants for services rendered by a private placement agent.  Each
share purchase warrant entitles the holder to purchase one common share at a
price of $1.40 up to 19 August 2009, commencing 19 February 2009 (Note
15).




During
the year ended 31 December 2008, the Company issued 5,007,300 units at a price
of $0.80 per unit for proceeds of $3,725,431, net of issue costs of
$280,409.  Each unit consists of one common share and one share
purchase warrant.  Each share purchase warrant entitles the holder to
purchase an additional common share at a price of $1.40 up to 19 August 2009,
commencing 19 February 2009.







F -
22
 Table of Contents


Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


During
the year ended 31 December 2008, the Company issued 1,000,000 common shares
valued at $1.59 per common share pursuant to the Atena Gold Project assignment
agreement (Notes 8 and 15).




During
the year ended 31 December 2008, the Company issued an additional 70,645 units
at a price of $0.70 per unit for services rendered by a private placement agent.
Each unit consists of one common share and one share purchase warrant. Each
share purchase warrant entitles the holder to purchase an additional common
share at a price of $1.40 up to 7 April 2009, commencing 7 October 2008 (Note
15).




During
the year ended 31 December 2008, the Company issued 1,009,211 units at a price
of $0.70 per unit.  Each unit consists of one common share and one
share purchase warrant.  Each share purchase warrant entitles the
holder to purchase an additional common share at a price of $1.40 up to 7 April
2009, commencing 7 October 2008.




During
the year ended 31 December 2008, the Company issued 300,000 common shares valued
at $0.70 per common share pursuant to the Cerro Amarillo assignment agreement
(Notes 8 and 15).




During
the year ended 31 December 2008, the Company issued 500,000 common shares valued
at $0.70 per common share pursuant to the Atena Gold Project assignment
agreement (Notes 8 and 15).




Share
Subscriptions Received in Advance




Share
subscriptions received in advance consists of $70,000 cash received by the
Company for 200,000 common shares valued at $0.35 that were not yet issued at 31
December 2009 (Note 18).




Share
Purchase Warrants




The
following share purchase warrants were outstanding at 31 December
2009:




Exercise
      price
            
            
            Number
              of
      warrants
            
            
            Remaining
              contractual
      life (years)$Warrants
            
            
            0.70
            
            
            
            200,000
            
            
            
            0.29Agent
      compensation warrants
            
            
            1.00
            
            
            
            315,775
            
            
            
            0.92Warrants
            
            
            1.00
            
            
            
            7,533,462
            
            
            
            0.92Warrants
            
            
            0.70
            
            
            
            4,129,639
            
            
            
            1.52Warrants
            
            
            0.70
            
            
            
            923,428
            
            
            
            1.6713,102,304







F -
23
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


The
following is a summary of warrant activities during the years ended 31 December
2009 and 2008:




Number
      of
              warrants
            
            
            Weighted
              average
              exercise
              price$Outstanding
      at 1 January 2008
            
            
            -
            
            
            
            -Granted
            
            
            6,437,667
            
            
            
            1.40Exercised
            
            
            -
            
            
            
            -Cancelled
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -Outstanding
      at 31 December 2008
            
            
            6,437,667
            
            
            
            1.40Weighted
      average fair value of warrants granted during the year
            
            
            
            
            
            
            0.62




Outstanding
      at 1 January 2009
            
            
            6,437,667
            
            
            
            1.40Granted
            
            
            13,102,304
            
            
            
            0.88Exercised
            
            
            -
            
            
            
            -Cancelled
            
            
            (1,079,856
            )
            
            
            1.40Expired
            
            
            (5,357,811
            )
            
            
            1.40Outstanding
      at 31 December 2009
            
            
            13,102,304
            
            
            
            0.88Weighted
      average fair value of warrants granted during the year
            
            
            
            
            
            
            0.55




The
weighted average grant date fair value of warrants issued during the year ended
31 December 2009, amounted to $0.55 per warrant (31 December 2008 - $0.62). The
fair value of each warrant granted was determined using the Black-Scholes
warrant pricing model and the following weighted average
assumptions:




2009
            
            
            2008Risk
      free interest rate
            
            
            0.52
            %
            
            
            2.02
            %Expected
      life
            
            1.40
      years
            
            
            1
      yearAnnualized
      volatility
            
            
            107.96
            %
            
            
            120.80
            %Expected
      dividends
            
            
            -
            
            
            
            -







F -
24
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


Stock
Options




The following incentive stock options
were outstanding at 31 December 2009:




Exercise
              price
            
            
            Number
              of
      options
            
            
            Remaining
              contractual
      life (years)$Options
            
            
            1.00
            
            
            
            1,410,000
            
            
            
            8.10Options
            
            
            1.05
            
            
            
            1,425,000
            
            
            
            8.86Options
            
            
            0.70
            
            
            
            3,240,000
            
            
            
            9.396,075,000




The
following is a summary of stock option activities during the years ended 31
December 2009 and 2008:




Number
      of
              options
            
            
            Weighted
              average
              exercise
              price$Outstanding
      and exercisable at 1 January 2008
            
            
            3,200,000
            
            
            
            0.30Granted
            
            
            8,430,000
            
            
            
            1.01Exercised
            
            
            -Cancelled
            
            
            (6,795,000
            )
            
            
            0.67Outstanding
      and exercisable at 31 December 2008
            
            
            4,835,000
            
            
            
            1.02Weighted
      average fair value of options granted during the year
            
            
            
            
            
            
            0.90Outstanding
      at 1 January 2009
            
            
            4,835,000
            
            
            
            1.02Granted
            
            
            5,440,000
            
            
            
            0.70Exercised
            
            
            -Cancelled
            
            
            (4,200,000
            )
            
            
            0.84Outstanding
      at 31 December 2009
            
            
            6,075,000
            
            
            
            0.85Weighted
      average fair value of options vested during the year
            
            
            
            
            
            
            0.73







F -
25
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


13.
            Stock-Based
      Compensation




During
the year ended 31 December 2009, the Company granted 5,440,000 stock options to
employees, directors and consultants of the Company entitling the holders to
purchase common shares of the Company for proceeds of $0.70 per common share
expiring 20 May 2019 of which 3,240,000 were granted to employees and 2,200,000
were granted to non-employees of the Company.  The fair value of the
portion of the options which vested in the year, estimated using Black-Scholes
model, was $1,543,706.  This amount has been expensed as stock-based
compensation.




During
the year ended 31 December 2008, the Company granted 8,430,000 stock options to
employees and directors of the Company entitling the holders to purchase up to
6,880,000 common shares of the Company for proceeds of $1.00 per common share
expiring 4 February 2018 and 1,550,000 common shares of the Company for proceeds
of $1.05 per common share expiring 10 November 2018. A total of 3,595,000 of
these stock options were cancelled during the year ended 31 December
2008.  The fair value of the portion of the options which vested in
the year, estimated using Black-Scholes model, was $2,918,132 (31 December 2008
- $2,033,607).  This amount has been expensed as stock-based
compensation.




A total
of 3,900,000 of the previously granted outstanding stock options, 3,700,000
granted to employees and 200,000 granted to non-employees, of the Company were
cancelled during the year ended 31 December 2009 (31 December 2008 – 6,795,000)
(Note 12).




The fair
value of each option was estimated on the date of grant using Black-Scholes
option pricing model. The assumptions about stock-price volatility have been
based exclusively on the implied volatilities of publicly traded options to buy
the Company’s stock with contractual terms closest to the expected life of
options granted to employees, directors or consultants.




The
following assumptions were used for the Black-Scholes valuation of stock options
granted/vested:




2009
            
            
            2008Risk
      free interest rate
            
            
            3.21
            %
            
            
            3.71
            %Expected
      life
            
            9.9
      years
            
            10.0
      yearsAnnualized
      volatility
            
            
            120
            %
            
            
            101
            %Expected
      dividends
            
            
            -
            
            
            
            -




14.
            Income
      Taxes




The
Company has losses carried forward for income tax purposes to 31 December
2009.  The Company has fully reserved for any benefits of these
losses.  The deferred tax consequences of temporary differences in
reporting items for consolidated financial statement and income tax purposes are
recognized, as appropriate. Realization of the future tax benefits related to
the deferred tax assets is dependent on many factors, including the Company’s
ability to generate taxable income within the net operating loss carryforward
period.  Management has considered these factors in reaching its
conclusion as to the valuation allowance for financial reporting
purposes.







F -
26
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


The
provision for refundable federal income tax consists of the
following:




For
      the
              year
      ended
              31
              December
              2009
            
            
            For
      the
              year
      ended
              31
              December
              2008$
            
            
            
            $Deferred
      tax asset attributable to:Current
      operations
            
            
            5,032,402
            
            
            
            1,808,240Amortization
            
            
            (25,696
            )
            
            
            (13,765
            )Stock
      based compensation
            
            
            (1,517,025
            )
            
            
            (691,426
            )Other
            
            
            45,900
            
            
            
            (68,000
            )Change
      in valuation allowance
            
            
            1,296,269
            
            
            
            (1,035,049
            )Future
      income tax recovery
            
            
            4,831,850
            
            
            
            -




The
composition of the Company’s deferred tax assets as at 31 December 2009and 31 December 2008 is as
follows:




As
      at 31 December
              2009
            
            
            As
      at 31 December
              2008$
            
            
            
            $Net
      income tax operating loss carryforward
            
            
            14,189,400
            
            
            
            3,799,141Statutory
      federal income tax rate
            
            
            34.05
            %
            
            
            34.15
            %Effective
      income tax rate
            
            
            0.00
            %
            
            
            0.00
            %Future
      income tax assets (liabilities)Tax
      loss carryforward
            
            
            4,831,850
            
            
            
            1,296,269Mineral
      property costs
            
            
            (5,584,070
            )
            
            
            -Less:
      Valuation allowance
            
            
            -
            
            
            
            (1,296,269
            )Future
      income tax assets (liabilities)
            
            
            (752,220
            )
            
            
            -




The
potential income tax benefit of these losses has been offset by a full valuation
allowance.




As at 31
December 2009, the Company has an unused net operating loss carryforward balance
of approximately $14,189,400 that is available to offset future taxable
income.  This unused net operating loss carryforward balance for
income tax purposes expires between the years 2020 to 2029.







F -
27
 Table of Contents




Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


15.
            Supplemental
      Disclosures with Respect to Cash
Flows




For
      the
              period
      from
              the
      date of
              inception
      on
              6
      March
              2000
      to 31
              December
              2009
              (Unaudited)
            
            
            For
      the
              year
      ended
              31
              December
              2009
            
            
            For
      the
              year
      ended
              31
              December
              2008
            
            
            For
      the
              year
      ended
              31
              December
              2007$
            
            
            
            $
            
            
            
            $
            
            
            
            $Cash
      paid during the year for interest
            
            
            38,802
            
            
            
            38,802
            
            
            
            -
            
            
            
            -Cash
      paid during the year for income taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -




During
the year ended 31 December 2009, the Company recorded a total write-down of
mineral property expenditures in the amount of $4,339,330 related to the Atena,
Cerro Amarillo and Amira properties (Note 8).




During
the year ended 31 December 2009, the Company recorded a total write-down of
property and equipment in the amount of $26,611 (Note 6).




During
the year ended 31 December 2009, the Company issued 315,775 agent compensation
warrants valued at $262,788 for agent services rendered (Note 12).




During
the year ended 31 December 2009, the Company issued 2,500,000 common shares
valued at $1.18 per common share pursuant to the Peruvian Gold Sands assignment
agreement (Notes 8 and 12).




During
the year ended 31 December 2009, the Company issued 2,000,000 common shares
valued at $0.65 per common share pursuant to the Peruvian Gold Sands assignment
agreement (Notes 8 and 12).




During
the year ended 31 December 2009, the Company issued 2,000,000 common shares
valued at $0.73 per common share pursuant to the Atena Agreement (Notes 8 and
12).




During
the year ended 31 December 2009, the Company issued 300,000 common shares valued
at $0.73 per common share pursuant to the Cerro Amarillo Agreement (Notes 8 and
12).




During
the year ended 31 December 2009, director and shareholder of the Company made
contributions to capital for management fees and rent of $Nil (31 December 2008
- $Nil, cumulative - $12,000) and $Nil (31 December 2008 - $Nil, cumulative -
$3,000) respectively.  This amount has been recorded as an increase in
expenditures and an increase in additional paid-in capital (Note
11).




During
the year ended 31 December 2008, the Company issued 500,000 common shares valued
at $0.70 per common share in pursuant to the Atena Gold Project assignment
agreement (Notes 8 and 12).







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Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


During
the year ended 31 December 2008, the Company issued 2,000,000 common shares
valued at $1.01 per common share in pursuant to the Peruvian Gold Sands
assignment agreement (Notes 8 and 12).




During
the year ended 31 December 2008, the Company issued 300,000 common shares valued
at $0.70 per common share pursuant to the Cerro Amarillo assignment agreement
(Notes 8 and 12).




During the year ended 31 December
2008, the Company issued 70,645 common shares valued at $49,252 and 70,645
warrants valued at $25,252 for agent services rendered (Note 12).




During
the year ended 31 December 2008, the Company issued 1,000,000 common shares
valued at $1.59 per common share pursuant to the Atena Gold Project assignment
agreement (Notes 8 and 12).




During
the year ended 31 December 2008, the Company issued 350,511 agent compensation
warrants valued at $237,293 for agent services rendered (Note 12).




By
agreements effective 18 January 2008, the Company assigned all of its rights,
title and interest in the Tombaugh Lease with a book value of $481,504 to a
purchaser in consideration for the purchaser assuming the Company’s outstanding
payment obligations of $788,619 related to its convertible debentures. The
Company recorded a gain of $307,115 upon completion of the transaction (Note
4).




During
the year ended 31 December 2008, the Company issued $Nil common shares (31
December 2007 – 1,145,300) for convertible debentures of $Nil (31 December 2007
- $22,906) (Note 11).




During
the year ended 31 December 2008 the Company accrued interest of $Nil (31
December 2007 - $74,770, cumulative – $126,525) on convertible
debentures.




16.
            Commitments




The Company is subject to certain
outstanding and future commitments related to its mineral property interest
(Note 8).




17.
            Interest
      in Variable Interest Entity




In
October 2009, the Company acquired 50% interest in Bacon Hill, the registered
owner of 999 shares of the 1,000 shares of Maranon that are issued and
outstanding.  Maranon is the beneficial owner of 100% interest in the
Peruvian Gold Sands (Note 8).  The aggregate purchase price was
$5,410,000 paid by $1,500,000 in cash and 4,500,000 common shares of the Company
valued at $3,910,000 (Notes 8, 12 and 15). The acquisition of Bacon Hill expands
the Company’s business of acquiring and exploring mineral
properties.  The Company also has the exclusive right to purchase the
remaining 50% share interest in Bacon Hill, upon certain terms and conditions
(Note 8).




The
Company follows ASC 810-10 and fully consolidates the assets, liabilities,
revenues and expenses of Bacon Hill.  A valuation of certain assets
was completed and the Company internally determined the fair value of others
assets and liabilities.  In determining the fair value of acquired
assets, standard valuation techniques were used including market and income
approach.







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Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


The
purchase price allocation has been determined as follows:


Assets
      purchased:Cash
      and cash equivalents
              
              $
              92Amounts
      receivable
              
              
              34,277Mineral
      property interests
              
              
              17,205,047Property
      and equipment
              
              
              38,363Total
      assets acquired
              
              $
              17,277,779Liabilities
      assumed:Accounts
      payable
              
              $
              197,976Due
      to related parties
              
              
              675,733Future
      income tax liabilities
              
              
              5,584,070Total
      liabilities assumed
              
              $
              6,457,779Non-controlling
      interest:
              
              $
              5,410,000Purchase
      price
              
              $
              5,410,000


Pro
forma information




The
following unaudited consolidated pro forma financial information presents the
combined results of operations of the Company and Bacon Hill for the years ended
31 December 2009 and 2008 as if the acquisition had occurred at 1 January
2008:




Unaudited
      Consolidated Pro FormaFor
      the year ended31December
      2009
            
            
            31
      December 2008$
            
            
            
            $Revenue
            
            
            -
            
            
            
            -Net
      loss
            
            
            9,587,411
            
            
            
            5,305,545Basic
      and diluted loss per common share
            
            
            (0.149
            )
            
            
            (0.100
            )




The
amounts of revenue and net loss of Bacon Hill since the acquisition date
included in the consolidated income statement for the year ended 31 December
2009 are $Nil and $4,367, respectively.




The
unaudited consolidated pro forma financial information does not include
adjustments to remove certain private company expenses, which may not be
incurred in future periods.  Similarly, the unaudited consolidated pro
forma financial information does not include adjustments for additional
expenses, such as rent, insurance, and other expenses that would have been
incurred subsequent to the acquisition date.  The unaudited
consolidated pro forma financial information does not necessarily reflect the
results of operations that would have been occurred had the Company and Maranon
been a single entity during these periods.







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Constitution
Mining Corp.
 (An
Exploration Stage Company)
 Notes to
Consolidated Financial Statements
 (Expressed
in U.S. Dollars)
 31
December 2009


18.
            Subsequent
      Events




Subsequent
to the year ended 31 December 2009 to the date the consolidated financial
statements were available to be issued on 26 March 2010, the following events
occurred:




1.
            On
      25 January 2010 (the “Effective Date”), the Company entered into an
      assignment agreement with Temasek (the “Minera Saramiriza Agreement”), to
      acquire a 100% interest in the mineral rights that are the property and
      title on Minera Saramiriza S.A.C. In order for the Company to keep its
      interest in good standing and to exercise the option to acquire a 100%
      interest in the property, the Company must issue, within 30 business days
      from the Effective Date, 500,000 common shares of the Company to the order
      and direction of Temasek.




The
Company may exercise the initial 33% option by fulfilling the following
conditions within 12 months of the Effective Date:




a.         Issued
the initial 500,000 common shares (issued and valued at $0.81);


b.         Pay
$250,000; and


c.         Issue
an additional 1,000,000 common shares.




The
Company may exercise the second 33% option by fulfilling the following
conditions within 24 months of the Effective Date:




a.         Exercise
and complete the initial 33 % option;


b.         Pay
an additional $1,000,000; and


c.         Issue
an additional 1,000,000 common shares.




The
Company may exercise the final 34% option by fulfilling the following conditions
within 36 months of the Effective Date:




a.         Exercise
and complete the initial and second 33 % options;


b.         Pay
an additional $2,000,000; and


c.         Issue
an additional 2,000,000 common shares.




The
property is subject to a 2.5% net returns royalty that the Company can reduce to
1.0% upon payment of a further $2,000,000 within 90 days of the exercise and
completion of the final 34% option.




2.
            On
      22 January 2010, the Company granted 3,240,000 stock options of which
      330,000 were granted to employees and 2,910,000 were granted to
      non-employees of the Company.




3.
            On
      1 March 2010, the Company extended the Seabridge Letter of Intent due
      diligence period to 15 March 2010 (completed) with closing of the
      transaction to occur on or about 31 March
2010.




4.
            On
      19 March 2010, the Company issued 500,000 common shares valued at $0.81
      per common share related to the Minera Saramiriza
    Agreement.







F -
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(a)(2)           Not
Applicable.




(a)(3)           Exhibits.


See
(b) below.


(b)            Exhibits.


See the
Exhibit Index following the signature page of this report, which is
incorporated herein by reference. Each management contract and compensatory plan
or arrangement required to be filed as an exhibit to this report is identified
in the Exhibit Index by an asterisk following its exhibit
number.


(c)            Financial
Statements Excluded From Annual Report to Shareholders.




Not
Applicable.


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Glossary of Certain Mining Terms




Alluvial
      -
            Material
      deposited by the action of running water.Anticline
      -
            An
      arch or fold in layers of rock shaped like the crest of a
      wave.Base
      Metal -
            Any
      non-precious metal (e.g., copper, lead, zinc, nickel,
    etc.).Bulk
      Sample -
            A
      large sample of mineralized rock, frequently hundreds of tonnes, selected
      in such a manner as to be representative of the potential orebody being
      sampled. Used to determine metallurgical
  characteristics.Bullion
      -
            Metal
      formed into bars or ingots.Concentrate
      -
            A
      fine, powdery product of the milling process containing a high percentage
      of valuable metal.Concentrator
      -
            A
      milling plant that produces a concentrate of the valuable minerals or
      metals. Further treatment is required to recover the pure
      metal.Development
      -
            Underground
      work carried out for the purpose of opening up a mineral deposit. Includes
      shaft sinking, crosscutting, drifting and raising.Erosion
      -
            The
      breaking down and subsequent removal of either rock or surface material by
      wind, rain, wave action, freezing and thawing and other
      processes.Exploration
      -
            Prospecting,
      sampling, mapping, diamond drilling and other work involved in searching
      for ore.Fault
      -
            A
      break in the Earth’s crust caused by tectonic forces which have moved the
      rock on one side with respect to the other.Fine
      gold -
            Fineness
      is the proportion of pure gold or silver in jewelry or bullion expressed
      in parts per thousand. Thus, 925 fine gold indicates 925 parts out of
      1,000, or 92.5% is pure gold.Fold
      -
            Any
      bending or wrinkling of rock strata.Geology
      -
            The
      science concerned with the study of the rocks which compose the
      Earth.Level
      -
            The
      horizontal openings on a working horizon in a mine; it is customary to
      work mines from a shaft, establishing levels at regular intervals,
      generally about 50 meters or more apart.Mineral
      -
            A
      naturally occurring homogeneous substance having definite physical
      properties and chemical composition and, if formed under favorable
      conditions, a definite crystal form.Mineralization
      -
            Occurrences
      of minerals, which may have an economic value.Mineralization
      -
            A
      natural concentration in rocks or soil of one or more metalliferous
      minerals.Ore
      -
            A
      mixture of ore minerals and gangue from which at least one of the metals
      can be extracted at a profit.


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 Table of Contents




Plant
      -
            A
      building or group of buildings in which a process or function is carried
      out; at a mine site it will include warehouses, hoisting equipment,
      compressors, maintenance shops, offices and the mill or
      concentrator.Prospect
      -
            A
      mining property, the value of which has not been determined by
      exploration.Reclamation
      -
            The
      restoration of a site after mining or exploration activity is
      completed.Reconnaissance
      -
            A
      preliminary survey of ground.Resource
      -
            The
      calculated amount of material in a mineral deposit, based on limited drill
      information.Rock
      -
            Any
      natural combination of minerals; part of the earth’s
  crust.Sample
      -
            A
      small portion of soil, silt, rock or a mineral deposit taken so that the
      metal content can be determined by assaying.Sampling
      -
            Selecting
      a fractional but representative part of a mineral deposit for
      analysis.Sediments
      -
            Solid
      fragmental material that originates from weathering of rocks and is
      transported or deposited by air, water, or ice, or that accumulates by
      other natural agents, such as chemical precipitation from solution or
      secretion by organisms, and that forms in layers on the Earth's surface at
      ordinary temperatures in a loose, unconsolidated form; e.g., sand, gravel,
      silt, mud, alluvium.Tertiary
      -
            The
      first period of the Cenozoic era considered to have covered the span of
      time between 2 and 65 million years ago.Trench
      -
            A
      long, narrow excavation dug through overburden, or blasted out of rock, to
      expose a vein or ore structure.Tunnel
      -
            A
      horizontal underground opening, open to the atmosphere at both
      ends.Waste
      -
            Un-mineralized,
      or sometimes mineralized, rock that is not minable at a
      profit.Zone
      -
            An
      area of distinct mineralization.




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Signatures




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, this 31st day of March,
2010.




CONSTITUTION MINING
CORP.,


a Delaware corporation




By:           /s/Michael
Stocker


Michael Stocker


President and Chief Executive
Officer




Each
person whose signature appears below authorizes Michael Stocker to execute in
the name of each such person who is then an officer or director of the
registrant, and to file, any amendments to this annual report on Form 10-K
necessary or advisable to enable the registrant to comply with the Securities
Exchange Act of 1934 and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, which amendments may make
such changes in such Report as such attorney-in-fact may deem
appropriate.




Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by following persons on behalf of the Registrant
and in the capacities and on the dates indicated.




Signature
      and Title
            
            Date/s/ Michael
      Stocker
            
            March
      31, 2010Michael
      Stocker, Director, President andChief
      Executive Officer
              (Principal
      Executive Officer)/s/ Alois
      Wiget
            
            March
      31, 2010Alois
      Wiget, Director andChairman
      of the Board/s/
      Peter
      Wiget
            
            March
      31, 2010Peter
      Wiget, Director/s/ Robert
      Van
      Tassell
            
            March
      31, 2010Robert
      Van Tassell, Director/s/
      Gary
      Artmont
            
            March
      31, 2010Gary
      Artmont, Director/s/
      Hernan
      Zaballa
            
            March
      31, 2010Hernan
      Zaballa, Director/s/ Kenneth
      Phillippe
            
            March
      31, 2010Kenneth
      Phillippe, Chief Financial Officer(Principal
      Financial Officer
              andPrincipal
      Accounting Officer),Secretary,
      and Treasurer


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CONSTITUTION
MINING CORP.





EXHIBIT INDEX
 TO
 2009
ANNUAL REPORT ON FORM 10-K




Exhibit
              Number
            Description
            Incorporated
      by Reference to:
            Filed
              Herewith2.1
            Agreement
      and Plan of Merger, dated October 21, 2009, by and between the
      Constitution Mining Corp, a Delaware corporation, and Constitution Mining
      Corp., a Nevada corporation.
            Exhibit
      2.1 to the Company’s Current Report on Form 8-K filed on October 21,
      2009.3.1
            Certificate
      of Incorporation of Constitution Mining Corp, a Delaware
    Corp.
            Exhibit
      3.1 to the Company’s Current Report on Form 8-K filed on October 21,
      2009.3.2
            Bylaws
      of Constitution Mining Corp., a Delaware Corp.
            Exhibit
      3.1 to the Company’s Current Report on Form 8-K filed on October 21,
      2009.10.1
            2007
      Stock Incentive Plan, as Amended.
            Exhibit
      10.1 to the Company's Annual Report on  Form 10-K for the fiscal
      year ended December 31, 200810.2
            Services
      Contract, dated October 15, 2008, between St. Lawrence Alluvial Services
      and Logistics Corp., its wholly-owned subsidiary Logistica y Servicios
      Aluviales San Lorenzo SAC, and Constitution Mining Corp.
            Exhibit
      10.2 to the Company's Annual Report on  Form 10-K for the fiscal
      year ended December 31, 200810.3
            Assignment
      Agreement, dated effective December 12, 2007, between Proyectos Mineros
      S.A. and Constitution Mining Corp. regarding Atena Gold
      Property.
            Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed December 18,
      2007.10.4
            Assignment
      Agreement, dated effective January 8, 2008, between Proyectos Mineros S.A.
      and Constitution Mining Corp. regarding Cerro Amarillo
      Property.
            Exhibit
      10.1 to the Registrant’s Current Report on Form 8-K filed January 10,
      2008.10.5
            Assignment
      and Assumption of Lease and Debt Agreement, dated effective January 18,
      2008.
            Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed January 24,
      2008.10.6
            Assignment
      Agreement, dated effective March 17, 2008, between Proyectos Mineros S.A.
      and Constitution Mining Corp., regarding the Amira, Amira Norte and
      Esparta II Properties.
            Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed March 21,
      2008.10.7
            Mineral
      Right Option Agreement, dated September 29, 2008, between Temasek
      Investments Inc. and Constitution Mining Corp.
            Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed September 29,
      200810.8
            Amendment
      No. 1 to Mineral Right Option Agreement, dated September 29, 2008, between
      Temasek Investments Inc. and Constitution Mining Corp.
            Exhibit
      10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
      March 31, 200910.9
            Second
      Amendment to Mineral Right Option Agreement, dated September 29, 2008,
      between Temasek Investments Inc. and Constitution Mining
Corp.
            Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed November 2,
      2009.   - 48
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 Table of Contents
   Exhibit
              Number
            Description
            Incorporated
      by Reference to:
            Filed
              Herewith10.10
            Mineral
      Right Option Agreement with Temasek Investments, Inc., January
      2010.
            Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed January 27,
      2010.10.11
            Consulting
      and Services Contact with Stocker International, Inc., dated October
      2009.
            Exhibit
      10.1 to the Company’s Current Report on Form 8-K filed January 15,
      2010.14.1
            Code
      of Ethics and Code of Conduct.
            Exhibit
      14.1 to the Company's Annual Report on  Form 10-K for the fiscal
      year ended December 31, 200821.1
            Subsidiaries of Constitution Mining
    Corp.
            
            X24.1
            Power of Attorney.
            
            X31.1
            Certificate of Michael Stocker, Chief Executive Officer,
      pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.
            
            X31.2
            Certificate of Kenneth Phillippe, Chief Financial
      Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.
            
            X32.1
            Certificate of Michael Stocker, Chief Executive Officer,
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
            
            X32.2
            Certificate of Kenneth Phillippe, Chief Financial
      Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
            
            X99.1
            Letter
      of Intent for the Acquisition of Certain Mining Claims in Nevada, dated
      December 2, 2009, by and between the Company and Seabridge Gold,
      Inc.
            Exhibit
      99.1 to the Company’s Current Report on Form 8-K filed December 4,
      2009.99.2
            Extension
      to Letter of Intent for the Acquisition of Certain Mining Claims in
      Nevada, dated February 24, 2010.
            Exhibit
      99.2 to the Company’s Current Report on Form 8-K filed March 1,
      2010.


___________







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