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RENEWALANNUAL INFORMATION FORM







For the 12 month period ended September 30, 2005

Dated December 22, 2005

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TABLE OF CONTENTS

|                                                                           |                                                                | Page
|-------------------------------------------------------------------------- | -------------------------------------------------------------- | ----
|PRELIMINARY NOTES                                                          | i                                                             
|                                                                           | Financial Statements                                           | i   
|                                                                           | Currency                                                       | i   
|                                                                           | Definitions and Technical Terms                                | i   
|CAUTIONARY STATEMENT REGARDING
      FORWARD-LOOKING STATEMENTS            | i                                                             
|GLOSSARY OF TECHNICAL TERMS
      AND DEFINITIONS                          | iii                                                           
|CORPORATE STRUCTURE                                                        | 1                                                             
|                                                                           | Name, Address and Incorporation                                | 1   
|GENERAL DEVELOPMENT OF THE
      BUSINESS                                  | 2                                                             
|                                                                           | Three Year History                                             | 2   
|DESCRIPTION OF THE BUSINESS                                                | 4                                                             
|                                                                           | General                                                        | 4   
|                                                                           | Peñasquito Project                                             | 4   
|RISK FACTORS                                                               | 24                                                            
|DIVIDENDS                                                                  | 30                                                            
|GENERAL DESCRIPTION OF
      CAPITAL STRUCTURE                             | 30                                                            
|MARKET FOR SECURITIES                                                      | 31                                                            
|DIRECTORS AND OFFICERS                                                     | 32                                                            
|                                                                           | Control of Securities                                          | 36  
|                                                                           | Committees of the Board of Directors                           | 37  
|                                                                           | Cease Trade Orders, Bankruptcies, Penalties
      or Sanctions | 38  
|                                                                           | Conflicts of Interest                                          | 39  
|AUDIT COMMITTEE INFORMATION                                                | 39                                                            
|                                                                           | Audit Committee Mandate                                        | 39  
|                                                                           | Composition of the Audit Committee                             | 39  
|                                                                           | Relevant Education and Experience                              | 39  
|                                                                           | External Auditor Services Fees (By Category)                   | 39  
|LEGAL PROCEEDINGS                                                          | 40                                                            
|INTEREST OF MANAGEMENT
      AND OTHERS IN MATERIAL TRANSACTIONS           | 40                                                            
|TRANSFER AGENTS AND REGISTRARS                                             | 40                                                            
|MATERIAL CONTRACTS                                                         | 40                                                            
|INTERESTS OF EXPERTS                                                       | 40                                                            
|                                                                           | Names of Experts                                               | 40  
|                                                                           | Interests of Experts                                           | 41  
|ADDITIONAL INFORMATION                                                     | 41                                                            
|Audit Committee Charter
      (Adopted Dec. 9, 2002, Amended Feb. 9, 2005) | 42                                                            
|A. Audit Committee Purpose                                                 | 42                                                            
|B. Audit Committee Composition
      and Meetings                          | 42                                                            
|C. Audit Committee Responsibilities
      and Duties - Detail              | 42                                                            

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PRELIMINARY NOTESIn this Annual Information Form
(the AIF), Western Silver Corporation, together with its subsidiaries, as the
context requires, is referred to as Western Silver or the "Company". All
information contained herein is as at December 22, 2005, unless otherwise
stated.

Financial Statements

This AIF should be read in conjunction with the Company's
consolidated financial statements and management's discussion and analysis for
the 12 months ended September 30, 2005, dated December 12, 2005. The financial
statements and management's discussion and analysis are available at
www.westernsilvercorp.com and under the Company's profile on the SEDAR website
at www.sedar.com. All financial statements are prepared in accordance with
Canadian generally accepted accounting principles.

Currency

All sums of money which are referred to in this AIF are
expressed in lawful money of Canada, unless otherwise specified.

Definitions and Technical Terms

Capitalized terms, that are not otherwise defined in the body
of this AIF, and technical terms are defined in Glossary and Technical Terms
herein.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this AIF that are not historical fact,
such as statements regarding the economic prospects of the Companys projects,
the Companys future plans or future revenues, timing of development or
potential expansion or improvements, are forward-looking statements as that term
is defined in the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties which could
cause actual results to differ materially from estimated results. Such risks and
uncertainties include, but are not limited to, the Companys ability to raise
sufficient capital to fund development, changes in general economic conditions
or financial markets, changes in prices for the Companys mineral products or
increases in input costs, litigation, legislative, environmental and other
judicial, regulatory, political and competitive developments in Mexico or
Canada, technological and operational difficulties or inability to obtain
permits encountered in connection with our exploration and development
activities, labour relations matters, and changing foreign exchange rates, all
which are described more fully in the Companys filings with the Securities and
Exchange Commission.

Cautionary note to U.S. investors:The terms measured
mineral resource, indicated mineral resource, and inferred mineral resource
used in this AIF are Canadian geological and mining terms as defined in
accordance with National Instrument 43-101, Standards of Disclosure for Mineral
Projects (NI 43-101) under the guidelines set out in the Canadian Institute of
Mining, Metallurgy and Petroleum (the CIM) Standards on Mineral Resources and
Mineral Reserves. We advise U.S. investors that while such terms are recognized
and required under Canadian regulations, the U.S. Securities and Exchange
Commission (the SEC) does not recognize them. Inferred mineral resources in
particular have a great amount of uncertainty as to their existence, and great
uncertainty as to their feasibility. It cannot be assumed that all or any part
of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules estimates of inferred mineral resources may not generally
form the basis of feasibility or other economic studies. U.S. investors are
cautioned not to assume that any part of all of an inferred mineral resource
exists, or is economically or legally mineable. Disclosure of contained metal
expressed in ounces is in compliance

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- ii -

with NI 43-101, but does not meet the requirements of Industry
Guide 7 of the SEC, which will only accept the disclosure of tonnage and grade
estimates for non-reserve mineralization.

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- iii -

GLOSSARY OF TECHNICAL TERMS AND DEFINITIONSIn this AIF, the following terms have the following meanings:

|Alteration          | changes in the chemical or mineralogical composition of a
      rock, generally produced by weathering or hydro-thermal solutions.                                                                                                                                                                                                                                                                                
|------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Anomalous           | inconsistent with or deviating from what is usual, normal
      or expected.                                                                                                                                                                                                                                                                                                                                      
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Anomaly             | the geographical area corresponding to anomalous
      geochemical or geophysical values.                                                                                                                                                                                                                                                                                                                         
|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Assay               | a chemical test performed on a sample of ores or minerals
      to determine the amount of valuable metals contained.                                                                                                                                                                                                                                                                                             
|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Carried interest    | an interest which does not require funding.                                                                                                                                                                                                                                                                                                                                                                       
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|CSA                 | Canadian Securities Administrators.                                                                                                                                                                                                                                                                                                                                                                               
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|CSAMT               | controlled source audio magneto telluric  a geophysical
      survey technique.                                                                                                                                                                                                                                                                                                                                  
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Felsic              | light-coloured igneous rock poor in iron and magnesium
      content, abundant in feldspars and quartz.                                                                                                                                                                                                                                                                                                           
|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Geology             | a science that deals with the history of the earth as
      recorded in rocks.                                                                                                                                                                                                                                                                                                                                    
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Geophysical survey  | an exploration method that measures magnetic, electrical
      or other physical characteristics of the earth, the results of which can
      be interpreted and used to predict the possibility of economic mineral
      concentrations beneath the surface of the earth.                                                                                                                                       
|
|
|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Grade               | the concentration of an ore metal in a rock sample, given
      either as weight percent for base metals or in grams per tonne (g/t) or
      ounces per short ton (oz/t) for precious metals. The grade of an ore
      deposit is calculated, often using sophisticated statistical procedures,
      as an average of the grades of a very large number of samples collected
      from throughout the deposit.
|
|
|
|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|g/t                 | grams per tonne                                                                                                                                                                                                                                                                                                                                                                                                   
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|IMC                 | Independent Mining Consultants, Inc. of Tucson, AZ, USA.                                                                                                                                                                                                                                                                                                                                                          
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Intrusive/intrusion | an igneous rock that was once molten and has intruded
      into pre-existing rocks in that state, after which it cools.                                                                                                                                                                                                                                                                                        
|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|IP                  | induced polarization  a geophysical survey technique.                                                                                                                                                                                                                                                                                                                                                            
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Kennecott           | Kennecott Canada Explorations Inc.                                                                                                                                                                                                                                                                                                                                                                                
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|M3                  | M3 Engineering and Technology Corporation of Tucson, AZ,
      USA.                                                                                                                                                                                                                                                                                                                                               
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|Mineralization      | minerals of value occurring in rocks.                                                                                                                                                                                                                                                                                                                                                                             

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- iv -

|NI 43-101            | National Instrument 43-101 Standards of Disclosure
      for Mineral Projects.                                                                                                                                 
|-------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |                                                                                                                                                                                                                  
|NPV                  | net present value - The present value of a series of
      future net cash flows that will result from an investment, minus the
      amount of the original investment.                                         
|
|                     |                                                                                                                                                                                                                  
|NSR                  | net smelter return  a calculation of net value metal
      produced less smeltering and refining changes.                                                                                                       
|
|                     |                                                                                                                                                                                                                  
|Ore                  | a naturally occurring material from which one or more
      minerals may be mined and sold at a profit, or from which some part may be
      profitably separated.                                               
|
|
|                     |                                                                                                                                                                                                                  
|RC                   | reverse circulation  a drilling technique that breaks
      rock into small fragments that are returned to surface.                                                                                             
|
|                     |                                                                                                                                                                                                                  
|SAG                  | semi-autogenous grinding  a method of grinding ore in
      which the grinding media consist of larger pieces of rock and steel balls.                                                                          
|
|                     |                                                                                                                                                                                                                  
|Sulphide             | A compound containing sulphur and some other metal.                                                                                                                                                              
|                     |                                                                                                                                                                                                                  
|Teck or Teck Cominco | Teck Cominco Limited, a mining company with its head
      office in Vancouver, Canada. Teck Cominco is a joint venture partner of
      Western Silver.                                                         
|
|                     |                                                                                                                                                                                                                  
|VMS                  | volcanogenic Massive Sulphide  a deposit of massive
      sulfide mineralization of volcanic origin commonly containing pyrite and
      variable amounts of gold, silver, copper, lead and zinc mineralization.
|
|
|                     |                                                                                                                                                                                                                  
|tpd                  | tonnes per day.                                                                                                                                                                                                  

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CORPORATE STRUCTURE

Name, Address and Incorporation

Western Silver was incorporated as Western Copper Holdings
Limited under the laws of the Province of British Columbia on July 11, 1984 by
registration of its memorandum and articles pursuant to the Company Act
(British Columbia). The Company increased its authorized capital from 20,000,000
common shares to 100,000,000 common shares on May 8, 1998, and to an unlimited
number of common shares on April 4, 2005. Western Silver changed its name to its
current name on March 20, 2003.

The registered and records office of the Company is located at
595 Howe Street, 10th Floor, Vancouver, British Columbia, V6C 2T5,
and its head office and principal place of business is located at Suite 2050,
1111 West Georgia Street, Vancouver, British Columbia, V6E 4M3. Its telephone
number is (604) 684-9497.

Western Silver has a number of subsidiaries that are organized
as set out below. Each of the subsidiaries incorporated in Mexico are held as to
99.99% by the entity indicated below and 0.01% by a Mexican individual in
accordance with Mexican corporate law. Minera Western Copper, S.A. de C.V. is a
corporation formed under the laws of Mexico on December 4, 1995. Minera
Penasquito S.A. de C.V., Minera Faja de Plata, S.A. de C.V. and WCI Jeronimo
Mexico, S.A. de C.V. are corporations formed under the laws of Mexico on
February 21, 1999. Carmacks Copper Ltd. is a corporation formed under the laws
of British Columbia on September 19, 1996, by registration of a memorandum and
articles, and is wholly-owned by Western Silver. Western Copper International
Ltd., WCI (Penasquito) Limited, WCI (Nicolas) Limited and WCI (Geronimo) Limited
were incorporated under the laws of the British Virgin Islands on April 9, 1998.
WCI (Faja de Plata) Limited was incorporated under the laws of the British
Virgin Islands on March 22, 1999.



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GENERAL DEVELOPMENT OF THE BUSINESS

Three Year History

Western Silver Corporation is a Canadian mineral exploration
and development company with an emphasis on silver, gold, lead and zinc projects
located in North America. Since 2001, the Company has focused almost exclusively
on the Company's material property, being its 100% ownership (subject to certain
royalty interests that are described below) of the mineral rights on mineral
concessions known as the Peñasquito Project, a silver, gold, lead and zinc
property located in the Concepcion del Oro district in the northeast corner of
the State of Zacatecas.

On November 11, 2005, the Company received an independent
feasibility study on the Peñasquito Project that identified four separate
mineralized deposits for which a resource has been calculated, called Peñasco,
Chile Colorado, Azul and El Sotol. For two of these, Peñasco and Chile Colorado,
a reserve has been calculated and mine plan developed in the feasibility study.
These two deposits are located about 1.5 kilometers apart and are believed to be
part of the same mineralized system.

The feasibility study, prepared by M3 Engineering &
Technology Corporation of Tucson, Arizona (M3), recommends an open pit mine
with development of the Peñasco deposit first followed by Chile Colorado at an
initial production rate of 50,000 tonnes of sulfide ore per day. The oxide cap
on each deposit will be heap leached to recover silver and gold. Over a
projected mine life of 17 years, approximately 219.9 million ounces of silver,
3.29 million ounces of gold, 1.36 million tonnes of zinc and 631,000 tonnes of
lead will be produced.

Key assumptions and results of the feasibility study are in the
following table.

Mine life
    17
      yearsMine throughput
    50,000
      tonnes per day (sulphide ore)Average stripping
      ratio
    1.94
      to 1 (includes oxide ore)Power consumption
    75 MWPower rate
    US$0.06 per KWhInitial capital
      cost
    US$334.2 millionSustaining capital
    US$125.9 millionAverage NSR
    US$12.66 (sulfide ore)Operating cost
    US$6.33 per tonne (sulfide ore)Taxes
    US$355
      millionLife of mine
      revenue from metal sales
    US$4,403 millionLife of mine total
      operating cost
    US$2,739 millionIRR before tax
      100% equity
    19.0%IRR after tax 100%
      equity
    16.2%NPV @ 0% discount
    US$877
      millionPayback
    6.4
      yearsPrices Used for economic analysis
    US$6.74 per ounce of silver US$434 per ounce of gold
      US$0.52 per pound of zinc US$0.37 per pound of lead


In addition to the Peñasco and Chile Colorado deposits, there
are a number of other mineralized areas that are being investigated on the
Peñasquito property. It is anticipated that the Peñasquito Project will continue
to be

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the Companys principal focus throughout the next fiscal year
ending September 30, 2006. For further information, see Peñasquito Project
herein.

The Company also owns other properties which are not considered
material properties for the purposes of NI 43-101. These properties include the
Companys 100% interest (subject to a royalty) in the Carmacks property in the
Yukon Territory, Canada and the San Nicholas project which is a joint venture
interest with Teck Cominco and which is located approximately 40 miles southeast
of the city of Zacatecas in the State of Zacatecas, Mexico. Both properties are
presently being maintained on a care and maintenance basis.

The Carmacks property consists of 232 contiguous and partial
unpatented mineral claims at Williams Creek in the Whitehorse Mining district of
the Yukon Territory, Canada. These mineral claims comprise approximately 4,270
hectares (approximately 10,550 acres) 43 kilometres northwest of the community
of Carmacks. Although Western Silver considers the Carmacks to be a good
long-term asset, from 1998 until recently, copper prices remained at a level at
which the project was not economic. Accordingly, during fiscal 2001, management
wrote down the project to an estimated realizable value of $4,000,000. As part
of the care and maintenance on the Carmacks project, the Company is reassessing
certain aspects of the feasibility study for the property and continuing with
permitting applications with a view to ensuring the Carmacks project retains its
value for the Company.

The San Nicolas joint venture property is now held by Minera
  Tama, with Minera Western holding 35% of the shares of Minera Tama and Teck
  Cominco holding the remaining 65%. Teck continues to hold a 40% carried interest
  in San Nicolas separate from the joint venture. After a decision is made to
  put the deposit into production, the 40% carried interest will, at Tecks
  election, be converted to either a 25% participating interest, in which case
  Western Silvers interest would become 26.25% (participating), or a 15%
  carried interest, in which case Western Silvers interest would become
  18.75% (carried). If Teck elects to convert the 40% carried interest to a 15%
  carried interest, Western Silvers interest in the San Nicolas project
  would be 29.75% (participating) or 21.25% (carried).

Fiscal year ended September 30, 2003

In September 2001 Western engaged SNC Lavalin Engineers and
Constructors (SNC Lavalin) to provide technical assistance in assessing the
economic potential of the Chile Colorado deposit within the Peñasquito Project.
SNC Lavalin, in conjunction with Western designed a site specific drill program
to categorize reserves in the Chile Colorado deposit that would meet CSA
reporting standards. The results of this drilling program were utilized by SNC
Lavalin in their preliminary resource estimate, provided to the Company in
March, 2003.

In July, 2003, M3 Engineering & Technology Corporation
(M3) of Tucson, Arizona completed a scoping study on the Peñasquito Project.

During fiscal 2003 the Company made a property payment of
US$654,000 on July 3, 2003 to maintain one of the principal claims in the
Peñasquito property, and made total lease and property payments on the
Peñasquito property for fiscal 2003 (from October 1, 2002 to September 30, 2003)
of US$672,500, including the payment mentioned above.

Fiscal year ended September 30, 2004

The Chile Colorado deposit within the Peñasquito property was
the subject of a pre-feasibility study completed in March, 2004 by M3 (the M3
Pre-feasibility Report). The Company completed a drilling program on the
Peñasco zone. The San Jeronimo exploration project was the subject of a joint
venture with Apex Silver Mines Ltd. until termination of that joint venture
effective October 2004.

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- 4 -

The Company completed a brokered private placement financing in
December 2003 with Kingsdale Capital Markets Inc., Kingsdale Capital Partners
Inc. and Orion Securities Inc. and raised gross proceeds of $12,360,000. The
Company issued 2,400,000 common shares at $5.15 each, and 240,000 underwriters
options exercisable for two years at $5.78 each.

Fiscal Year ended September 30, 2005

On December 23, 2004, the Company completed a prospectus
offering with Orion Securities Inc., CIBC World Markets Inc. and Kingsdale
Capital Markets Inc. and raised gross proceeds of $64,831,250. The Company
issued 6,325,000 common shares at $10.25 each. These amounts include 825,000
common shares issued upon the exercise of the over-allotment option granted to
the underwriters. The proceeds of the Offering are expected to be used to fund
the further development of the Peñasquito Project and for general corporate
purposes.

During the year ended September 30, 2005, the Company received
$693,600 from the exercise of 120,000 warrants at a price of $5.78 per warrant,
and $2,215,420 from the exercise of 612,000 stock options, at prices ranging
from $1.00 to $9.54 per share.

The Company received an independent resource estimate at
Peñasco which increased the resources at the Company's wholly-owned Peñasquito
property in central Mexico. This increased resource estimate was obtained
subsequent to and is therefore not reflected in the reserve calculations in the
M3 March 2004 Pre-feasibility Report.

Subsequent to Fiscal Year ended September 30, 2005

On November 11, 2005, the Company received a Feasibility Study
on its Peñasquito Project. The Feasibility Study concluded that the Peñasco and
Chile Colorado deposits contained within the Companys wholly-owned Peñasquito
silver-gold-zinc-lead property in central Mexico can be developed economically
at an after-tax internal rate of return (IRR) of 16.2%, based on 100% equity.
The project has an undiscounted NPV of US$877 million with payback of initial
capital investment in 6.4 years.

See Description of the Business  Peñasquito Project herein
for further information about the Peñasquito Project.

DESCRIPTION OF THE BUSINESSGeneral

Western Silver Corporation is a Canadian mineral exploration
and development company with an emphasis on silver, gold, lead and zinc projects
located in North America. Since 2001, the Company has focused almost exclusively
on the Peñasquito Project located in Zacatecas State, Mexico.

Peñasquito Project

On November 11, 2005 the Company received a technical report
entitled "Peñasquito Feasibility Study" (the "Feasibility Study") prepared by M3
Engineering & Technology Corp. ("M3"). The Feasibility Study contained new
resource and reserve estimates for the Peñasquito Project and recommended the
Company proceed immediately to development. The reserve estimates detailed in
the Feasibility Study were prepared under the direction of Conrad E. Huss, P.E.,
Ph.D., Jerry T. Hanks, P.E., Michael L. Pegnam, P.E., Thomas J. Wythes, P.E. and
John M. Marek, P.E., each being independent of the Company and a Qualified
Person as defined in NI 43-101.

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- 5 -

Information in this section of this AIF of an economic,
scientific or technical nature in respect of the Peñasquito Project is based
upon the Feasibility Study and has been prepared with the consent of the authors
of the report. The executive summary of the Feasibility Study may be viewed on
SEDAR at www.sedar.com and on the Companys
website at www.westernsilvercorp.com.

Property Description and Location

The Peñasquito Project is situated in the western half of
  the Concepción del Oro district in the north-east corner of Zacatecas State,
  Mexico, approximately 200 km north-east of the city of Zacatecas, approximately
  24° 45 N latitude / 101° 30 W longitude. The
  closest major town is Concepción del Oro which lies on

Mexican highway 54, a well maintained, paved highway which
links the major cities of Zacatecas (in the state of Zacatecas), approximately
250 km to the south-west with Saltillo (in the state of Coahuila), approximately
125 km to the north-east. Some 20 km to the north-east, on the north side of
Sierra el Mascaron, is the Tayahua Mine at Terminal and Concepción del Oro is
the site of the Macocozac Mine.

The following table lists claims affected by the development of
the Peñasquito Project. This table is not a complete list of Western Silver
claims in the area.

CLAIM
    TYPE
    TITLE
    FILE NO.
    AREA HECTARES
    DATE ISSUED
    EXP. DATEEL PEÑASQUITO
    EXPLOIT.
    196289
    43/885
    2.000
    1993-07-16
    2011-07-11LA PEÑA
    EXPLOIT.
    203264
    07/1.3/547
    58.000
    1996-06-28
    2046-06-27LAS PEÑAS
    EXPLOIT.
    212290
    8/1.3/00983
    40.000
    2000-09-29
    2050-09-28ALFA
    EXPLOIT.
    201997
    7/1.3/485
    1100.000
    1995-10-11
    2045-10-10BETA
    EXPLOIT.
    211970
    8/1.3/01137
    2054.761
    2000-08-18
    2050-08-17SEGUNDA RED. CONCHA
    EXPLOR.
    218920
    8/2/00018
    23304.691
    2000-11-07
    2006-11-06MAZAPIL 3 F. I
    EXPLOR.
    217001
    007/13852
    1950.702
    2002-06-14
    2008-06-13MAZAPIL 10
    EXPLOR
    223327
    93/26975
    1073.555
    2004-10-02
    2010-10-01


A 2% NSR royalty is owed to Kennecott on production from both
the Chile Colorado and Peñasco locations. A further 3% NSR royalty on Peñasco
production is owed to Grupo Industrial de Coahuila S.A. de C.V. as assignee from
Minera Catasillas, S.A. de C.V., on the El Peñasquito, Las Peñas, La Peña,
Mazapil and Mazapil 2 concessions. This obligation may be purchased by Western
Silver at any time for the sum of US$5 million.

There is no previous mine development of any form in the
immediate area of Chile Colorado or Peñasco deposits and as such no
environmental liabilities are attached to the property. All drilling pads are
cleaned and rehabilitated on an ongoing basis.

Permits

Western Silver is currently in possession of valid exploration
permits for the drill work being performed in the area. The development of a
mine at this location will require additional permits from state and federal
authorities as set out below.

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- 6 -

Key PermitsREQUIREDPERMIT
    MININGSTAGE
    AGENCY
    ESTIMATEDRESPONSETIME
    ACTUAL STATUS   (November 2005)Environmental Impact Manifest- mine1
    Construction/ operation/ abandonment
    SEMARNAT-State offices
    2 to 4 months
    Substantially CompleteLand use
      change study-mine1
    Construction/ operation
    SEMARNAT- DGGFS2-State offices.
    2 to 3 months
    Substantially CompleteRisk
      analysis study-mine1
    Construction/ operation
    SEMARNAT- (Mexico City office)
    2 to 4 months
    Substantially CompleteEnvironmental Impact Manifest- power line1
    Construction/ operation/ abandonment
    SEMARNAT-State offices
    2 to 4 months
    20% completeLand use
      change study-power line1
    Construction/ operation
    SEMARNAT- DGGFS2-State offices.
    2 to 3 months
    20% completeLand use
      license1
    Construction
    Mazapil municipality
    2 months
    Discussions underwayKey
      PermitsREQUIREDPERMIT
    MININGSTAGE
    AGENCY
    ESTIMATEDRESPONSETIME
    ACTUAL STATUS   (November 2005)Explosive handling and storage permits
    Construction/- operation
    SEDENA3(Also requires state and local
      approvals)
    2 to 3 months
    Application to be submitted when final design is completeArchaeological release letter1
    Construction
    INAH4(State offices)
    3 to 4 months
    CompleteWater
      use concession title
    Construction/ operation
    CNA5(State offices)
    2 to 5 months
    Hydrologic study complete. Water rights application submitted
      April 25, 2005. On July 25,2005, CNA responded with a request for more
      details and completed Environmental Impact Manifest.Water
      discharge permit
    Operation
    CNA (State offices)
    2 to 5 months
    Application to be submitted when final design is completeUnique
      license
    Operation
    SEMARNAT-State offices
    3 to 12 months
    Not required for construction and start-up, application will be
      submitted once mine is in operationAccident
      prevention plan
    Operation
    SEMARNAT-State offices
    Not defined
    Not required for construction and start-up; to be submitted once
      mine is in operation


1Mandatory to start construction activities.
2DGGFS (General Department of Permitting for Forestry and Soils)
3SEDENA (National Secretary of Defense) 4INAH
(National Institute of Anthropology and History) 5CNA (National
Water Commission)

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- 7 -

Climate

The climate is generally dry with precipitation being limited
for the most part to a rainy season in the months of June and July. Annual
precipitation for the area is approximately 700 mm, most of which falls in the
rainy season. Temperatures range between 30°C and 20° C in the summer and 15°C
to 0°C in the winter. Western Silver has maintained an automatic weather station
in the area since August 2003, however some data has been lost due to power
supply problems.

Physiography

The deposits occur in a wide valley bounded to the north by the
Sierra El Mascaron and the south by the Sierra Las Bocas. Except for one small
outcrop, the area is covered by up to 30 m of alluvium. The terrain is generally
flat, rolling hills; vegetation is mostly scrub, with cactus and coarse grasses.
The prevailing elevation of the property is approximately 1900 m above sea
level.

The project site is generally flat with a gradual fall of 1.5 
2.5% to the west. There is adequate space for development of the process
facilities and the tailings and waste areas. The tailings disposal will be
constructed as a four-sided containment area using mine waste for a starter dam
and tailings for raising the embankment. In general, this is a very favourable
site for development.

Infrastructure

An adequate network of road and rail services exists in the
region. Road access to the site is presently gained west out of Concepción del
Oro approximately 15 km to the town of Mazapil and then a further 12 km west
from Mazapil. The road is very steep immediately west of Concepción del Oro with
numerous tight switchbacks. It is either paved or cobbled and maintained to
approximately 6 km west of Mazapil. After that the road is gravel but well
maintained. The Chile Colorado deposit is within 2 km of this main road and the
Peñasco deposit lies directly beneath the road. A system of gravel roads to the
east connects to Cedros and eventually to Torreon and the Torreon/Fresnillo
highway.

Additionally there is one railhead close to the site
approximately 100 km to the west. The State of Zacatecas is in the process of
building a new road east from Mazapil to join Highway 54 approximately 25 km
south of Concepción del Oro. The road is approximately 70% complete with only
about 5 km yet to be completed over the mountain pass north of La Laja. This
road will provide much superior grade and alignment to the old road from
Concepción del Oro. However, some minor improvements to this road will be needed
on sections already completed to accommodate large construction loads. Use of
this new road will eliminate the rather steep switchback sections of cobblestone
road just west of Concepción del Oro and the town of Concepción del Oro itself.
Work is in the final stages and will be completed well in advance of project
construction startup.

Given the mining experience in the area and the high
unemployment rate, there is expected to be an adequate pool of mining personnel
available.

Surface Rights

Surface rights in the vicinity of the Chile Colorado and
Peñasco pits are held by one private individual and three Ejidos. Western Silver
currently is in negotiations to purchase surface rights to the land required for
the project, assisted by a Mexican legal firm. Relations with the Ejidos through
the exploration process have been positive.

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- 8 -

An Ejido is a communal ownership of land recognized by the
Federal laws in Mexico. While mineral rights are administered by the Federal
government through federally issued mining concessions, an Ejido controls
surface rights over communal property through a Board of Directors which is
headed by a president. An Ejido may also allow individual members of the Ejido
to obtain title to specific parcels of land and thus the right to rent or sell
the land.

Negotiations for the high voltage power line right-of-way will
begin upon finalization of preliminary routing.

Water

By Mexican federal law, water encountered as the result of
mining operations (e.g., open pits or underground workings) are available to the
mining operation without application so long as mining continues. The pits will
intercept both the upper regional aquifer and the more massive lower
multi-valley aquifer. In meetings and teleconferences with Comision Nacional del
Agua (CNA), it has been indicated that the lower aquifer is totally
unsubscribed.

A study has been conducted to confirm the presence of adequate
capacity in solely the upper aquifer. Reportedly, such a general study was not
previously carried out and as such, by Mexican regulations, the general study
was the first step in process. This summary report was prepared for M3 entitled,
Study for an Integral Hydrogeological Evaluation of Cedros Aquifer and
Adjoining Basins, Mazapil County, Zacatecas. Its analysis concludes that the
unsubscribed water availability from the Cedros upper aquifer is 17.3 million
m3/year, evaluated according to NOM-011-CNA-2000 which is more than
adequate for the project.

Power

As a result of several productive meetings with Comision
Federal de Electricidad (CFE), the federal government utility company, the
Feasibility Study assumes that power will be available from a 400kV power line
tapped in reasonable proximity to the site. (Figure 1-4). From this location,
power will be transmitted at 230kV via a new overhead power line to the mine
site main substation. The power rate of US$0.06/kWhr used in the Feasibility
Study, is based on CFEs published interruptible power rates with limited power
shedding during peak hours (approximately 15 hours on average per week). Power
shedding is accomplished mainly by operating only one ball mill during these
peak hours and performing scheduled maintenance on the off-line unit.

History

The region has a strong tradition of mining going back to the
mid 1500s when silver mining first started in the region and the city of
Zacatecas was founded. Until the 19th century, 20% of all silver mined in the
world was reportedly mined from the City of Zacatecas Region.

Mining remains active in the State of Zacatecas. M3 has
provided Engineering & Procurement and Start Up services for the recent
Peñoles Fresnillo expansion as well as the greenfields Peñoles F.Y. Madero
project. Both of these ongoing operations have poly-metallic ore bodies.

Perhaps of greater interest is the recently mined out Real de
Angeles property near the city of Zacatecas. This open pit mine operated from
June 1982 to November 1998, averaged 17,000 tpd ore, and had life-of-mine ore
grades of 0.58% lead, 0.9% zinc, 70 g/t of silver and no appreciable gold.
Life-of-mine stripping ratio was approximately 5 to 1. Values of metal contained
are similar to the Peñasquito deposit, taking into account the gold prevalent at
Peñasquito.

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- 9 -

At Peñasquito, some limited exploration of the project area had
taken place previously with a short shaft and two shallow drill holes in the
1950s. But it was not until 1994 when Kennecott initiated a comprehensive
exploration program that the size and potential of the mineralized system were
recognized.

Beginning in 1994, Kennecott consolidated the land position and
completed extensive geochemical, geophysical and drilling programs to evaluate
the area, primarily for large tonnage porphyry copper/skarn deposits.

During 1996, drilling along the southern edge of the Azul pipe
resulted in the discovery of the Chile Colorado silver-lead-zinc-gold zone,
which was not of interest to Kennecott on a stand-alone basis.

Western Silver acquired 100% of the Peñasquito Project from
Kennecott in March 1998. The acquisition was driven by the large size of the
alteration-mineralization system (in excess of 9 km sq), the two large breccia
pipes, the zone of probable economic silver-gold-zinc-lead mineralization at
Chile Colorado, and numerous untested targets with potential similar to Chile
Colorado. During 1998 Western Silver completed nine core holes (3,185 metres)
and 13.4 line kilometres of Tensor CSAMT. Most of the work was focused on Chile
Colorado and the adjacent Azul breccia pipe.

During the fourth quarter of 2000, Hochschild completed a 14
hole, 4,601 metre drill program, with 11 holes drilled in the Chile Colorado
area. However, they returned Peñasquito to Western Silver after spending more
than US$1 million on drilling and land payments.

Since 2002, Western Silver has continually drilled the deposit
and continues to do so as of the date of this report (Phase 15). Drilling to end
of July 2005 (Phase 14) is included in this report.

Geological Setting

The regional geology of the area is well understood and has
been extensively mapped. Concepción del Oro lies within the Mexico Geosyncline,
a 2.5 km thick series of marine sediments deposited during the Jurassic and
Cretaceous Periods and consisting of a 2000 metre thick sequence of carbonaceous
and calcareous turbidic siltstones and interbedded sandstones underlain by a
1200 metre thick limestone sequence.

The two sierras in the area are separated in the western half
of the district by the Mazapil Valley which is a synclinal valley underlain by
the Upper Cretaceous Caracol Formation. The Caracol siltstone-sandstone section
is generally flat lying in the valley with occasional small parasitic anticlines
and drag folds along faults. The local geology is dominated almost entirely by
the rocks of the Mexico Geosyncline. The oldest rocks in the area are the Upper
Jurassic aged limestones and cherts of the Zuloaga Limestone.

These rocks are overlain by the La Caja Formation, a series of
thinly bedded phosphatic cherts and silty to sandy limestones that may be
fossiliferous.

The La Caja Formation is overlain by the limestones and
argillaceous limestones of the Taraises Formation which in turn are overlain by
the limestones of the Cupido Formation, one of the more favorable host rock
units for much of the mineralization previously mined in the area.

The Cupido limestones are overlain by the cherty limestones of
the La Pena Formation, deposited during the Lower Cretaceous Period. These rocks
are in turn overlain by the Cuesta del Cura limestone.

The Indidura Formation, a series of shales, calcareous
siltstones and argillaceous limestones, overlies the Cuesta del Cura limestone.

Upper Cretaceous Period rocks of the Caracol Formation,
consisting primarily of interbedded shales and

---

- 10 -

sandstones, overlie the Indidura Formation. These rocks
dominate the geology in the Peñasquito Project area and are overlain by the
Tertiary aged Mazapil Conglomerate.

A large granodiorite stock is believed to underlie the entire
area and the sediments described above are cut by numerous intrusive dykes,
sills and stocks of intermediate to felsic composition. The intrusives are
interpreted to have been emplaced from the late Eocene to mid-Oligocene Epochs
and have been dated at 30-40 million years in age.

Exploration

Kennecott completed numerous air and ground based geophysical
surveys on the Peñasquito claim groups between 1994 and 1997. The aeromagnetic
survey of the region defined an 8 km x 4 km, N-S trending magnetic high centered
roughly on the Outcrop Breccia. These surveys provided coverage of the area
including the Peñasco zone and confirmed the area as a suitable target for
drilling.

In 2004 Western Silver initiated additional CSAMT and IP
surveys that extended coverage on the older lines, and extended coverage to the
east of the pre-existing coverage. The geophysical database for the Peñasquito
Project area now provides a detailed electric cross-section that images changes
in geology, and appears to identify specific targets of interest.

Kennecott completed an extensive rapid air blast (RAB) drilling
campaign across much the Peñasquito Project area after the discovery of the
Chile Colorado deposit. This program, designed to systematically test the entire
project area, consisted of 250 holes. The holes penetrated the extensive
overburden cover and collected chip samples from anomalies, which had been
discovered during the numerous geophysical surveys as well as outlining other,
previously unknown anomalies. Twenty-eight of the RAB holes in this campaign by
Kennecott were drilled within and immediately adjacent to the Peñasco zone
breccia pipe. The geochemical survey results indicated that further exploration
was warranted in this area. Exploration drilling results subsequently confirmed
significant mineralization in the Peñasco zone.

Mineralization

Sulphide mineralization occurs in the Chile Colorado deposit,
in the Peñasco deposit hosted in the Outcrop breccia, in the Luna Azul and Azul
NE deposits hosted in the Azul Breccia, and at other smaller targets on the
Peñasquito Project. Exploration drilling has recently focused on the large
Peñasco deposit.

The Peñasco deposit is in the east half of the Outcrop breccia
directly above the projected throat of the brecca pipe. In plan view it is ovoid
in shape, at least 300 meters wide in an east direction and 450 meters long in a
north direction, and has formed around a complex series of small quartz-porphyry
stocks and dikes with some felsite dikes. It is composed of disseminations and
veinlets of medium to coarse-grained sphalerite-galena-argentite, other
unidentified silver sulfosalts, minor tetrahedrite-polybasite and common gangue
of calcite-rhodochrosite-quartz-fluorite.

The intrusive rocks themselves are also often mineralized.
Mineralization also extends upwards along the north and south contacts of the
Outcrop breccia. At the south contract, it extends upwards in the mixed clast
breccia adjacent to the northwest faults that cut the breccia pipe.

The most common mineral host is the intrusive hydrothermal
breccia. This breccia is the dominant rock below the 1,600 metre level. It also
is widely distributed as a halo around the porphyry stocks and dikes. The
porphyry often appears to brecciate into the intrusive hydrothermal breccia as
it passes upwards. Mineralization is present in the upper mixed clast breccia
along the south contact, the quartz-felsdpar porphyry intrusive breccia and to a
lesser extent the quartz-porphyry dikes. The felsite dikes are at times also

---

- 11 -

good mineral hosts.

The Chile Colorado silver-zinc-lead mineralization normally
occurs as both veining and narrow fracture filling, hosted in weakly silicified
sandstone, siltstone or shale. The mineralization has been interpreted to
represent stockworks, localized by a north-south trending fracture zone,
extending south from the Azul diatreme.

Sphalerite and galena associated with carbonate and pyrite
occur as massive veins. Pyrite, sphalerite and galena have also been observed as
discrete crystals and disseminations within sandstone units. Late state
carbonates and pyrite fracture fillings occur throughout the sediments.

Drilling

Drilling at the Peñasquito property has focused on the
exploration of three principal areas: Chile Colorado, Azul (Azul Breccia, Azul
NE and Luna Azul) and Peñasco including El Sotol adjacent to Peñasco. Work is
presently concentrated on both in-fill and step-out exploration drilling of the
Peñasco zone.

The Peñasquito property has been drilled by different operators
over several campaigns and phases beginning in 1995 under Minera Kennecott S.A.
de C.V.

The following tables summarize exploration drilling performed
and assayed to date on the Peñasquito property. This data has been used in the
preparation of the resource estimates used in this report.

The summaries of the drilling through Phase 14 are as of end of
July 2005. At December 22nd additional extensive (5 rigs) drilling is
ongoing.

Summary of Project Drilling at Peñasquito

Hole Purpose
    TOTAL DRILLHOLESNumber
    MetresResource Estimate  Peñasco & El Sotol
    265
    117,200Resource Estimation  Chile Colorado & Azul
    122
    48,900Subtotal  Holes Used for Resource Estimate (1)
    387
    166,100Chile Colorado  Hochschild Holes Excluded from Resource
      Estimate
    14
    4,601Condemnation
    11
    4,559Metallurgy
    13
    4,016Hole Purpose
    TOTAL DRILLHOLESNumber
    MetresPit
      Geotechnical
    11
    4,126Outside Exploration
    29
    7,721Total
    465
    191,123


(1) 15,135 metres are reverse
circulation drilling; the balance is core.

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- 12 -

Summary of Exploration Drilling Campaigns at Peñasquito*

Campaign
    Period
    Drilling Type
    Hole ID's
    Number ofDrillholes
    **Metres of**Drilling
    **Average Hole** Length
      (m)Kennecott
    1994-1997
    Reverse Circulation & Diamond Drilling
    PN01 - PN71
    71
    23,325
    329Western Copper
    1998
    Diamond Drilling
    WC01 - WC09
    9
    3,185
    354Mauricio Hochschild
    2000
    Diamond Drilling
    MHC01 - MHC14
    14
    4,601
    329Western Copper
    2002
    Diamond Drilling
    WC10 - WC54
    45
    19,645
    437Western Copper
    2003
    Reverse Circulation Diamond Drilling
    S01 - S57 S09Ext*,S24Ext*,S30Ext*
    57
    6,845
    120Western Copper
    2003
    Diamond Drilling
    WC55 - WC100 WC67A, PN26Ext* WC53Ext**
    47
    19,816
    422Western Silver - Phase 9
    2004
    Diamond Drilling
    WC101 - WC130 WC119A
    31
    14,841
    479Western Silver - Phase 10
    2004
    Diamond Drilling
    WC131 - WC179 WC131A,WC137A WC138A,WC146A
      WC150A,WC154A WC156A
    56
    20,241
    361Western Silver - Phase 11
    2004
    Diamond Drilling
    WC180 - WC211 WC99Ext**, WC189A
    33
    22,186
    672Western Silver - Phase 12
    2005
    Diamond Drilling
    WC212 - WC227
    16
    10,003
    625Western Silver - Phase 13
    2005
    Diamond Drilling
    WC228 - WC256
    29
    19,508
    673Western Silver - Phase 14
    2005
    Diamond Drilling
    WC257 - WC278
    22
    14,226
    647


* - Feasibility Study grade modeling excludes all MHC drilling,
  WC277, the latter part of WC276, and all of Phase 15. 
  Ext*- diamond drill extension of reverse circulation hole. 
  Ext**- diamond drill extension of diamond drill hole.

Summary of Drilling Activity at the Peñasquito Property

Calendar Year
    Number of Drillholes
    Metres of Drilling
    Average Hole Length (m)1994-1997 Drilling
    71
    23,325
    3291998 Drilling
    9
    3,185
    3542000 Drilling
    14
    4,601
    3292002 Drilling
    45
    19,645
    4372003 Drilling
    104
    26,661
    2562004 Drilling
    120
    57,269
    4772005 Drilling to
      July 31
    67
    43,737
    653Drilling
      Total
    430
    178,422
    415


Sampling, Analysis, Security and Data Verification

Due to the alluvial cover at Peñasquito the vast majority of
resource sampling has been done using either reverse circulation or diamond core
drilling. All drilling in 2004 and most other drilling has been primarily HQ
size core drilling, but narrowing to NQ diameter at depth in the longer holes.

Western Silver samples drillholes from bedrock to final depth.
The standard sample interval is 2.0 metres. Some samples are limited to
geological boundaries and are less than 2.0 metres in length. A senior geologist
examines the core, defines the primary sample contacts, and designates the axis
along which to cut the core.

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- 13 -

Special attention in veined areas is taken to ensure
representative splits are made perpendicular and not parallel to veins.

Geological logging is very detailed and follows the geological
legend on a regional scale. Once the core has been measured, marked,
photographed and logged geotechnically and geologically the core boxes are
brought to the diamond saw cutting stations. The core is sawed in half. One half
of every sample is placed into a heavy plastic bag. The Splitters Helper has
previously marked the drill hole and sample number on the plastic bag and
inserted the relative sample tag in the plastic bag.

Standard Reference Material samples and blanks are inserted
into the sample stream going to the assay laboratory in a documented sequence on
a frequency of approximately 1 in 20 samples.

A Western Silver truck transports the sacks to the ALS Chemex
laboratories in Guadalajara approximately once per week, where the samples are
prepped and pulped. Pulps are sent to ALS Chemex labs in Vancouver where they
are assayed and checked. At present ALS Chemex is Western Silvers primary assay
lab. Check samples are sent to Acme Labs of Vancouver.

The sample preparation procedures on site prior to shipment to
the laboratory have been independently reviewed and deemed secure and
adequate.

An independent sampling, preparation and assaying audit has not
been performed.

The quality assurance and quality control procedures employed
by Western Silver (QA/QC) have been independently reviewed and no significant
concerns noted. Approximately 90% of the data base assays were run on Western
Silver samples, and Western Silver generally used ALS Chemex as the primary lab
and Acme as the check lab. Both Chemex and Acme are ISO9002-certified. Both labs
use industry standard sample preparation procedures.

No independent samples have been taken and assayed, but
comparisons between Western Silver and Kennecott drilling results show no
biases.

Based on a review of Western Silvers sample preparation,
analysis, security, and QA/QC procedures to date with respect to database
verification, the database used for the resource estimates is deemed to be
accurately compiled and maintained, and is suitable for use in mineral resource
estimation.

No significant problems were identified during reviews of the
drilling data. The holes appear to have been properly located and
downhole-surveyed and to have recovered an adequate sample (core recovery during
the later Western Silver campaigns averaged 97.8%) .

Almost all of the drilled intervals are assayed for gold,
silver, lead and zinc. The average assay interval is slightly over 2 m.
Approximately 90% of the data base assays were run on Western Silver samples,
and Western Silver generally used ALS Chemex as the primary lab and Acme as the
check lab. Both Chemex and Acme are ISO9002-certified. Data entry errors should
be minimal because IMC re-compiled the bulk of the assay data base directly from
the original labs electronic files of assay certificates.

Several thousand gold, silver, lead and zinc check assays run
by a check laboratory (usually Acme) on pulps prepared by the primary laboratory
that ran the data base assays (usually Chemex) are available for the Kennecott
campaign and for Western Silver Phases 1, 2, 3, 5, 6, 7, 8 9, 10 and 11. These
assays act as a check on the analytical procedures used by the primary lab. A
few hundred gold, silver, lead and zinc assays run by a check lab (Acme,
M3/Hazen Research or Davis Metallurgical Laboratories) on fresh pulps prepared
by the check lab are available for Western Silver Phases 1, 2, 3, 7, 8, 9, 10,
11 and 12. These assays act as a check on

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- 14 -

both the analytical and the sample preparation procedures used
by the primary lab. No check assays are available for the Hochschild, Western
Silver 1998 and Western Silver Phase 4 campaigns, and as of the time of writing
the check assaying for Western Silver Phases 13 and 14 was in progress.

The check assay comparisons show generally acceptable overall
agreement between the primary and check labs for all of the campaigns/phases for
which check assays are available. Standard and blank assaying results also
appear to be generally acceptable. There are indications that some of the data
base silver assays run by Chemex during the later Western Silver phases may be
biased 5-15% low as a result of analytical factors, but this bias cannot
presently be confirmed, and the errors introduced into NSR value estimates would
be minimal even if it did exist.

IMC supplemented the check assay data by performing numerous
paired comparisons of grades from different drilling and assaying campaigns,
including those for which no check assays are available. The results show no
evidence to indicate that any of the Western Silver and Kennecott data base
assays are affected by large analytical or sample preparation biases. However,
they do suggest that the Hochschild grades are quite heavily high-biased
relative to the Kennecott and Western Silver grades for gold, silver and zinc.
No Hochschild samples were available for re-assay, so the precautionary decision
was taken not to use the Hochschild assays when estimating grades in the
model.

The paired-comparison reviews did not detect any biases between
core and reverse circulation drilling. (About 10% of the exploration drilling is
RC.)

No significant problems were identified with other data
supplied to IMC, which included sulfur assays (used to define oxidized zones)
and lithology, alteration, and oxidation data base codings. Drill logs were of
excellent quality. Density data were obtained from core sample measurements and
the values are reasonable relative to sample lithology.

Mineral Resource Estimate

Mineral resources for Chile Colorado and the Peñasco zones were
classified according to the CIM Standards on Mineral Resources and Reserves,
Definitions and Guidelines prepared by the CIM Standing Committee on Reserve
Definitions and adopted by CIM Council August 20, 2000. A number of elements
that represent the confidence in the geological interpretation, the database
integrity, the spatial continuity of mineralization and the quality of
estimation were utilized in the classification.

The model used for the Chile Colorado and Azul deposits in this
report is the IMC March 2005 model based on drill hole information through the
Phase 12 drilling completed in early 2005. No significant additional drilling
has been done in this area after Phase 12 (only five holes in Phases 13 and 14
were drilled in the Chile Colorado  Azul area). The Hochschild drilling
information (14 holes) was not used for grade estimation (IMC believes this data
is high biased). A total of 122 drill holes (48,900m) were used to define the
Chile Colorado  Azul resource.

The Chile Colorado  Azul resource is based on a computer block
model with a block size of 20m by 20m in plan and 10m high. The silver, gold,
lead and zinc grade are estimated into the model from 10m composites of the
drill data using ordinary kriging with a 135m maximum spherical search. Geologic
information (lithology, alteration and oxidization) are assigned to the model
using a nearest neighbor approach from the drill hole composite data. Density
values are based on test work on core samples and are assigned to the model
based on the oxidization and lithology assignments: overburden, 2.20; oxide (all
lithologies), 2.40; mixed (all lithologies), 2.475; sulphide, Caracol sediments,
2.60; sulphide, Azul breccia units, 2.50.

The model used for the Peñasco deposit is the IMC September
2005 model developed from drill through drill

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- 15 -

Phase 14 (with the exception of the latter part of WC 276 and
all of WC 277). The drill hole data used for the Peñasco model contains 265
holes (117,200m).

The Peñasco resource is from a computer block model with a
block size of 10m by 10m in plan and 10m high. The silver, gold, lead and zinc
grade are estimated into the model from 10m composites of the drill data using
ordinary kriging with a 50m maximum spherical search. Geologic information
(lithology, alteration and oxidization) are assigned to the model using a
nearest neighbor approach from the drill hole composite data. Density values are
based on test work on core samples and are assigned to the model based on the
oxidization and lithology assignments: overburden, 2.20; oxide (all
lithologies), 2.30; mixed (all lithologies), 2.40; sulphide, Caracol sediments,
2.60; sulphide, breccia units, 2.50.

An NSR value for the sulphide, mixed and oxide materials was
calculated using input data on costs and recoveries dated September 2005. A
flotation mill process is assumed for the sulphide material with an internal
cut-off calculated at US$3.60 NSR for Peñasco and US$4.18 for Chile Colorado. A
run-of-mine (ROM) heap leach for gold and silver is assumed for the oxide and
mixed materials with an internal cutoff calculated at US$1.30 NSR. The
classification of the resources is based on the following criteria:

Chile
      Colorado  Azul DepositsWithin 135m of 5 or more holes and within 50m of the closest
      hole and the zinc kriging standard deviation less than 0.40
    MeasuredWithin 135m of 2 to 4 holes and within 50m of the closest
      hole
    IndicatedWithin 135m of one hole
    Inferred**Peñasco Deposit**Within 50m of 5 or more holes
    MeasuredWithin 50m of 2 to 4 holes
    IndicatedWithin 50m of one hole
    Inferred


These criteria ensured that measured-indicated blocks were
identified only in areas within and immediately adjacent to the closer-spaced
drilling, not around isolated holes.

Constraints are much tighter at Peñasco because primary
variogram ranges there are much shorter than at Chile Colorado/Azul (60-70m
versus 180-210m for silver, lead and zinc), indicating significantly lower grade
continuity in the Peñasco deposit.

The grade of the block was not used as a determinant in
resource classification.

The following table summarizes the Peñasquito resources by
measured, indicated and inferred classifications. The resource is with a
geometry defined by the end of September 2005 spot metal prices. This geometry
bounds a resource, which has potential extraction by open pit mining. The
tabulation of this resource used NSR values based on US $6.624/oz for silver, US
$431.57/oz for gold, US $0.35/lb for lead and US $0.508/lb for zinc.

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- 16 -

Estimated Resource Potential by Open Pit

Measured Category
    MillionTonnes
    Cut-Off
    Silverg/tonne
    Goldg/tonne
    Lead%
    Zinc%Peñasco Oxide
      Resource
    16.0
    1.30
    25.09
    0.247
    -
    -Peñasco Mixed
      Resource
    11.6
    1.30
    26.49
    0.288
    -
    -Peñasco Sulphide
      Resource
    59.4
    3.60
    30.93
    0.628
    0.38
    0.77Chile Colorado
      Oxide Resource
    15.8
    1.30
    19.36
    0.216
    -
    -Chile Colorado
      Mixed Resource
    4.8
    1.30
    20.45
    0.225
    -
    -Chile Colorado
      Sulphide Resource
    137.0
    4.18
    33.36
    0.321
    0.31
    0.79Azul Oxide
      Resource
    1.0
    1.30
    25.90
    0.162
    -
    -Azul Mixed
      Resource
    1.5
    1.30
    25.68
    0.187
    -
    -Azul Sulphide
      Resource
    26.4
    4.18
    32.50
    0.201
    0.37
    0.75El Sotol Oxide
      Resource
    0.0
    1.30El Sotol Mixed
      Resource
    0.0
    1.30El Sotol Sulphide
      Resource
    0.1
    3.60
    18.22
    0.296
    0.31
    0.55Total Oxide
    32.9
    
    22.36
    0.230
    -
    -Total Mixed
    17.9
    
    24.79
    0.263
    -
    -Total
      Sulphide
    222.9
    
    32.60
    0.389
    0.34
    0.78Indicated Category
    Million Tonnes
    Cut-Off
    Silver g/tonne
    Gold g/tonne
    Lead %
    Zinc %Peñasco Oxide
      Resource
    11.8
    1.30
    25.22
    0.301
    -
    -Peñasco Mixed
      Resource
    12.8
    1.30
    25.46
    0.425
    -
    -Peñasco Sulphide
      Resource
    222.3
    3.60
    28.62
    0.601
    0.28
    0.67Chile Colorado
      Oxide Resource
    3.2
    1.30
    13.35
    0.192
    -
    -Chile Colorado
      Mixed Resource
    2.3
    1.30
    20.31
    0.189
    -
    -Chile Colorado
      Sulphide Resource
    51.4
    4.18
    20.45
    0.247
    0.17
    0.53Azul Oxide
      Resource
    5.8
    1.30
    21.48
    0.157
    -
    -Azul Mixed
      Resource
    2.2
    1.30
    36.01
    0.143
    -
    -Azul Sulphide
      Resource
    81.4
    4.18
    27.52
    0.150
    0.33
    0.68El Sotol Oxide
      Resource
    1.4
    1.30
    21.91
    0.241
    -
    -El Sotol Mixed
      Resource
    0.0
    1.30El Sotol Sulphide
      Resource
    3.1
    3.60
    17.35
    0.297
    0.28
    0.55Total Oxide
    22.2
    
    22.32
    0.244
    -
    -Total Mixed
    17.3
    
    26.14
    0.357
    -
    -Total
      Sulphide
    358.1
    
    27.10
    0.445
    0.28
    0.65


---

- 17 -

Estimated Resource Potential by Open Pit (Continued)

Inferred Category
    MillionTonnes
    Cut-Off
    Silverg/tonne
    Goldg/tonne
    Lead%
    Zinc%Peñasco Oxide Resource
    2.1
    1.30
    21.42
    0.244
    -
    -Peñasco Mixed Resource
    2.1
    1.30
    23.29
    0.723
    -
    -Peñasco Sulphide Resource
    101.5
    3.60
    24.97
    0.569
    0.22
    0.59Chile Colorado Oxide Resource
    1.6
    1.30
    14.36
    0.139
    -
    -Chile Colorado Mixed Resource
    2.2
    1.30
    22.27
    0.148
    -
    -Chile Colorado Sulphide Resource
    52.9
    4.18
    23.60
    0.223
    0.19
    0.53Azul Oxide Resource
    9.5
    1.30
    16.10
    0.156
    -
    -Azul Mixed Resource
    2.2
    1.30
    22.27
    0.148
    -
    -Azul Sulphide Resource
    68.7
    4.18
    25.50
    0.174
    0.33
    0.66El Sotol Oxide Resource
    2.1
    1.30
    20.13
    0.174
    -
    -El Sotol Mixed Resource
    0.0
    1.30El Sotol Sulphide Resource
    1.7
    3.60
    20.32
    0.257
    0.34
    0.57Total Oxide
    15.4
    
    17.20
    0.169
    -
    -Total Mixed
    6.4
    
    22.90
    0.338
    -
    -Total Sulphide
    224.9
    
    24.77
    0.365
    0.25
    0.60


Mineral Reserve Estimate (for sulphides, mixed and
oxides):

The proven and probable reserves for the Chile Colorado and
Peñasco deposit are contained within an engineered pit design based on a
floating cone analysis of the resource block model using the measured and
indicated resources. Proven and probable reserves are derived from measured and
indicated resources respectively that fall within the pit boundary. The figures
obtained for metallurgical recovery, revenue and costs were combined to assign
NSR figures for each block in the resource model. The NSR values assigned to the
block models for the purpose of developing the pit geometry are based on lower
metal prices than those used to tabulate the reserve within the final pit. The
prices used for the development of the pit geometry were US$5.50/oz Ag,
US$350/oz Au, US$0.30/lb Pb and US$0.45/lb Zn.

Based on the calculated operating costs from previous studies
and an overall pit slope angles based on earlier pit designs, a number of
theoretical pit shell runs were calculated. The final pit shell in both
deposits was based on a US$0.60/tonne mining cost for rock and US$0.50/tonne for
overburden, an additional 2.0 -cent per bench of depth below the 1980 elevation
to both ore and waste and a discount rate of 1% per bench or 8% per year
assuming on average 8 benches are mined per year along the final wall. Overall
slope angles ranged from 39o to 46o in Peñasco and
38o to 44o in Chile Colorado  Azul. The floating cone
runs did generate a pit shell in the Azul and El Sotol deposits, but for this
study they were not included in the reserve or mine production schedule.

The reserve summary is the sum of a mine production schedule
using the proven and probable tonnages from the two pit designs. The sulphide
material reports to a flotation mill and the oxide plus mixed material reports
to a run-of-mine, heap leach. The NSR values used to tabulate the reserves
within the final pits are based on metal prices of: US$6.62/oz Ag, US$432/oz Au,
US$0.35/lb Pb and US$0.51/lb Zn. These prices are the M3 reporting metal prices
as of the end of September 2005.

---

- 18 -

Project Open Pit Reserve Summary

Category
    Ktonnes
    Ag, g/tonne
    Au g/tonne
    Pb, %
    Zn, %Sulphides: Mill
      ore(1)Chile Colorado
    Proven
    81,810
    37.58
    0.332
    0.37
    0.87Peñasco
    Proven
    38,742
    26.42
    0.484
    0.32
    0.59Total, Proven Pit
      Reserve
    
    120,552
    33.99
    0.381
    0.35
    0.78Chile Colorado
    Probable
    6,937
    20.75
    0.268
    0.18
    0.56Peñasco
    Probable
    130,326
    27.17
    0.639
    0.28
    0.61Total, Probable
      Pit Reserve
    
    137,263
    26.85
    0.620
    0.27
    0.61Mill
      Ore, Combined Proven & Probable
    257,815
    30.19
    0.508
    0.31
    0.69Oxides + Mixed:
      Leach ore (2)Chile Colorado
    Proven
    20,530
    19.63
    0.218
    -
    -Peñasco
    Proven
    27,565
    25.65
    0.263
    -
    -Total, Proven Pit
      Reserve
    
    48,095
    23.90
    0.250
    -
    -Chile Colorado
    Probable
    5,027
    16.14
    0.194
    -
    -Peñasco
    Probable
    24,204
    25.35
    0.358
    -
    -Total, Probable
      Pit Reserve
    
    29,231
    23.76
    0.330
    -
    -Leach
      Ore, Combined Proven & Probable
    77,326
    23.34
    0.277
    -
    -


NSR values based on US$6.62/oz Ag, US$432/oz Au, US$0.35/lb Pb,
US$0.51/lb Zn (end of September 2005 M3 pricing). 1) Sulphides are reported
at a US$3.60/tonne NSR cut-off for Peñasco and US$4.18/tonne for Chile Colorado.
2) Leach tonnage is reported at a US$1.30/tonne NSR cut-off.

Mining Method

The Chile Colorado and Peñasco mine plan will provide sulphide
ore to a mill  flotation plant that will produce two concentrates for sale: a
lead concentrate and a zinc concentrate. Both concentrates will have gold and
silver credits. Likewise, the mine plan will provide oxide and mixed ores to a
heap leaching facility that will produce a silver and gold doré.

The following table shows the combined production schedule for
both sulphide and oxide ores from both the Peñasco and Chile Colorado deposits.
The calendar year 2007, the start of mining operations, is taken as year 1 in
the mining schedule. The average annual mining rate during commercial production
is 15.2 million tonnes of sulphide ore per year from Year 2 through Year 18, 5.5
million tonnes of leach ore per year from Year 1 through Year 14, and nominally
40.3 million tonnes of waste per year from Year 1 through Year 15. The total
material mined per year peaks at 73.0 million (208,600 tpd) during Years 3
through 12.

---

- 19 -

Mine Production Schedule

Year
    SULPHIDE MILL ORE (1)
    LEACH ORE, US$1.30 NSR Cutoff
    Overbrdn
    Waste Rock
    Total Waste
    TOTALktonnes
    NSR
    lead
    zinc
    silver
    gold
    ktonnes
    NSR
    silver
    gold
    ktonnes
    ktonnes
    ktonnes
    ktonnes(%)
    (%)
    g/tonne
    g/tonne
    
    
    g/tonne
    g/tonne1
    65
    6.22
    0.22
    0.25
    16.94
    0.173
    3,625
    3.12
    29.01
    0.199
    12,024
    2,286
    14,310
    18,0002
    7,985
    9.46
    0.33
    0.59
    25.79
    0.194
    18,866
    3.10
    24.57
    0.225
    19.952
    20,197
    40,149
    67,0003
    18,250
    10.69
    0.34
    0.61
    26.89
    0.273
    10,553
    3.68
    28.01
    0.275
    5,510
    28,687
    44,197
    73,0004
    18,250
    9.58
    0.29
    0.53
    24.16
    0.296
    5,930
    3.54
    24.60
    0.280
    16,543
    32,277
    48,820
    73,0005
    18,250
    11.67
    0.28
    0.69
    24.45
    0.430
    3,163
    4.67
    21.33
    0.442
    14,544
    37,043
    51,587
    73,0006
    18,250
    11.82
    0.25
    0.63
    26.51
    0.455
    2,842
    3.81
    24.3
    0.315
    2,470
    49,438
    51,908
    73,0007
    18,250
    11.38
    0.28
    0.54
    25.53
    0.442
    3,428
    4.45
    24.80
    0.393
    3,347
    47,975
    51,322
    73,0008
    18,250
    11.35
    0.25
    0.51
    24.12
    0.491
    1,415
    5.48
    23.11
    0.530
    12,415
    40,920
    53,335
    73,0009
    13,507
    19.22
    0.33
    0.71
    34.76
    0.986
    1,281
    7.63
    23.48
    0.802
    12,072
    46,140
    58,212
    73,00010
    12,020
    17.60
    0.25
    0.56
    26.03
    1.074
    8,681
    2.66
    15.95
    0.244
    8,841
    43,458
    52,299
    73,00011
    16,585
    11.85
    0.31
    0.58
    26.01
    0.495
    8,168
    2.70
    22.10
    0.211
    16,007
    32,240
    48,247
    73,00012
    16,947
    19.26
    0.34
    0.71
    32.40
    1.044
    4,033
    3.97
    21.74
    0.370
    28,527
    23,493
    52,020
    73,00013
    15.511
    15.12
    0.40
    0.69
    38.32
    0.635
    1,933
    2.27
    17.48
    0.184
    714
    27,663
    28,377
    45,82114
    14,600
    12.91
    0.52
    0.86
    46.52
    0.269
    2,969
    2.61
    20.86
    0.208
    
    33,405
    33,405
    50,97415
    14,600
    10.59
    0.34
    0.81
    33.33
    0.309
    374
    2.88
    19.64
    0.250
    
    16,327
    16,327
    31,30116
    14,600
    10.15
    0.29
    0.75
    32.43
    0.320
    66
    1.96
    6.20
    0.212
    
    4,352
    4,352
    18,01817
    14,600
    13.69
    0.31
    1.14
    40.33
    0.466
    
    
    
    
    
    597
    597
    15,19718
    7,287
    12.04
    0.12
    1.10
    30.42
    0.542
    
    
    
    
    
    167
    167
    7,454Total
    **257,80****7**
    12.79
    0.31
    0.69
    30.19
    0.508
    77,327
    3.40
    23.34
    0.276
    152,966
    496,665
    649,631
    984,765Note: Sulphide mill cutoff grade is US$3.60/t for
      Peñasco ore and US$4.18/t for Chile Colorado
ore.


The current ore reserves are 257.8 million tonnes of sulphide,
77.3 million tones of leach ore with a life of mine waste to ore ratio of 1.94.
Commercial sulphide production is scheduled for 17 years.

Mining begins in the Peñasco pit, which provides the only
sulphide mill feed through Year 10, and continues to provide mill feed through
Year 13. Waste stripping begins in Chile Colorado in Year 9. Sulphide ore is
mined during Years 11 through 18. The sulphide mill feed if from both pits
during Years 11, 12 and 13.

Metallurgy

Three hundred and sixty-eight development metallurgical tests
were undertaken on sulphide ore, and a further 91 were undertaken on oxide ore.
Locked cycle tests on ore from both the Peñasco and Chile Colorado deposits were
performed as part of the flotation test program in order to provide a basis for
the projected plant recoveries. These tests revealed that recoveries in the
Peñasco Pit correlated with three basic ore categories: breccia, intrusive and
sedimentary. Recoveries in the Chile Colorado tests have not yet revealed an
obvious correlation. Work is ongoing to determine if any correlation exists and
to improve recoveries. Based on the most recent results, the following
metallurgical data has been used in the study:

---

- 20 -

Projected Metallurgical Data

Peñasquito Poly-Metallic Project  
       Peñasco BrecciaPb
    Zn
    Ag
    AuMine
      Head Grades
    0.29%
    0.62%
    26.94g/t
    0.62g/tPb
      Flotation Recovery
    86%
    4.2%
    74%
    65%Zn
      Flotation Recovery
    5.9%
    88%
    15%
    12%Pb
      Cleaner Concentrate Grade
    60%
    
    4792
    96g/tZn
      Cleaner Concentrate Grade
    -
    53%
    391g/t
    7.2g/t


Peñasquito Poly-Metallic Project  
       Peñasco IntrusivePb
    Zn
    Ag
    AuMine
      Head Grades
    0.30%
    0.55%
    28.00g/t
    0.58g/tPb
      Flotation Recovery
    74%
    6.2%
    63%
    63%Zn
      Flotation Recovery
    6.1%
    60%
    12%
    8%Pb
      Cleaner Concentrate Grade
    54%
    -
    4241g/t
    89g/tZn
      Cleaner Concentrate Grade
    -
    51%
    522g/t
    3.6g/t


Peñasquito Poly-Metallic Project  
       Peñasco SedimentaryPb
    Zn
    Ag
    AuMine
      Head Grades
    0.22%
    0.50%
    24.22
    0.37g/tPb
      Flotation Recovery
    70%
    4.0%
    42%
    35%Zn
      Flotation Recovery
    6.0%
    55%
    4%
    6%Pb
      Cleaner Concentrate Grade
    54%
    
    2446g/t
    31g/tZn
      Cleaner Concentrate Grade
    -
    53%
    186g/t
    4.3g/t


Peñasquito Poly-Metallic Project   Chile
      Colorado SedimentaryPb
    Zn
    Ag
    AuMine
      Head Grades
    0.36%
    0.84%
    36.26g/t
    0.33g/tPb
      Flotation Recovery *
    70%
    2.4%
    59%
    36%Zn
      Flotation Recovery
    3.2%
    80%
    19%
    10%Pb
      Cleaner Concentrate Grade
    50%
    
    5143g/t
    28g/tZn
      Cleaner Concentrate Grade
    -
    53%
    166g/t
    2.2g/t


* Lead plus carbon concentrate.

The recoveries for silver and gold from the heap leach are
presently estimated as: 1) Peñasco oxide and mixed ores, gold 58%, silver 26%;
and 2) Chile Colorado oxide and mixed ores, gold 57%, silver 23%.

Testing continues as of this report to further optimize
recoveries.

Smelters, Refineries and Markets

At the time of this report no agreements have been made with
any smelters and no discussions have been entered into with a view to concluding
any agreements. Not withstanding this, several smelter operators have expressed
interest in entering into discussions. Samples of the concentrates have been
provided to those requesting it. Market research has been performed by a
specialist consultant and incorporated into the Feasibility Study.

---

- 21 -

The markets for the lead and zinc concentrates from Peñasquito
fall into two categories, smelters within Mexico and smelters overseas. The
overseas smelters are further divided into Asian, North American and European
markets.

For the purpose of the study, it is assumed that all lead
concentrate will be smelted in Mexico but it is also recognized that some will
be smelted in overseas smelters. The smelter terms shown below were recommended
by a specialist consultant and represent typical terms for the market. They
represent a forecast of terms based on historical averages with due
consideration for projected supply and demand over the foreseeable future.

It is possible that there may be a market for zinc concentrate
in Mexico. The report assumes that zinc will be split between local and overseas
either Europe or Asia. Again the smelter terms used in the calculations in this
report represent an average of the typical terms deduced from the market
research.

Transportation cost and port charges in-country have been
determined based on a survey of transportation companies and other users. They
represent current costs. Ocean freight charges recommended by the consultant are
projected future costs based on historical averages and projected supply and
demand.

Lead ConcentratePayable Lead in Lead Concentrate
    95.00%Lead Minimum Deduction  unit
    3.0Treatment Charge - $/t
    US$145.00Gold Refining Charge - $/oz
    US$6.00Silver Refining Charge - $/oz
    US$0.40Payable Zinc in Lead Concentrate
    0.00%Payable Gold in Lead Concentrate
    95.00%Gold Deduction  gpt
    1.000Payable Silver in Lead Concentrate
    95.00%Silver Minimum Deduction  gpt
    50.0Zinc ConcentratePayable Zinc in Zinc Concentrate
    85.00%Zinc Minimum Deduction  unit
    8Treatment Charge - $/t*
    US$150.00Payable Lead in Zinc Concentrate
    0.00%Payable Gold in Zinc Concentrate
    75.00%Gold Deduction  gpt
    1.000Payable Silver in Zinc Concentrate
    70.00%Silver Deduction  gpt
    93.3* Treatment
        charge increases to US$165.00 after two years


Concentrate Transportation Costs

The base case considers concentrate transportation charges as
follows:

---

- 22 -

| | • | Truck from mine to port                            | US$25.00
| | - | -------------------------------------------------- | --------
| | • | Port storage and loading charges                   | US$10.00
| | • | Ocean freight including losses
      and insurance | US$35.00
| |   | Total Overseas Cost                                | US$70.00
| |   |                                                    |         
| | • | Truck from mine to inland smelter                  | US$25.00
| | • | Total Local Cost                                   | US$25.00

Doré will likely be shipped to either Salt Lake City,
Utah or Idaho for refining.

Environmental Considerations

Federal laws primarily regulate mining in Mexico, however there
are several permit programs subject to state and local jurisdiction. The key
permits required are shown above. The chart shows the government agencies
involved as well as the status and the estimated approval time for each permit.
The Secretary of Environment and Natural Resources (SEMARNAT) is the chief
agency regulating environmental matters in Mexico. The CNA has authority over
all matters concerning water rights and activities that affect ground and
surface water supplies, including activities in the floodplains.

The SEMARNAT permit programs that are mandatory for the
construction stage are the Environmental Impact Manifest (MIA), Risk Study and
the Land Use Change Study. An endorsement must also be obtained at the municipal
level to start the mine construction. A release letter from National Institure
of Anthropology and History (INAH) must be obtained prior to any actions that
could disturb the identified cultural resources at the site. Western Silver has
obtained a release letter from INAH.

The explosives use permit must be secured before any explosives
can be brought into the storage area. The National Secretary of Defense (SEDENA)
has authority over all explosives permits.

The preparation of a full MIA for the mine, processing plant
and associated facilities is complete in accordance with Mexican requirements.
The MIA will comprise the following volumes:

| | • | Environmental Impact Assessment
| | - | -------------------------------
| | • | Risk Analysis                  
| | • | Land Use Change                

A separate MIA must be prepared for the power line once the
final alignment is established. This MIA does not require a risk analysis.

The Aquifer Study and Flora and Fauna Study are both complete.
The Aquifer Study has identified adequate water for the project and work is in
progress to secure this water. The Flora and Fauna Study identified no obstacles
to the project.

Key elements of reclamation will be accomplished during the
course of mining.

|• | Rock pile will be placed at a 3 horizontal to 1 vertical average
      side slope.                                                                     
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Leach piles will be placed at a 21⁄2 horizontal to 1 vertical
      average side slope.                                                                  
|• | Tailings will be placed by centerline spigot (or cyclone)
      construction and have a minimum average side slope of 4 horizontal to 1
      vertical.
|

---

- 23 -

|• | Rock pile foundations will be caliche or silty-clay grade
      surface. A suitable thickness of pit oxide overburden (10 metres minimum)
      will be placed on this benign strata. Sulphide or oxide waste rock will be
      placed over the oxide overburden layer. During the last placements of
      material, surveying will be employed to ensure proper slopes and suitable
      grades for drainage of the top surface. At the end-of-mine life, a
      topcover layer will be placed on the sides and top of each rock pile unit,
      in effect bagging the sulphide material in an oxide envelope. In the
      case of the Peñasco rock piles, overburden for the Chile Colorado pit will
      likely be largely used as it is scheduled to be mined after Peñasco. For
      Chile Colorado waste rock, topcover will come from previously stockpiled
      topsoil. The possibility also exists that Chile Colorado waste rock maybe
      deposited in the Peñasco Pit.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|
|
|
|
|
|• | Leach pile foundations will be cliché or silty-clay
      scarified surface. On this surface a double liner will be placed (clay and
      LLDPE geomembrane). On top of this a cushioning sand layer will be
      followed by a crushed and screened drainage layer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
|
|• | Tailings foundation will be caliche or silty-clay grade
      surface. The caliche/silty-clay will be overlain by consolidated tails to
      form a sufficient barrier for tails confinement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|

Taxes

Taxes have been calculated on a project basis in accordance
with published Mexican taxation legislation. Specialist taxation advice has not
been solicited at this stage and no tax planning strategies have been assumed.

IVA (Impuesto Valor Agregado) is a value-added sales tax at the
Federal level. This tax has not been included in the estimates.

PITEX (Programa de Importacion Temporal para Producir Articulos
de Exportacion) is a federal program allowing a waiver of import duties on
imported items that will exported at the end of the project. The cost of
administrating this program has been included in the estimate.

Income tax has been applied at a rate of 28% of taxable income
after 2007 and an allowance for employee profit sharing has been included.

Total federal income tax paid over the life of the mine is
US$337 million.

Exploration and Development

Based on the recommendations of M3, the Companys focus will be
the following items:

| | • | Incorporation of Environmental Impact Assessment
        (EIA) into basic engineering documents.                                                                                                                                                                     
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                      
| | • | Maintenance of permit matrix.                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                      
| | • | Addition of geotechnical foundation investigation
        based on final major equipment location.                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                      
| | • | Continuation of metallurgical testing
        program, with emphasis on early phase of Peñasco mining and Chile
        Colorado.                                                                                                                                    
|
| |   |                                                                                                                                                                                                                                                                      
| | • | Groundwater Study has been completed
        for upper aquifer. Water rights should be secured for this upper aquifer.
        Consideration should be given to securing addition rights for the lower
        aquifer to accommodate the possibility of mill growth.
|
|

---

- 24 -

| | • | Resource Estimation update based on current drilling
      campaign and associated revised mine planning. Further drilling in Peñasco
      to improve production in early years and provide additional ore tonnage.        
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| |   |                                                                                                                                                                                                                             
| | • | Verification of timely availability of clay for pad
      liners at near surface.                                                                                                                                           
| |   |                                                                                                                                                                                                                             
| | • | Final design of tailings pond.                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                             
| | • | Material (sulphide rock, oxide rock, overburden, and
      silty-clays) management plan be developed for rockpiles, leach pad,
      tailings, and open pits. This plan will constitute the first step of
      reclamation.
|
|
| |   |                                                                                                                                                                                                                             
| | • | Negotiation proceeds on an urgent basis with CFE to
      approve the power supply option.                                                                                                                                  

RISK FACTORS

An investment in securities of the Company involves significant
risks which should be carefully considered by prospective investors before
purchasing such securities. In addition to the other information set forth
elsewhere in this AIF, prospective investors should carefully review the
following risk factors:

The Company has incurred losses

The Company has incurred net losses in the past and may incur
losses in the future and will continue to incur losses until and unless it can
derive sufficient revenues from its projects. Such future losses could have an
adverse effect on the market price of its common shares, which could cause
investors to lose part or all of their investment in the Companys shares.

The Company currently depends on one principal property

The Company is currently dependent on one principal mineral
property, being its Peñasquito Project, which is a development stage project.
The Peñasquito Project may never develop into a commercially viable ore body,
which would have a materially adverse affect on the Companys potential mineral
resource production, profitability, financial performance and results of
operations.

The Company is a development company and may never develop
  a commercially viable ore body

The Company is in the development stage. None of the properties
in which it has interests are in commercial production. In order to obtain more
reliable information on which to base decisions about possible development of a
property, it is necessary to expend significant time and money, and many such
properties prove commercially unviable and not worth developing. Whether a
mineral deposit will be commercially viable depends on a number of factors,
including the particular attributes of the deposit, such as size, grade and
proximity to infrastructure; metal prices which are highly cyclical; and
government regulations, including regulations relating to prices, taxes,
royalties, land tenure, land use, importing and exporting of minerals and
environmental protection. The impact of any one of these factors cannot be
accurately predicted, however, a combination of these factors may result in the
Company not receiving an adequate return on invested capital. Consequently, it
is impossible to ensure that the exploration or development programs planned by
the Company, or any of its joint venture partners, will result in a profitable
commercial mining operation. The Company may thus expend significant amounts of
financing and effort on any or all of its properties without reaching a stage of
commercial production, which could make it more difficult for the Company to
finance future operations.

---

- 25 -

The Company may be unable to obtain additional financing
  to fund exploration and development on itsproperties

The Company does not have sufficient financial resources
available to undertake development of its projects. Commercial development, if
warranted, would require additional substantial financing. There can be no
assurance that needed future financing will be available in a timely or
economically advantageous manner, or at all. Failure to obtain sufficient
financing may result in delaying or indefinite postponement of exploration,
development or production on any or all of the Companys properties or even a
loss of property interest, in which case, the Companys ability to operate would
be adversely effected. Failure to obtain such additional financing could result
in delay or postponement of future exploration or development of its properties.

Mineral exploration and development activities are inherently
  risky

The business of mineral exploration and extraction involves a
high degree of geological, technical and economic uncertainty because of the
difficulty of locating a viable mineral deposit, the costs and other risks
involved in bringing a deposit into production and the uncertainty of future
mineral prices. Few properties that are explored are ultimately developed into
production.

The Company is subject to risks respecting development
  and production activities

Unusual or unexpected formations, formation pressures, fires,
power outages, labour disruptions, flooding, explosions, cave-ins, landslides
and the inability to obtain suitable or adequate machinery, equipment or labour
are other risks involved in extraction operations and the conduct of exploration
programs. Although the Company carries liability insurance with respect to its
mineral exploration operations, the Company may become subject to liability for
damage to life and property, environmental damage, cave-ins or hazards against
which it cannot insure or against which it may elect not to insure.

Western Silver has not acquired surface rights

The Company has not yet acquired all necessary surface rights
to the land required for any mining on the Peñasquito Project. There is no
assurance that the Company will obtain adequate surface rights to permit
development of the Peñasquito Project.

Western Silver is a passive foreign investment company
  for United States federal income tax purposes

Western Silver believes that it is a passive foreign investment
company for United States Federal income tax purposes, and it expects to
continue to be a passive foreign investment company until it generates
sufficient revenue from its mineral exploration and extraction activities. If a
person holding Common Shares is treated as owning stock of a passive foreign
investment company, any gain recognized by such person upon a sale or other
disposition of Common Shares may be ordinary (rather than capital), and any
resulting United States federal income tax may be increased by an interest
charge. Rules similar to those applicable to dispositions generally will apply
to certain excess distributions in respect of a Common Share. Such a holder may
generally take steps to avoid these unfavorable United States federal income tax
consequences.

Fluctuation of mineral prices may adversely affect the
  Companys financial results

Factors beyond the control of the Company may affect the
marketability of any ore or minerals discovered at and extracted from the
Companys properties. Resource prices have fluctuated widely, particularly in
recent years, and are affected by numerous factors beyond the Companys control
including international economic and political trends, inflation, currency
exchange fluctuations, interest rates, global or regional consumption patterns,
speculative activities and increased production due to new and improved
extraction and production

---

- 26 -

methods. The effect of these factors cannot accurately be
predicted.

The Company has no experience in placing properties into
  production

The Company has no experience in placing mineral deposit
properties into production, and its ability to do so will be dependent upon
using the services of appropriately experienced personnel or entering into
agreements with other major resource companies that can provide such expertise.
There can be no assurance that the Company will have available to it the
necessary expertise when and if the Company places mineral deposit properties
into production.

Title to the Companys properties or interests may be
disputed

The acquisition of title to resource properties or interests
therein is a very detailed and time-consuming process. Title to and the area of
resource concessions may be disputed. There is no guarantee of title to any of
the Companys properties. The properties may be subject to prior unregistered
agreements or transfers and title may be affected by undetected defects. Title
may be based upon interpretation of a countrys laws, which laws may be
ambiguous, inconsistently applied and subject to reinterpretation or change. The
Company has not definitively surveyed the boundaries of any of its mineral
properties and consequently the boundaries of the properties may be disputed.
The Company may be unable to operate its properties as permitted or to enforce
its rights with respect to its properties.

The Company must seek government approval to develop mines

The establishment and operations by which any particular
mineral property is to be explored or operated is subject to obtaining Mexican
government approvals at various levels and for particular matters, including
mining rights, importation of equipment, hiring of labour, and environmental
regulations. The Company currently, either on its own or though joint venture
partners, has obtained licenses to conduct mineral exploration activities, but
will be required to obtain a mining license to, if warranted, develop and
conduct operations on any property. Depending on the scope of the operation, its
location and the particular issues involved, the level of government from which
approvals must be sought and the process involved may vary potentially
restricting the Companys operations. The process for obtaining these approvals
can be costly and lengthy.

Environmental regulations may adversely affect the Companys
  projects

The Companys operations are subject to environmental
regulations promulgated by various Mexican government agencies from time to
time. Violation of existing or future Mexican environmental rules may result in
various fines and penalties. As Mexicos economy modernizes and expands, it is
expected that regulations covering environmental protection and the reclamation
and remediation of industrial sites would be strengthened which could increase
the operating costs in Mexico.

Political, economic and social conditions of Mexico may
  adversely affect the Companys investments

The Companys investments may be adversely affected by
political, economic and social uncertainties in Mexico which could have a
material adverse effect on the Companys results of operations and financial
condition. Certain areas of Mexico have experienced and may continue to
experience local political unrest and disruption by the indigenous peoples which
could potentially affect the Companys projects. Changes in leadership, social
or political disruption or unforeseen circumstances affecting Mexicos
political, economic and social structure could adversely affect the Companys
property interests or restrict its operations. The Companys mineral exploration
and development activities may be affected by changes in government

---

- 27 -

regulations relating to the mining industry and may include
regulations on production, price controls, labour, export controls, income
taxes, expropriation of property, environmental legislation and safety factors.

The Companys financial results may be adversely affected
  by foreign currency fluctuation

The Company attempts to minimize the risks associated with
Mexican currency fluctuations by paying its expenses in Mexico in U.S. dollars.
Since the Companys financial results are reported in Canadian dollars and most
of the Companys financial assets are maintained in Canadian dollars, its
financial position and results are impacted by exchange rate fluctuations
between the Canadian and U.S. dollars and increases in the U.S. dollar relative
to the Canadian dollar could have a negative impact on operations. The Company
does not engage in foreign currency hedging transactions.

Statutory and regulatory compliance is complex and may
  result in delay or curtailment of Companyoperations

The current and future operations of the Company, from
exploration through development activities and commercial production, if any,
are and will be governed by laws and regulations governing mineral concession
acquisition, prospecting, development, mining, production, exports, taxes,
labour standards, occupational health, waste disposal, toxic substances, land
use, environmental protection, mine safety and other matters. Companies engaged
in exploration activities often experience increased costs and delays in
production and other schedules as a result of the need to comply with applicable
laws, regulations and permits. The Company has received all necessary permits
for the exploration work it is presently conducting, however such permits are,
as a practical matter, subject to the discretion of government authorities and
there can be no assurance that the Company will be successful in maintaining
such permits. Further, there can be no assurance that all permits which the
Company may require for future exploration, construction of mining facilities
and conduct of mining operations, if any, will be obtainable on reasonable terms
or on a timely basis, or that such laws and regulations would not have an
adverse effect on any project which the Company may undertake.

Failure to comply with applicable laws, regulations and permits
may result in enforcement actions thereunder, including the forfeiture of
claims, orders issued by regulatory or judicial authorities requiring operations
to cease or be curtailed, and may include corrective measures requiring capital
expenditures, installation of additional equipment or costly remedial actions.
The Company may be required to compensate those suffering loss or damage by
reason of its mineral exploration activities and may have civil or criminal
fines or penalties imposed for violations of such laws, regulations and permits.
The Company is not currently covered by any form of environmental liability
insurance. See Risks associated with the Companys activities may not be
insurable., below.

Existing and possible future laws, regulations and permits
governing operations and activities of exploration companies, or more stringent
implementation thereof, could have a material adverse impact on the Company and
cause increases in capital expenditures or require abandonment or delays in
exploration.

Risks associated with the Companys activities may
  not be insurable

The Companys business is subject to a number of risks and
hazards and no assurance can be given that insurance to cover the risks to which
the Companys activities are subject will be available at all or at commercially
reasonable premiums. The Company currently maintains insurance within ranges of
coverage which it believes to be consistent with industry practice for companies
of a similar stage of development. The Company carries liability insurance with
respect to its mineral exploration operations, but is not currently covered by
any form of political risk insurance or any form of environmental liability
insurance, since insurance against political risks and environmental risks
(including liability for pollution) or other hazards

---

- 28 -

resulting from exploration and development activities is
prohibitively expensive. The payment of any such liabilities would reduce the
funds available to the Company. If the Company is unable to fully fund the cost
of remedying an environmental problem, it might be required to suspend
operations or enter into costly interim compliance measures pending completion
of a permanent remedy.

There is substantial competition for mineral deposits where
  the Company conducts its operations

Significant and increasing competition exists for mineral
deposits in each of the jurisdictions in which the Company conducts operations.
As a result of this competition, much of which is with large established mining
companies with substantially greater financial and technical resources than the
Company, the Company may be unable to acquire additional attractive mining
claims or financing on terms it considers acceptable. The Company also competes
with other mining companies in the recruitment and retention of qualified
employees. Consequently, the Companys revenues, operations and financial
condition could be materially adversely affected.

The Company depends on key management and employees

The Companys development depends on the efforts of key members
of management and employees. Loss of any of these people could have a material
adverse effect on the Company. The Company does have employment and consulting
agreements with its key members of management, which provide, among other
things, that either party may terminate on a minimum of 30 days notice. The
Company does not have key person insurance with respect to any of its key
employees.

The Companys shares may experience price volatility

Securities markets have a high level of price and volume
volatility, and the market price of securities of many companies, including the
Company, have experienced wide fluctuations in price which have not necessarily
been related to the operating performance, underlying asset values or prospects
of such companies. Factors unrelated to the financial performance or prospects
of the Company include macroeconomic developments in North America and globally,
and market perceptions of the attractiveness of particular industries. The
Companys share price, financial condition and results of operations are all
also likely to be significantly affected by short-term changes in gold, silver,
copper, lead or zinc prices. There can be no assurance that continual
fluctuations in metal prices will not occur. As a result of any of these
factors, the market price of the Common Shares at any given point in time may
not accurately reflect the Companys long-term value.

Figures for ore reserves and mineral resources upon which
  the Company relies are estimates

The figures for ore reserves and mineral resources contained in
this AIF are estimates only and no assurance can be given that the anticipated
tonnages and grades will be achieved, that the indicated level of recovery will
be realized or that ore reserves will be mined or processed profitably. There
are numerous uncertainties inherent in estimating ore reserves and mineral
resources, including many factors beyond the Companys control. Such estimation
is largely a subjective process, and the accuracy of any reserve or resource
estimate is a function of the quantity and quality of available data and of the
assumptions made and judgments used in engineering and geological
interpretation. Short term operating factors relating to the ore reserves, such
as the need for orderly development of the ore bodies or the processing of new
or different ore grades, may cause the mining operation to be unprofitable. In
addition, there can be no assurance that gold, silver, lead or zinc recoveries
in small-scale laboratory tests will be duplicated in larger scale tests under
on-site conditions or during production. Fluctuations in gold, silver, copper,
lead or zinc prices, results in drilling, metallurgical testing and production
and the evaluation of mine plans subsequent to the date of any estimate may
require revision of such estimate. The volume and grade of reserves mined and
processed and recovery rates may not be the same as currently anticipated. Any
material reductions in estimates of ore reserves and mineral

---

- 29 -

resources, or of the Companys ability to extract these ore
reserves, could have a material adverse effect on the Companys results of
operations and financial condition.

The Company may encounter difficulties in conducting its
  business through foreign subsidiaries

Western Silver is a holding company that conducts its business
through foreign subsidiaries, joint ventures and divisions, and substantially
all of its assets are held in such entities. Accordingly, any limitation on the
transfer of cash or other assets between Western Silver and its subsidiaries, or
among its subsidiaries, could restrict the Companys ability to fund operations
efficiently. Any such limitations, or the perception that such limitations may
exist now or in the future, could have an adverse impact on the Companys
valuation and share price.

The Company may be unable to expand its operations on favourable
  terms to the Company

As part of the Companys business strategy, it has sought and
will continue to seek new mining and development opportunities in the mining
industry. In pursuit of such opportunities, the Company may fail to select
appropriate acquisition candidates or negotiate acceptable arrangements,
including arrangements to finance acquisitions or integrate the acquired
businesses and their personnel into the Company. The Company cannot assure that
it will be able to complete any acquisition or business arrangement that it
pursues, or is pursuing on favourable terms, or that any acquisitions or
business arrangements completed will ultimately benefit the Companys business.

Changes in critical accounting estimates could adversely
  effect the financial results of the Company

The most significant accounting estimates for the Company
relates to the carrying value of its mineral property assets. The accounting
policies in relation to mineral properties are set out in full in the annual
financial statements. Management of the Company regularly reviews the net
carrying value of each mineral property. Where estimates of future net cash
flows are not available and where other conditions suggest impairment,
management assesses if carrying value can be recovered. Managements estimates
of mineral prices, recoverable proven and probable reserves, and operating,
capital and reclamation costs are subject to certain risks and uncertainties
which may effect the recoverability of mineral property costs. Although
management has made its best estimate of these factors, it is possible that
changes could occur in the near term, which could adversely effect the future
net cash flows to be generated from the properties. As a result of the Companys
change of focus to the Peñasquito Project, to the extent that other projects are
not advanced, their carrying values may be written down. Another significant
estimate relates to accounting for stock based compensation. Option pricing
models require the input of highly subjective assumptions including the expected
price volatility. Changes in the subjective input assumptions can materially
effect the fair value estimate, and therefore the existing models do not
necessarily provide a reliable single measure of the fair value of the Companys
stock options granted/vested during the year.

The Companys shareholder rights plan may discourage
  certain transactions

The Company recently adopted a shareholder rights plan (the
Rights Plan). The Rights Plan is designed to provide the Board of Directors of
the Company with the means to negotiate with an offeror and with sufficient time
to seek out and identify alternative transactions on behalf of the Companys
shareholders. The Rights Plan has not been proposed and adopted in response to,
or in anticipation of, any acquisition or take-over bid and is not intended to
prevent a take-over of the Company, to secure continuance of current management
or the directors in office or to deter fair offers for the common shares of the
Company. The Rights Plan may, however, increase the price to be paid by a
potential offeror to obtain control of the Company and may discourage certain
transactions.

---

- 30 -

The Company has not declared dividends and expects to retain
  any earnings

No dividends on the Companys common shares have been paid by
the Company to date. The Company anticipates that it will retain all future
earnings and other cash resources for the future operation and development of
its business. The Company does not intend to declare or pay any cash dividends
in the foreseeable future, until it commences mining operations and generates
profits. Payment of any future dividends will be at the discretion of the
Companys Board of Directors after taking into account many factors, including
the Companys operating results, financial condition and current and anticipated
cash needs.

Future sales of common shares by its present shareholders
  and dilution of common shares

The increase in the number of common shares in the market and
the possibility of sales of such shares may have a depressive effect on the
price of the common shares and the Companys ability to raise capital through
future sales of common shares. The Company has previously completed private
placements at prices per share which are lower than the current market price of
the common shares. Accordingly, a significant number of shareholders of the
Company have an investment profit in the common shares that they may seek to
liquidate. Substantially all of the common shares not held by affiliates of the
Company can be resold without material restriction whether in the United States
and/or in Canada. In addition, as a result of additional common shares in the
market, the voting power of the Companys existing shareholders will be diluted.

Risks associated with conflicts of interest

Certain of the directors and officers of the Company also serve
as directors and/or officers of other companies or other managerial positions
involved or related to natural resource exploration and development and
consequently there exists the possibility for such directors and officers to be
in a position of conflict. Any decision made by any of such directors and
officers involving the Company will be made in accordance with their duties and
obligations to deal fairly and in good faith with a view to the best interests
of the Company and its shareholders. In addition, each of the directors is
required to declare and refrain from voting on any matter in which such
directors may have a conflict of interest in accordance with the procedures set
forth in the Business Corporations Act(British Columbia) and other
applicable laws.

DIVIDENDS

The Company has not paid any dividends on its common shares.
The Company may pay dividends on its common shares in the future if it commences
mining operations and generates profits. Any decision to pay dividends on common
shares in the future will be made by the board of directors on the basis of the
earnings, financial requirements and other conditions existing at such time.

GENERAL DESCRIPTION OF CAPITAL STRUCTURE

The authorized share capital of the Company consists of an
unlimited number of common shares. As at December 22, 2005, 48,585,581 common
shares of the Company were issued and outstanding as fully paid and
non-assessable shares.

The holders of the common shares are entitled to receive notice
of and to attend and vote at all meetings of the shareholders of the Company and
each common share confers the right to one vote in person or by proxy at all
meetings of the shareholders of the Company. The holders of the common shares,
subject to the prior rights, if any, of the holders of any other class of shares
of the Company, are entitled to receive such dividends in any financial year as
the board of directors of the Company may by resolution determine. In the event
of the liquidation, dissolution or winding-up of the Company, whether voluntary
or involuntary, the

---

- 31 -

holders of the common shares are entitled to receive, subject
to the prior rights, if any, of the holders of any other class of shares of the
Company, the remaining property and assets of the Company.

The Company has a stock option plan pursuant to which the
directors of the Company are authorized to grant options to directors, officers,
employees and consultants of the Company and its subsidiaries. As at December
22, 2005, the following options were outstanding under the stock option plan:

Expiry Date
      Number of Options/Shares
      Exercise PriceOct. 15, 2006
    200,000
    $1.50Oct. 22, 2006
    75,000
    $2.00Mar. 20, 2007
    393,500
    $1.00May 7, 2007
    300,000
    $1.50Dec. 9, 2007
    8,500
    $3.28Dec. 11, 2008
    40,000
    $6.00Jan. 7, 2009
    10,000
    $7.30Jan. 20, 2009
    230,000
    $6.80Mar. 4, 2009
    557,000
    $9.54May 25, 2010
    760,000
    $10.25Aug. 22, 2010
    100,000
    $10.25TOTAL
    2,674,000


There are no outstanding warrants to acquire common shares of
the Company.

MARKET FOR SECURITIES

Trading Price and Volume

The Companys shares are listed for trading through the
facilities of the TSX under the symbol WTC, and on the American Stock Exchange
(AMEX) under the symbol WTZ. During the 12 months ended September 30, 2005 and
the subsequent period to November 30, 2005, the Companys shares traded on the
TSX as follows:

Month
      Volume
      High
      LowNovember 2005
    2,832,368
    $11.69
    $9.42October 2005
    1,455,021
    $10.50
    $9.20September 2005
    2,472,498
    $10.84
    $9.48August 2005
    1,171,474
    $11.50
    $9.40July 2005
    751,026
    $11.36
    $9.85June 2005
    1,492,683
    $12.33
    $10.53May 2005
    2,435,187
    $11.95
    $9.29April 2005
    1,926,565
    $11.39
    $9.27March 2005
    2,247,364
    $13.80
    $10.41February 2005
    2,363,891
    $13.66
    $11.40January 2005
    2,544,505
    $12.05
    $9.76


---

- 32 -

Month
      Volume
      High
      LowDecember 2004
    2,526,521
    $12.15
    $10.25November 2004
    3,023,810
    $13.92
    $12.20October 2004
    2,543,147
    $13.20
    $10.50


DIRECTORS AND OFFICERSName, Occupation and
Security Holding

The following table sets forth all current directors and
executive officers as of the date of this AIF, with each position and office
held by them in the Company and the period of service as such. Each directors
term of office expires at the next annual general meeting of shareholders.

Name, Position and Country of
      Residence(1)
      Principal Occupation During the
      Past 5 Years(1)
      Director, Officer or Shareholder
      Since
      Number of Shares and % of
      Class(1)F. DALE CORMAN (6) Director,
      Chairman of the Board and Chief Executive
      Officer British Columbia, Canada
      Chairman of the Board and Chief 
        Executive Officer of the Company.
      October 31, 1995
      509,000, 1.05%THOMAS C. PATTON (6)Director, President
      and Chief Operating Officer Washington, USA
      President and Chief Operating 
        Officer of the Company.
      January 1, 1998
      265,000, 0.55%LAWRENCE PAGE, Q.C. Director British
      Columbia, Canada
      Securities Lawyer.
      January 28, 1997
      NilDAVID WILLIAMS(2)(3)(4)Director
      Ontario, Canada
    President, Roxboough Holdings Limited, a
      private investment company.
    August 10, 2003
    364,800, 0.75%KLAUS ZEITLER(2)(3)(4)(5)Director
      British Columbia, Canada
    Senior Vice-president, Teck Cominco Limited
      from March, 1997 to October 2002.
    September 18, 2000
    7,300, 0.02%ROBERT GAYTON (2)(5)Director 
        British Columbia, Canada
      Chartered Accountant; Vice- 
        President Finance
      of the Company (1995 to Jan. 2004); financial  consultant to
      the mineral exploration and technology industries since 
        1990.
      January 1, 1996
      29,200, 0.06%LEE BILHEIMER 
          Director 
        British Columbia, Canada
      Engineering consultant since 1994; 
        formerly
      Vice-President Construction, Teck Cominco Limited.
      July 25, 1997
      3,000, 0.01%BRENT KINNEY Director Dubai, UAE
      Petroleum lawyer, Director of Husky 
        Energy Inc. and Dragon Oil plc.
    May 25, 2005
    NilJONATHAN CLEGG Vice-president, Engineering
      British Columbia, Canada
      Mining Engineer.
    January 20, 2004
    Nil


---

- 33 -

Name, Position and Country of
      Residence(1)
      Principal Occupation During the
      Past 5 Years(1)
      Director, Officer or Shareholder
      Since
      Number of Shares and % of
      Class(1)GERALD PROSALENDIS (6)
      Vice-president, Corporate Development British
      Columbia, Canada
    Corporate development consultant.
    January 7, 2004
    NilJOSEPH LITNOSKY (6) Vice-president,
      Finance and Chief Financial Officer British Columbia,
      Canada
    Business, corporate development and financial
      consultant since 1987.
    November 1, 2003
    NilJEFFREY GIESBRECHT (6)
      Vice-president, Legal and Secretary British
      Columbia, Canada
    Securities and mining lawyer; General Counsel
      to Western Silver since 1998.
    July 13, 1998
    3,000, 0.01%


|(1) | The information as to country of residence, principal
      occupation, and shares beneficially owned or controlled, not being within
      the knowledge of the Company, has been furnished by the respective
      individuals.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Denotes member of Audit Committee.                                                                                                                                                                                               
|(3) | Denotes member of Compensation Committee.                                                                                                                                                                                        
|(4) | Denotes member of Nominating Committee.                                                                                                                                                                                          
|(5) | Denotes member of Corporate Governance, Health and Safety
      Committee.                                                                                                                                                       
|(6) | Denotes member of Disclosure Committee.                                                                                                                                                                                          

F. Dale Corman,B.Sc., P.Eng. Chairman &
Chief Executive Officer

Mr. Corman graduated with a Bachelor of Science degree in
geology from Rensselaer Polytechnic Institute in Troy, New York in 1961 and
obtained Professional Engineer status in Ontario in 1972. He has 30 years
experience as a senior corporate officer of publicly listed companies and has
extensive expertise in mineral and geothermal exploration and development,
property evaluation and acquisition, project financing and corporate management.

Thomas C. Patton,B.Sc., M.Sc., Ph.D. President
& Chief Operating Officer

Dr. Patton graduated from the University of Washington in 1971
(Ph.D.) and has since worked with both junior and senior mining companies. His
exploration efforts have concentrated on North America and have resulted in
several significant discoveries and reserve expansions of existing operations.
Prior to joining Western Silver, Dr. Patton held senior positions with Rio Tinto
PLC and Kennecott Corporation., where he served as Senior Vice President,
Exploration and Business Development. Dr. Patton is a member of the Society of
Economic Geologists and the American Institute of Mining & Metallurgical
Engineers.

Robert J. Gayton,B.Comm., Ph.D., FCA Director,
Audit Committee Member

Dr. Gayton, F.C.A., graduated from the University of British
Columbia in 1962 with a Bachelor of Commerce and in 1964 earned the chartered
accountant (C.A.) designation while at Peat Marwick Mitchell. Dr. Gayton joined
the Faculty of Business Administration at the University of British Columbia in
1965, beginning 10 years in the academic world, including time at the University
of California, Berkeley, earning a Ph.D. in Business. Dr. Gayton rejoined Peat
Marwick Mitchell in 1974 and became a partner in 1976 where he provided audit
and consulting services to private and public company clients for 11 years. Dr.
Gayton has directed the accounting and financial matters of public companies in
the resource and non-resource fields

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- 34 -

since 1987. Dr. Gayton is a director of several public
companies.

Klaus Zeitler,Ph. D. Director, Audit Committee
Member

Dr. Zeitler received his Ph.D. in Business Administration and
Economics from the University of Karlsruhe, Germany in 1967. Dr. Zeitler was the
Senior Vice President of Teck Cominco Limited from 1997 until 2002. Previously,
Dr. Zeitler was on the Board of Directors of Teck Corp. from 1981 to 1997, and
was on the board of directors of Cominco Limited from 1986 to 1996. Dr. Zeitler
was on the audit committee of Cominco Limited and Teck Corporation during a
portion of his time on the board. He was also the Chief Financial Officer of
Nanisivik Mines Ltd., a private Canadian mining company with zinc and lead
concentrate production 1975 to 1981, and Founder and Chief Executive Officer of
Metall Mining Corporation (now Inmet Mining Corporation), a company whose shares
are listed on the Toronto Stock Exchange, from 1986 to 1996. Dr. Zeitler is a
Director of Western Silver Corporation and the President and a Director of
Amerigo Resources Ltd.

David Williams, MBA Director, Audit Committee
Member

Mr. Williams obtained a Master of Business Administration
Degree from Queens University in 1964 and was a recipient of a Doctor of Civil
Laws from Bishops University in 1966. Mr. Williams currently manages
investments for a private family holding company and is involved in community
affairs, including Bishops University where the Faculty of Business and
Economics is named in his honour. He is Chairman of Bennett Environmental and
Roador Inc. and is on the boards of Atlantis Systems Corp., Calvalley Petroleum
Inc, Newport Partners Income Fund, and Resin Systems Inc.

Lee Bilheimer,B.Sc. Director

Mr. Bilheimer hold degrees from the University of Michigan and
the Missouri School of Mines. He has been a consultant in project management and
new mine development since retiring as Vice-President, Construction for Teck
Cominco. Prior to that he was Vice President, Project Development for Cominco
Alaska and responsible for construction of their Red Dog mine, the largest zinc
producer in the world.

Lawrence Page, B.A., LL.B., Q.C. Director

Mr. Page obtained his law degree from the University of British
Columbia in 1964 and was called to the Bar of British Columbia in 1965.
Thereafter he studied labour law and industrial relations in Sydney, Australia
as a Commonwealth Scholar, returning to active practice in Vancouver in 1967. In
1970, he was a founding partner of Worrall Scott and Page where he practiced
until 1995. Mr. Page was counsel for and a Director of Corona Corporation (now
Homestake) and Prime Resources Corporation which have brought into production
and operate Canadian gold mines.

Brent Kinney,B.Sc., Ll.B. Director

Mr. Kinney is an international petroleum lawyer based in Dubai,
United Arab Emirates. He has more than 20 years experience representing both
government and private sector clients throughout the world. Prior to leaving
Canada in 1990 he was a partner in one of Albertas leading energy law firms. He
has represented governments, state oil companies and international oil companies
in petroleum ventures worldwide and is

---

- 35 -

currently advising the Peoples Republic of China through one
  of its state entities in petroleum interests in the Middle East. Mr. Kinney
  is also a director of Husky Energy Inc., Dragon Oil plc, and Sky Petroleum Inc.
  He has both a Bachelor of Laws degree and a Bachelor of Science (Geology) degree
  from the University of Manitoba, Canada. He is a member of the Canadian Bar
  Association and the Law Societies of Alberta, England and Wales and Hong Kong
  and is also a member of the Chartered Institute of Arbitrators, London, England.

Jonathan Clegg,P.Eng. Vice-president,
Engineering

Since receiving his degree in civil engineering from Cambridge
University in 1974, Mr. Clegg has nearly 30 years of experience in the design,
management and construction of mining related projects. This experience has
encompassed all phases of project development from initial studies to project
start-up. Mr. Clegg has also worked on infrastructure and petrochemical
projects. From 1974 to 1979 Mr. Clegg worked in South Africa on a number of
projects before joining Kilborn Engineering. In 1979 he moved to Canada with
Kilborn and remained with the company until 2002. During the last ten years he
held a number of positions of responsibility with Kilborn; from 1999 to 2002 he
was Vice President and General Manager of Kilborn Engineering Pacific Ltd.

Joseph Litnosky,B. Comm., C.M.A. Vice-president,
Finance

Mr. Litnosky obtained his degree in Commerce from the
University of British Columbia in 1986 and his Certified Management Accounting
designation in 1990. He has more than seventeen years of experience in business,
corporate finance, and financial management including four years as manager of
Finance and Administration for Billiton Metals Canada Ltd. and the BHP Billiton
Investment Group; six years as Chief Financial Officer for various junior mining
companies; and, six years as Chief Financial Officer for Glacier National Life
Assurance Company, a Canadian national insurance company.

Gerald ProsalendisVice-president, Corporate
Development

Mr. Prosalendis was Vice President of Corporate Development of
Dia Met Minerals Ltd. and was involved in developing the Ekati mine, Canada's
first diamond mine, and the sale of Dia Met to BHP Billiton for $687 million.
Mr. Prosalendis has consulted to Anderson & Schwab Inc., a mineral and
business consulting firm based in New York; is vice president of corporate
development of Shear Minerals Ltd.; a former business editor of The Vancouver
Sun;former senior counselor to James Hoggan and Associates, Western
Canada's leading communications firm.

Jeffrey Giesbrecht,B. Eng., Ll.B.
Vice-president, Legal

Mr. Giesbrecht completed his degree in engineering geophysics
in 1989 and worked in mineral exploration throughout North America before
receiving a law degree in 1994. During his legal career he has specialized in
mining and securities law and has acted as Western Silver's General Counsel
since 1998.

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- 36 -

Other Positions Held by Directors

NAME
      Position at Western SilverCorporation
      Other DirectorshipsF. DALE
      CORMAN
    Director, Chairman of the Board and Chief Executive
      Officer
    Rio Fortuna Exploration Corp. Radiant Resources Inc.
      Quaterra Resources Inc. Avalon Ventures Ltd.THOMAS
      C. PATTON
    Director, President and Chief Operating Officer
    Southern Silver Exploration Corp. Rio Fortuna Exploration
      Corp. Quaterra Sources Inc. Piper Capital Inc.LAWRENCE
      PAGE, Q.C.
    Director
    Rio Fortuna Exploration Corp. Quaterra Resources Inc.
      Avalon Ventures Ltd. Canadian Empire Exploration Corp. Bravo
      Venture Group Inc. Southern Silver Exploration Corp.DAVID
      WILLIAMS
    Director
    Bennett Environmental Inc. Roador Inc. Calvalley
      Petroleum Inc. Resin Systems Inc. Newport Partners Income Fund
      Atlantis Systems Corp.KLAUS ZIETLER
    Director
    Amerigo Resources Ltd.ROBERT
      GAYTON
    Director
    Bema Gold Corporation Northern Orion Resources, Inc.
      Amerigo Resources Ltd. Nevsun Resources Ltd. Minco Mining
      & Metals Corp. Canadian Zinc Corporation Intrinsyc Software
      International, Inc. Quaterra Resources Inc. Rio Fortuna
      Exploration Corp. Bravo Venture Group Inc. Southern Silver
      Exploration Corp. Doublestar Resources Ltd.LEE BILHEIMER
    Director
    NilBRENT
      KINNEY
    Director
    Husky Energy Inc. Dragon Oil PLC Aurado Energy Inc.
      Sky Petroleum Inc.


Control of Securities

As at December 22, 2005, the directors and executive officers
of the Company as a group beneficially owned, directly or indirectly, or
exercised control or direction over, an aggregate of 1,181,300 common shares of
the Company, representing approximately 2.43% of the issued and outstanding
common shares of the Company. In addition, the director and executive officers
of the Company as a group held incentive stock options for the purchase of an
aggregate of 1,495,500 common shares in the capital of the Company, which
options are exercisable at between $1.00 and $10.25 per common share and expire
between 2006 and 2010.

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- 37 -

Committees of the Board of Directors

The committees of the board of directors of the Company and the
directors serving on each of the committees are described below:

Audit Committee

The members of the Company's audit committee are Robert Gayton
(Chairman), David Williams and Klaus Zeitler, all three of whom are independent
directors. The audit committee oversees the Company's financial reporting
obligations, financial system and disclosures. It reviews the annual financial
statements, monitors and assesses the integrity of the Company's internal
control systems, meets with the Company's auditors and liaises between the board
of directors and the auditors. The Companys auditors, PricewaterhouseCoopers
LLC, report directly to the Audit Committee.

Nomination Committee

The members of the Company's nomination committee are David
Williams and Klaus Zeitler, both of whom are independent directors. This
committee is responsible for reviewing the performance of the Companys CEO, CFO
and COO, the Board as a whole, and individual directors. The committee also
oversees the orientation program for new recruits to the Board. In its report to
the Board of Directors, the committee recommends nominees for election to the
Board of Directors and from time to time recommends candidates to fill Board
vacancies and newly created Director positions.

Compensation Committee

The members of the Company's compensation committee are David
Williams (Chairman) and Klaus Zeitler. This committee is responsible for
determining the compensation to be paid to the Company's Board of Directors and
executive officers and for reviewing the corporate goals and objectives of the
executive officers.

Corporate Governance, Environment and Safety
Committee

The members of the Company's corporate governance,
environmental, health and safety committee are Robert Gayton and Klaus Zeitler,
both of whom are independent directors. This committee is responsible for
developing the implementing the Company's approach to corporate governance,
including reviewing and adopting a corporate disclosure policy and an insider
trading policy. This committee's mandate is also to develop, implement and
monitor the Company's environmental and safety practices.

Disclosure Committee

The Company has a disclosure committee comprised of the Chief
Executive Officer (Dale Corman), the Chief Operating Officer (Thomas Patton),
the Chief Financial Officer (Joe Litnosky) the Vice-president, Legal (Jeffrey
Giesbrecht), and the Vice-president, Corporate Development (Gerald Prosalendis).
This committee is responsible for overseeing all of the Companys corporate
disclosure, the Company's corporate disclosure practices and the administration
of the Company's policy on corporate disclosure, confidentiality and insider and
employee trading.

The Board of Directors has approved a Code of Business Conduct
and Ethics that is available on the Companys website at
www.westernsilvercorp.com.

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- 38 -

Project Management Committee

The Company has a Project Management Committee consisting of
Lee Bilheimer, Klaus Zeitler and Jonathan Clegg. This committee monitors all
technical aspects of the Peñasquito project, and reports to the Board of
Directors.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

Lawrence Page, Robert Gayton, Thomas Patton and Jeffrey
Giesbrecht were directors or officers of Newcoast Silver Mines Ltd. at the date
of a Cease Trade Order issued by the British Columbia Securities Commission on
September 30, 2003 and by the Alberta Securities Commission on October 31, 2003
for failure to file financial statements. The orders were revoked on October 23,
2003 and March 25, 2004 respectively.

Lawrence Page is a director and the President of Saturna Beach
Estates Ltd., a private company formed under the laws of British Columbia,
Canada (SBEL). This company conducts the business of a vineyard and winery. On
August 17, 2004, SBEL obtained an Order from the Supreme Court of British
Columbia under the provisions of the Companies Creditors Arrangement Act
(Canada) that allows the Company to continue to run the daily business affairs
of SBEL without creditor action during financial reorganization. The financial
restructuring was completed in May 2005 and the CCAA Order terminated.

Other than as disclosed above, none of the Company's directors
or executive officers or any shareholder holding a sufficient number of
securities of the Company to affect materially the control of the Company:

| | (a) | is, as at the date of this AIF or has been, within the
      ten years before the date of this AIF, a director or executive officer of
      any company, that while that person was acting in that                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                 
|
|
| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                
|
|
|
|
| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                               
|
|
|
|
| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| | (b) | has, within the ten years before the date of this AIF,
      become bankrupt, made a proposal under any legislation relating to
      bankruptcy or insolvency, or become subject to or instituted any
      proceedings, arrangement or compromise with creditors, or had a receiver,
      receiver manager or trustee appointed to hold the assets of the director,
      officer or shareholder.
|
|
|
|

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- 39 -

Conflicts of Interest

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

AUDIT COMMITTEE INFORMATIONAudit Committee
Mandate

The Company's audit committee has a charter (the "Audit
Committee Charter") in the form attached to this AIF as Schedule "A".

Composition of the Audit Committee

The following are the members of the Company's audit & risk
management committee:

|Robert Gayton (Chairman) | Independent
      (1) | Financially literate
      (1)
|------------------------ | --------------------- | ------------------------------
|David Williams           | Independent
      (1) | Financially literate
      (1)
|Klaus Zeitler            | Independent
      (1) | Financially literate
      (1)

(1) As defined by Multilateral Instrument 52-110.

Relevant Education and Experience

A description of the education and experience of each audit
committee member that is relevant to the performance of his or her
responsibilities as an audit committee member may be found above under the
heading Directors and Officers: Name, Occupation and Security Holding.

External Auditor Services Fees (By Category)

The aggregate fees billed by the Company's external auditors in
the 12 months ended September 30, 2005 are as follows:

Category
    Year ended September 30, 2005
    Year ended September 30, 2004Audit Fees
      (1)
    76,375
    59,850Audit-Related Fees
      (2)
    103,585
    NilTax Fees
      (3)
    23,730
    35,560


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- 40 -

All Other Fees
    Nil
    NilTotal
    203,690
    95,410


| | (1) | Audit Fees: Includes services provided by the independent
      auditor in connection with review of statutory and regulatory filings,
      review of the Companys financial statements, audit of the Companys
      annual financial statements;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Audit-Related Fees: Includes assurance services provided
      by the independent auditor in connection with the Companys prospectus and
      assistance relating to compliance with SEC securities law, including
      Sarbanes-Oxley 404;      
| | (3) | Tax Fees: Includes services rendered by the independent
      auditor mainly for tax compliance, tax planning, and tax advice; and                                                                                                                  

LEGAL PROCEEDINGSThe Company is not a party to any
legal proceedings and is not aware of any such proceedings known to be
contemplated.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONSNo director, senior officer or principal shareholder of the Company, or
any associate or affiliate of the foregoing, has had any material interest,
direct or indirect, in any transaction within the three most recently completed
financial years or during the current financial year prior to the date of this
AIF that has materially affected or will materially affect the Company.

TRANSFER AGENTS AND REGISTRARSThe transfer agent
and registrar for the common shares is Computershare Trust Company of Canada,
510 Burrard Street, Vancouver, British Columbia, Canada, V6B 5A1 and
Computershare Investor Services of Denver, Colorado.

MATERIAL CONTRACTSContracts of the Company, other
than contracts entered into in the ordinary course of business, that are
material to the Company and that were entered into by the Company within the
most recently completed financial year or were entered into prior to such year
and are still in effect are listed below:

Underwriting Agreement dated December 15, 2004 among Orion
Securities Inc., CIBC World Markets Inc., Kingsdale Capital Markets Inc. and the
Company pursuant to which the Company raised $64,831,250 pursuant to a
prospectus offering.

INTERESTS OF EXPERTS

Names of Experts

PricewaterhouseCoopers LLP (PWC) at Suite 700, 250 Howe
Street, Vancouver, British Columbia, V6C 3S7, are the auditors for the Company.
PWC provided the auditors report on the annual financial statements of the
Company for the year ended September 30, 2005.

Conrad Huss, P.E. Ph.D., independent consulting engineer and a
"qualified person" for the purposes of National Instrument 43-101, is
responsible for the preparation of portions of a technical report dated November
11, 2005, entitled "Peñasquito Feasibility Study".

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- 41 -

Jerry T. Hanks, P.E., an independent consulting engineer and a
"qualified person" for the purposes of National Instrument 43-101, is
responsible for the preparation of portions of a technical report dated November
11, 2005, entitled "Peñasquito Feasibility Study".

Michael L. Pegnam, an independent consulting engineer and a
"qualified person" for the purposes of National Instrument 43-101, is
responsible for the preparation of portions of a technical report dated November
11, 2005, entitled "Peñasquito Feasibility Study".

Thomas Wythes, of Golder Associates, an independent consulting
engineer and a "qualified person" for the purposes of National Instrument
43-101, is responsible for the preparation of portions of a technical report
dated November 11, 2005, entitled "Peñasquito Feasibility Study".

John Marek, an independent consulting engineer and a "qualified
person" for the purposes of National Instrument 43-101, is responsible for the
preparation of portions of a technical report dated November 11, 2005, entitled
"Peñasquito Feasibility Study".

Interests of Experts

To the knowledge of the Company, none of the experts named
under "Names of Experts", has received or will receive any registered or
beneficial interests, direct or indirect, in any securities or other property of
the Company or of one of the Company's associates or affiliates in connection
with the preparation or certification of any statement, report or valuation
prepared by such person.

ADDITIONAL INFORMATIONAdditional information
relating to the Company may be found on SEDAR at www.sedar.com.

Additional information, including directors and officers
remuneration and indebtedness, principal holders of the Companys securities,
and securities authorized for issuance under equity compensation plans, where
applicable, is contained in the Companys Information Circular for its most
recent annual general meeting of securityholders that involved the election of
directors.

Additional financial information is provided in the Companys
consolidated financial statements and management's discussion and analysis for
the 12 months ended September 30, 2005.

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- 42 -

SCHEDULE "A" - AUDIT COMMITTEE CHARTER

Audit Committee Charter(Adopted Dec. 9, 2002,
Amended Feb. 9, 2005)A.. Audit Committee Purpose

The Board of Directors of the Corporation has an overall
responsibility to oversee the affairs of the Company for the benefit of the
shareholders. The Audit Committee is appointed by the Board to assist the Board
in fulfilling its oversight responsibilities. The Audit Committees primary
duties and responsibilities are to:

| | • | Ensure the effectiveness of the overall process of
      identifying and addressing principal business risk and the adequacy of the
      related disclosure      
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | • | Monitor the integrity of the Companys financial
      reporting process and systems of internal controls regarding finance,
      accounting and legal compliance
|
| | • | Monitor the independence of the and performance of the
      Companys independent auditors                                                                       
| | • | Provide an avenue of communications among the independent
      auditors, management and the Board of Directors                                                   
|
| | • | Encourage adherence to, and continuous improvement of,
      the Companys polices, procedures and practices at all levels                                        
|

The Audit Committee has the authority to conduct any
investigation appropriate to fulfilling its responsibilities, and it has direct
access to the independent auditors as well as anyone in the organization. The
Audit Committee has the ability to retain, at the Companys expense, special
legal, accounting, or other consultants or experts it deems necessary in the
performance of its duties.

B. Audit Committee Composition and Meetings

Audit Committee members shall meet the requirements of the TSX.
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent non-executive directors, free
from any relationship that would interfere with the exercise of his or her
independent judgement. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the Committee shall
have accounting or related financial expertise.

Audit Committee members shall be appointed by the Board. If the
Audit Committee Chair is not designated or present, the members of the Committee
may designate a Chair by majority vote of the Committee membership.

The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall prepare
and/or approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management, the
independent auditors and as a committee to discuss any matters that the
Committee or each of these groups believe should be discussed. In addition, the
Committee, or at least its Chair, should communicate with management quarterly
to review the Companys financial statements and significant findings based upon
the Auditors limited review procedures, if any.

C. Audit Committee Responsibilities and Duties - Detail

Review Procedures

| | 1. | Review the Companys annual audited financial statements
      and management discussion and analysis
| | -- | -----------------------------------------------------------------------------------------------------

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- 43 -

| |    | prior to filing or distribution. Review should include
      discussion with management and independent auditors of significant issues
      regarding accounting principles, practices and judgements.                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 2. | In consultation with management and the independent
      auditors, consider the integrity of the Companys financial reporting
      processes and controls. Discuss significant financial risk exposures and
      the steps management has taken to monitor, control and report such
      exposures. Review significant findings prepared by the independent
      auditors together with managements responses.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 3. | Review with financial management the Companys quarterly
      financial results and management discussion and analysis prior to the
      release of earnings. Discuss any significant changes to the Companys
      accounting principles and any items required to be communicated by the
      independent auditors.                                                                                            

Independent Auditors

| | 4. | The independent auditors are accountable directly to the
      Audit Committee. The Audit Committee shall review the independence and
      performance of the auditors and annually recommend to the Board of
      Directors the appointment of the independent auditors or approve any
      discharge of auditors when circumstances warrant.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                  
| | 5. | Approve the fees and other significant compensation to be
      paid to the independent auditors, and pre- approve any non-audit services
      that the auditor may provide.                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                  
| | 6. | On an annual basis, the Committee should review and
      discuss with the independent auditors all significant relationships they
      have with the Company that could impair the auditors independence.                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                  
| | 7. | Review the independent auditors audit plan and engagement
      letter.                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                  
| | 8. | Prior to releasing the year-end earnings, discuss the
      results of the audit with the independent auditors.                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                  
| | 9. | Consider the independent auditors judgements about the
      quality and appropriateness of the Companys accounting principles as
      applied in its financial reporting.                                                                                                                                                                    

Other Audit Committee Responsibilities

| | 10. | On at least an annual basis, review with the Companys
      counsel, any legal matters that could have a significant impact on the
      organizations financial statements, the Companys compliance with
      applicable laws and regulations, and inquiries received from regulators or
      governmental agencies.                        
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                   
| | 11. | Annually prepare a report to shareholders to be included
      in the Companys annual information circular. The Chairman of the
      Committee will review all disclosure documents to be issued by the Company
      relating to financial matters, including news releases, annual information
      forms and information circulars.         
| |     |                                                                                                                                                                                                                                                                                                                                                   
| | 12. | Establish procedures for the receipt, retention and
      treatment of complaints received by the issuer regarding accounting,
      internal accounting controls, or auditing matters, including the
      confidential, anonymous submission by employees of the issuer of concerns
      regarding questionable accounting or auditing matters.

---