United
States


Securities
and Exchange Commission


Washington,
D.C. 20549





Form
20-F/A


Amendment
No. 1





[  ]           Registration
Statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of
1934


or





[X]           Annual
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934


For
the fiscal year ended December 31, 2008


or





[  ]           Transition
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934


For the
transition period from _________ to  _________


or





[  ]           Shell
Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934





Commission
file number: 001-32558





KOBEX
MINERALS INC.


(formerly IMA Exploration
Inc.)


(Exact
name of Registrant as specified in its charter)





KOBEX
MINERALS INC.


(Translation
of Registrant’s name into English)





British
Columbia


(Jurisdiction
of incorporation or organization)





1700 -700 West Pender Street,
Vancouver, British Columbia, Canada V6C 1G8


(Address
of principal executive offices)





Samuel Yik, 604-688-9368,syik@kobexminerals.com


1700
-700 West Pender Street, Vancouver, British Columbia, Canada V6C
1G8


(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact
Person)





Securities
registered or to be registered pursuant to Section 12(b) of the
Act.  None





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


Common
Shares, no par value


(Title of
Class)





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


Not
Applicable


(Title of
Class)





Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the period covered by the annual report.


52,132,064
Common Shares as of the close of the period covered by the report December 31,
2008





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes
           No  X


1


If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.


Yes
           No  X





Note -
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes X                      No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):


Large
accelerated
filer  _______                                                                Accelerated
filer
                                Non-accelerated
filer  X





Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:





U.S.
GAAP  _____                                           International
Financial Reporting Standards as issuedOther __X___


By the International Accounting
Standards Board   _____





If
“Other” has be checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow.





Item 17
X                                Item
18 ______





If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act)   Yes
     No
X










2























Table of
Contents




EXPLANATORY
      NOTE:
            4Item
      3.  Key Information.
            4Item
      4.   Information on the Company.
            4Item
      17.  Financial Statements.
            5Item
      19.  Exhibits.
            5






3


EXPLANATORY
NOTE:




We hereby
amend our Annual Report, on Form 20-F, filed on April 8, 2009, by this Amendment
No. 1 on Form 20-F/A, in response to a request from the Securities and Exchange
Commission to clarify or amend the Company’s financial statements and related
disclosures in the Company’s 20-F for the year ended December 31,
2008.






We amend
our 20-F for the following purposes:






1.
            amendment
      to Item 3. Key Information, Selected Financial Information table to revise
      the description of the line items in the Consolidated Statements of Cash
      Flows table so that the parentheses appropriately represent “used” cash
      resources;






2.
            amendment
      to Item 4. Information on the Company, we have included the map
      of  our Island Copper Project;
and






3.
            inclusion
      of  the “signed” audit report of our auditors for the fiscal
      year ended December 31, 2008.






We are
also updating Exhibits 12.1, 12.2, 13.1, 13.2 and 15.1.






This
Amendment does not amend or restate any information contained in our 20-F filed
on April 8, 2009, other than as noted in this Explanatory Note. This Amendment
does not purport to update any recent events or developments to the date of the
original filing on April 8, 2009.










Item 3.  Key
Information.





Selected
Financial Data





2008
            
            
            Restated
              2007
            
            
            Restated
              2006
            
            
            Restated
              2005
            
            
            Restated
              2004Consolidated
      statements of cash flowsOperating
      ActivitiesCash
      generated (used) per Canadian and US GAAP
            
            $
            15,419
            
            
            $
            (1,954
            )
            
            $
            (8,277
            )
            
            $
            (10,875
            )
            
            $
            (7,410
            )Investing
      ActivitiesCash
      generated (used) per Canadian and US GAAP
            
            $
            (15,500
            )
            
            $
            1,687
            
            
            $
            (920
            )
            
            $
            (3,233
            )
            
            $
            (1,561
            )Financing
      activitiesCash
      provided per Canadian and US GAAP
            
            
            -
            
            
            $
            60
            
            
            $
            9,437
            
            
            $
            13,478
            
            
            $
            9,297











Item
4.   Information on the Company.





Principal
Properties





Canada





Island Copper
Project





The
following map identifies the location of the Island Copper
Project:


4








Item
17.  Financial Statements.


PageAudited
      Financial Statements for the Years
              Ended
      December 31, 2008, 2007 and 2006
            
            F-1
      – F-27








Item
19.  Exhibits.





(a)
            Financial
      Statements





Audited Financial Statements for the
Years Ended December 31, 2008, 2007 and 2006





(b)
            List
      of Exhibits.








Exhibit Number
            Description12.1
            Certification
      of Alfred Hills Pursuant to Rule 13a-14(a)12.2
            Certification
      of Samuel Yik Pursuant to Rule 13a-14(a)13.1
            Certification
      of Alfred Hills Pursuant to 18 U.S.C. Section 135013.2
            Certification
      of Samuel Yik Pursuant to 18 U.S.C. Section 135015.1
            Consent
      Independent Registered Public Accounting Firm





5








SIGNATURES





The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F/A and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.






















KOBEX MINERALS
      INC.Dated:
      December
      1,  2009
            /s/ Alfred
      HillsAlfred
      Hills,President, Chief
      Executive Officer, and Director




6











IMA
Exploration Inc.


(An
Exploration Stage Company)





CONSOLIDATED
FINANCIAL STATEMENTS


FOR THE
YEARS ENDED


DECEMBER
31, 2008, 2007 AND 2006


(Expressed
in Canadian Dollars)



























































Management’s
Responsibility for Financial Reporting





The
accompanying consolidated financial statements of the Company have been prepared
by management in accordance with accounting principles generally accepted in
Canada and reconciled to accounting principles generally accepted in the United
States as set out in Note 15 and contain estimates based on management’s
judgment.  Management maintains an appropriate system of internal
controls to provide reasonable assurance that transactions are authorized,
assets safeguarded, and proper records maintained.





The Audit
Committee of the Board of Directors has met with the Company’s independent
auditors to review the scope and results of the annual audit, and to review the
financial statements and related financial reporting matters prior to submitting
the financial statements to the Board for approval.





The
Company’s independent auditors, PricewaterhouseCoopers LLP, are appointed by the
shareholders to conduct an audit in accordance with generally accepted auditing
standards in Canada and the Public Company Accounting Oversight Board (United
States), and their report follows.








“Joseph
      Grosso”
            “Mike
  Clark”Joseph
    Grosso
            Mike
  ClarkPresident
            Chief Financial
      Officer





March 27,
2009











Independent
Auditors’ Report





To
the Shareholders of


IMA
Exploration Inc.





We have
audited the consolidated balance sheets of IMA Exploration Inc. (the
“Company”) as at December 31, 2008 and 2007 and the consolidated statements of
operations, comprehensive income (loss) and deficit, cash flows, and changes in
shareholders’ equity for each of the years in the three year period ended
December 31, 2008. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.





We
conducted our audits in accordance with Canadian generally accepted auditing
standards and the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.





In our
opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2008 and 2007
and the results of its operations and its cash flows for each of the years in
the three year period ended December 31, 2008 in accordance with Canadian
generally accepted accounting principles.








(signed)
“PricewaterhouseCoopers LLP”








Chartered
Accountants





Vancouver,
BC


March 24,
2009








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





In the
United States, reporting standards for auditors require the addition of an
explanatory paragraph (following the opinion paragraph) when there is a change
in accounting principles that has a material effect on the comparability of the
Company's financial statements, such as the change described in note 2 to
the financial statements. Our report to the shareholders dated March 24, 2009 is
expressed in accordance with Canadian reporting standards which do not require a
reference to such a change in accounting principles in the auditors’ report when
the change is properly accounted for and adequately disclosed in the financial
statements.








(signed)
“PricewaterhouseCoopers LLP”








Chartered
Accountants





Vancouver,
BC


March 24,
2009








IMA
EXPLORATION INC.


(An
Exploration Stage Company)


CONSOLIDATED
BALANCE SHEETS


AS
AT DECEMBER 31, 2008 AND 2007


(Expressed
in Canadian Dollars)





2008
              $
            
            
            
            2007
              $A
      S S E T SCURRENT
      ASSETSCash
            
            
            102,706
            
            
            
            183,628Short-term
      investments (Note 5)
            
            
            21,347,769
            
            
            
            6,813,462Marketable
      securities and investment (Note 6)
            
            
            120,869
            
            
            
            -Other
      receivables and prepaids (Note 10)
            
            
            190,007
            
            
            
            422,400Navidad
      interest (Notes 2 and 3)
            
            
            -
            
            
            
            18,500,00021,761,351
            
            
            
            25,919,490DEPOSIT(Note
      10)
            
            
            205,000
            
            
            
            205,000INVESTMENT(Note
      6)
            
            
            718,248
            
            
            
            -22,684,599
            
            
            
            26,124,490L
      I A B I L I T I E SCURRENT
      LIABILITIESAccounts
      payable and accrued liabilities (Note 10)
            
            
            193,343
            
            
            
            105,724TERMINATION BENEFIT(Note
      10)
            
            
            711,500
            
            
            
            -904,843
            
            
            
            105,724S
      H A R E H O L D E R S ' E Q U I T YSHARE CAPITAL (Note
      8)
            
            
            58,753,501
            
            
            
            58,753,501WARRANTS(Note
      8)
            
            
            -
            
            
            
            1,281,946CONTRIBUTED SURPLUS(Note 9)
            
            
            7,502,258
            
            
            
            6,157,412DEFICIT
            
            
            (44,476,003
            )
            
            
            (40,174,093
            )21,779,756
            
            
            
            26,018,76622,684,599
            
            
            
            26,124,490





NATURE OF OPERATIONS (Note
1)


NAVIDAD INTEREST(Notes 2 and
3)


COMMITMENTS(Note
10)


SUBSEQUENT EVENT(Note
7)





APPROVED
      BY THE BOARD“David Horton”,
      Director“Robert Stuart Angus”,
      Director


The
accompanying notes are an integral part of these consolidated financial
statements.
 F-4


IMA
EXPLORATION INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF OPERATIONS, COMPREHENSIVE INCOME (LOSS) AND DEFICIT


FOR
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006


(Expressed
in Canadian Dollars)





2008
              $
            
            
            
            2007
              $
            
            
            
            2006
              $EXPENSES
            
            
            
            
            
            Restated
      – Note 2
            
            
            Restated
      – Note 2Administrative
      and management services
            
            
            268,882
            
            
            
            209,201
            
            
            
            461,553Corporate
      development and investor relations
            
            
            183,784
            
            
            
            167,817
            
            
            
            328,779Exploration  (Note
      7)
            
            
            1,930,325
            
            
            
            99,589
            
            
            
            4,678,096Consulting
            
            
            232,000
            
            
            
            -
            
            
            
            -Office
      and sundry
            
            
            245,894
            
            
            
            238,220
            
            
            
            181,913Professional
      fees
            
            
            234,382
            
            
            
            1,022,321
            
            
            
            1,124,144Rent,
      parking and storage
            
            
            108,658
            
            
            
            49,023
            
            
            
            96,263Salaries
      and employee benefits
            
            
            350,792
            
            
            
            244,337
            
            
            
            652,530Stock-based
      compensation (Note 8)
            
            
            62,900
            
            
            
            34,421
            
            
            
            393,120Telephone
      and utilities
            
            
            20,347
            
            
            
            12,053
            
            
            
            17,432Transfer
      agent and regulatory fees
            
            
            70,731
            
            
            
            80,122
            
            
            
            103,457Travel
      and accommodation
            
            
            69,690
            
            
            
            35,230
            
            
            
            93,392Navidad
      holding costs (Note 3)
            
            
            -
            
            
            
            109,666
            
            
            
            312,349LOSS
      BEFORE OTHER ITEMS
            
            
            (3,778,385
            )
            
            
            (2,302,000
            )
            
            
            (8,443,028
            )OTHER
      INCOME (EXPENSE)Foreign
      exchange loss
            
            
            (14,758
            )
            
            
            (8,324
            )
            
            
            (2,865
            )Interest
      income
            
            
            863,416
            
            
            
            675,156
            
            
            
            373,009Other
      than temporary loss on marketable securities (Note 6)
            
            
            (474,810
            )
            
            
            -
            
            
            
            -Loss
      from equity investment (Note 6)
            
            
            (68,174
            )
            
            
            -
            
            
            
            -Loss
      on held-for-trading investment (Note 6)
            
            
            (117,699
            )
            
            
            -
            
            
            
            -Termination
      benefit (Note 10)
            
            
            (711,500
            )
            
            
            -
            
            
            
            -Navidad
      recovery (Note 3)
            
            
            -
            
            
            
            18,314,000
            
            
            
            -(523,525
            )
            
            
            18,980,832
            
            
            
            370,144INCOME
      (LOSS) AND COMPREHENSIVE (INCOME) LOSS FOR THE YEAR
            
            
            (4,301,910
            )
            
            
            16,678,832
            
            
            
            (8,072,884
            )DEFICIT
      - BEGINNING OF YEAR
            
            
            (40,174,093
            )
            
            
            (56,852,925
            )
            
            
            (48,780,041
            )DEFICIT
      - END OF YEAR
            
            
            (44,476,003
            )
            
            
            (40,174,093
            )
            
            
            (56,852,925
            )BASIC AND DILUTED INCOME (LOSS)
      PER COMMON SHARE
            
            $
            (0.08
            )
            
            $
            0.32
            
            
            $
            (0.16
            )WEIGHTED
      AVERAGE NUMBER OF
              COMMON SHARES
      OUTSTANDING
            
            
            52,132,064
            
            
            
            52,099,787
            
            
            
            51,263,575





The
accompanying notes are an integral part of these consolidated financial
statements.
 F-5


IMA
EXPLORATION INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006


(Expressed
in Canadian Dollars)








2008

              $
            
            
            
            2007

              $
            
            
            
            2006

              $CASH
      PROVIDED FROM (USED FOR)
            
            
            
            
            
            Restated
      – Note 2
            
            
            Restated
      – Note 2OPERATING
      ACTIVITIESIncome
      (loss) for the year
            
            
            (4,301,910
            )
            
            
            16,678,832
            
            
            
            (8,072,884
            )Items
      not affecting cashAccrued
      interest in short-term investments
            
            
            (534,307
            )
            
            
            -
            
            
            
            -Stock-based
      compensation
            
            
            62,900
            
            
            
            34,421
            
            
            
            393,120Loss
      on marketable securities (Note 6)
            
            
            474,810
            
            
            
            -
            
            
            
            -Loss
      from equity investment (Note 6)
            
            
            68,174
            
            
            
            -
            
            
            
            -Loss
      on held-for-trading investment
            
            
            117,699
            
            
            
            -
            
            
            
            -Receipt
      of Navidad interest
            
            
            18,500,000
            
            
            
            -
            
            
            
            -Termination
      benefit (Note 10)
            
            
            711,500
            
            
            
            -
            
            
            
            -Navidad
      recovery (Note 3)
            
            
            -
            
            
            
            (18,314,000
            )
            
            
            -15,098,866
            
            
            
            (1,600,747
            )
            
            
            (7,679,764
            )Change
      in non-cash working capital balances
            
            
            320,012
            
            
            
            (353,083
            )
            
            
            (596,912
            )15,418,878
            
            
            
            (1,953,830
            )
            
            
            (8,276,676
            )INVESTING
      ACTIVITIESPurchase
      of marketable securities and investments
            
            
            (1,499,800
            )
            
            
            -
            
            
            
            -Purchase/proceeds
      on disposal of in short-term investments
            
            
            (14,000,000
            )
            
            
            1,686,538
            
            
            
            (920,000
            )(15,499,800
            )
            
            
            1,686,538
            
            
            
            (920,000
            )FINANCING
      ACTIVITIESIssuance
      of common shares
            
            
            -
            
            
            
            59,500
            
            
            
            10,308,450Share
      issuance costs
            
            
            -
            
            
            
            -
            
            
            
            (871,749
            )-
            
            
            
            59,500
            
            
            
            9,436,701INCREASE
      (DECREASE) IN CASH
            
            
            (80,922
            )
            
            
            (207,792
            )
            
            
            240,025CASH
      - BEGINNING OF YEAR
            
            
            183,628
            
            
            
            391,420
            
            
            
            151,395CASH
      - END OF YEAR
            
            
            102,706
            
            
            
            183,628
            
            
            
            391,420








SUPPLEMENTARY CASH FLOW
INFORMATION (Note 16)





The
accompanying notes are an integral part of these consolidated financial
statements.
 F-6


IMA
EXPLORATION INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY




FOR
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006




(Expressed
in Canadian Dollars)







2008

              $
            
            
            
            2007

              $
            
            
            
            2006

              $Restated
      – Note 2
            
            
            Restated
      – Note 2SHARE
      CAPITALBalance
      at beginning of year
            
            
            58,753,501
            
            
            
            58,664,727
            
            
            
            50,414,672Private
      placements
            
            
            -
            
            
            
            -
            
            
            
            10,027,500Warrant
      valuation
            
            
            -
            
            
            
            -
            
            
            
            (1,298,981
            )Exercise
      of options
            
            
            -
            
            
            
            59,500
            
            
            
            280,950Contributed
      surplus reallocated on the exercise of options
            
            
            -
            
            
            
            29,274
            
            
            
            95,300Share
      issue costs
            
            
            -
            
            
            
            -
            
            
            
            (854,714
            )Balance
      at end of year
            
            
            58,753,501
            
            
            
            58,753,501
            
            
            
            58,664,727WARRANTSBalance
      at beginning of year
            
            
            1,281,946
            
            
            
            1,281,946
            
            
            
            -Warrant
      valuation from private placement warrants granted
            
            
            -
            
            
            
            -
            
            
            
            1,298,981Warrant
      valuation from agent’s warrants granted
            
            
            -
            
            
            
            -
            
            
            
            110,164Warrant
      issue costs
            
            
            -
            
            
            
            -
            
            
            
            (127,199
            )Contributed
      surplus reallocated on expiry of warrants
            
            
            (1,281,946
            )
            
            
            -
            
            
            
            -Balance
      at end of year
            
            
            -
            
            
            
            1,281,946
            
            
            
            1,281,946CONTRIBUTED
      SURPLUSBalance
      at beginning of year
            
            
            6,157,412
            
            
            
            6,152,265
            
            
            
            5,854,445Contributed
      surplus as a result of stock options granted
            
            
            62,900
            
            
            
            34,421
            
            
            
            393,120Contributed
      surplus reallocated on expiry of warrants
            
            
            1,281,946
            
            
            
            -
            
            
            
            -Contributed
      surplus reallocated on the exercise of stock options
            
            
            -
            
            
            
            (29,274
            )
            
            
            (95,300
            )Balance
      at end of year
            
            
            7,502,258
            
            
            
            6,157,412
            
            
            
            6,152,265DEFICITBalance
      at beginning of year
            
            
            (40,174,093
            )
            
            
            (56,852,925
            )
            
            
            (48,780,041
            )Income
      (loss) for the year
            
            
            (4,301,910
            )
            
            
            16,678,832
            
            
            
            (8,072,884
            )Balance
      at end of year
            
            
            (44,476,003
            )
            
            
            (40,174,093
            )
            
            
            (56,852,925
            )TOTAL
      SHAREHOLDERS’ EQUITY
            
            
            21,779,756
            
            
            
            26,018,766
            
            
            
            9,246,013











The
accompanying notes are an integral part of these consolidated financial
statements.
 F-7


1.           NATURE
OF OPERATIONS





IMA
Exploration Inc. (the “Company”) is a natural resource company engaged in the
business of acquisition, exploration and development of mineral
properties.  The Company presently has no property interests with
proven or probable reserves and on the basis of information to date, it has not
yet determined whether these properties contain economically recoverable ore
reserves.  Consequently the Company considers itself to be an
exploration stage company.








2.
            CHANGE
      IN ACCOUNTING POLICY





During
the year ended December 31, 2008, the Company retrospectively changed its
accounting policy for exploration expenditures to more appropriately align
itself with policies applied by other comparable companies at a similar stage in
the mining industry. Prior to the year ended December 31, 2008, the Company
capitalized all such costs to mineral properties held directly or through an
investment and only wrote down capitalized costs when the property was abandoned
or if the capitalized costs were not considered to be economically
recoverable.





Exploration
expenditures are now charged to earnings as they are incurred until the property
reaches development stage. All direct costs related to the acquisition of
resource property interests will continue to be capitalized. Development
expenditures incurred subsequent to a development decision, and to increase or
to extend the life of existing production, are capitalized and will be amortized
on the unit-of-production method based upon estimated proven and probable
reserves.





The
Company has accounted for this change in accounting policy on a retroactive
basis. The impact of this change on the previously reported December 31, 2007
and 2006 consolidated financial statements is as follows:





As
      previously reported
              $
            
            
            Restatement
              $
            
            
            As
      stated
              $Navidad
      recovery for the year ended December 31, 2007
            
            
            550,479
            
            
            
            17,763,521
            
            
            
            18,314,000Income
      (loss) for the year ended December 31, 2007
            
            
            (1,084,689
            )
            
            
            17,763,521
            
            
            
            16,678,832Loss
      per share for the year ended December 31, 2007
            
            
            (0.02
            )
            
            
            0.34
            
            
            
            0.32Navidad
      interest as at December 31, 2006
            
            
            17,949,521
            
            
            
            (17,763,521
            )
            
            
            186,000Exploration
      expense for the year ended December 31, 2006
            
            
            (186,572
            )
            
            
            (4,491,524
            )
            
            
            (4,678,096
            )Income
      (loss) for the year ended December 31, 2006
            
            
            (3,581,360
            )
            
            
            (4,491,524
            )
            
            
            (8,072,884
            )Loss
      per share for the year ended December 31, 2006
            
            
            (0.07
            )
            
            
            (0.09
            )
            
            
            (0.16
            )Deficit
      at December 31, 2006
            
            
            (39,089,404
            )
            
            
            (17,763,521
            )
            
            
            (56,852,925
            )







F-8





3.           NAVIDAD
INTEREST





On March
5, 2004, Aquiline Resources Inc. (“Aquiline”), through its subsidiary, Minera
Aquiline Argentina SA, filed a claim in the Supreme Court of British Columbia
against the Company seeking a constructive trust over the Navidad properties and
damages.  On July 14, 2006 the court released its judgment on the
claim.  The Company was not successful in its defense and the court
found in Aquiline’s favour.





The Order reads in part:





“(a)
            that
      Inversiones Mineras Argentinas SA (“IMA SA”) transfer the Navidad Claims
      and any assets related thereto to Minera Aquiline or its nominee within 60
      days of this order;


(b)
            that
      IMA take any and all steps required to cause IMA SA to comply with the
      terms of this order;


(c)
            that
      the transfer of the Navidad Claims and any assets related thereto is
      subject to the payment to IMA SA of all reasonable amounts expended by IMA
      SA for the acquisition and development of the Navidad Claims to date;
      and


(d)
            any
      accounting necessary to determine the reasonableness of the expenditures
      referred to in (c) above shall be by reference to the Registrar of this
      court.”





On
October 18, 2006, the Company and Aquiline reached a definitive agreement for
the orderly conduct of the Navidad Project pending the determination of the
appeal by the Company against the judgment of the trial court.  The
parties have agreed that the transactions outlined in the agreement were in
satisfaction of the Order referenced above.  The principal terms and
conditions of the agreement are as follows:





(a)
            control
      of the Navidad Project will be transferred to Aquiline in trust for the
      ultimately successful party in the
appeal;





(b)
            the
      Company and Aquiline have agreed to the costs spent to date developing the
      Navidad Project in the amount of $18,500,000. Upon transfer of control of
      the Navidad Project, Aquiline paid $7,500,000 of the costs into trust and
      the balance will be expended by Aquiline in developing the Navidad Project
      during the period of the appeal and secured under the terms of the trust
      conditions;





(c)
            in
      the event that the Company is unsuccessful on appeal, the Company will be
      paid such $18,500,000 amount.





The
effective date of the transfer of the Navidad project was November 16,
2006.





The
Company’s appeal of this judgment was heard by the British Columbia Court of
Appeal between April 10 and April 12, 2007.  The Court of Appeal
dismissed the Company’s appeal and released their reasons for judgment on June
7, 2007.





The
Company filed an application for leave to appeal to the Supreme Court of Canada
in October 2007.  On December 20, 2007 the Supreme Court of Canada
denied the Company’s appeal.  This brought the lawsuit to a
close.  The Navidad property has been transferred to
Aquiline.





F-9





3.           NAVIDAD INTEREST(continued)




As at
December 31, 2007, the Company recorded a Navidad interest balance of
$18,500,000, the components of which are as follows:




$Mineral
      properties (i)
            
            
            17,763,521Navidad
      recovery (ii)
            
            
            550,47918,314,000Marketable
      securities (iii)
            
            
            186,000Navidad
      interest
            
            
            18,500,000





(i)
            The
      mineral property costs represent the carrying value of the acquisition
      costs and all exploration costs the Company had incurred in the
      development of the Navidad project.





(ii)
            The
      Company has recorded an additional recovery of $550,479 to bring the total
      Navidad interest amount recoverable to $18,500,000 pursuant to
      IPDA.





(iii)
            Marketable
      securities represents the carrying value of the common shares of publicly
      traded companies the Company received as partial consideration for
      entering into option and sale agreements for certain of its non-core
      mineral property holdings relating to the Navidad
      Project.  Accordingly, these marketable securities were subject
      to transfer to Aquiline in relation to the July 2006 court
      order.





The
      Company received the $7.5 million held in trust on January 8, 2008 plus
      interest that had accrued in the amount of $341,380.  The
      balance of $11 million was received on February 11,
  2008.





The
      Company expensed Navidad holding costs of $109,666 in the year ended
      December 31, 2007.  These are costs the Company incurred in
      order to maintain basic operations in Argentina subsequent to the transfer
      of control of the Navidad project to Aquiline under the terms of theIPDA.








4.
            SIGNIFICANT
      ACCOUNTING POLICIES





Basis
of Presentation





These
consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (“Canadian GAAP”).  The
significant measurement differences between those principles and those that
would be applied under United States generally accepted accounting principles
(“US GAAP”) as they affect the Company are disclosed in Note 15.





Use
of Estimates





The
preparation of financial statements in conformity with Canadian GAAP requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of revenues and
expenses during the period.  Significant areas requiring the use of
management estimates include the assumptions used in the determination of the
fair value of stock based compensation and other than temporary impairments for
investments.  Actual results may differ from these
estimates.











F-10





4.
            SIGNIFICANT ACCOUNTING POLICIES(continued)





Principles
of Consolidation





These
consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned.  All inter-company
transactions and balances have been eliminated.  The Company also
equity accounts an entity that is subject to control on basis other than
ownership of a majority of the voting interests (note 6).





Cash and Cash Equivalents





Cash and
cash equivalents include cash and money market investments, maturing less than 3
months from the date of initial investment.   Cash equivalents
are stated at cost, which is approximates fair value.





Short-term
Investments





Short-term
investments include money market investments maturing less than 12 months from
the date of initial investment.





Mineral
Properties





During
the year ended December 31, 2008, the Company changed its accounting policy
relating to mineral property exploration expenditures and it now expenses
exploration expenditures when incurred (see note2).





When a
property is placed in commercial production, acquisition costs will be depleted
using the units-of-production method.  Management of the Company
periodically reviews the recoverability of the capitalized mineral
properties.  Management takes into consideration various information
including, but not limited to, results of exploration activities conducted to
date, estimated future metal prices, and reports and opinions of outside
geologists, mine engineers and consultants.  When it is determined
that a project or property will be abandoned then the costs are written-off, or
if its carrying value has been impaired, then it is written down to fair
value.





The
Company accounts for foreign value added taxes paid as expenses when
incurred.  The recovery of these taxes will commence on the beginning
of foreign commercial operations.  Should these amounts be recovered
they would be treated as a recovery of exploration expenses.





Although
the Company has taken steps to verify title to mineral properties in which it
has an interest, these procedures do not guarantee the Company's
title.  Such properties may be subject to prior agreements or
transfers and title may be affected by undetected defects.





Asset
Retirement Obligations





Asset
retirement obligations are recognized when a legal or constructive obligation
arises.  This liability is recognized at the fair value of the asset
retirement obligation.  When the liability is initially recorded the
Company capitalizes the cost by increasing the carrying amount of the related
long-lived assets.  Over time the liability is accreted to its present
value each period, and the capitalized cost is amortized on the same basis as
the related asset.  Upon settlement of theliability, the Company may
incur a gain or loss.  As at December 31, 2008 the Company does not
have any asset retirement obligations.














F-11





4.
            SIGNIFICANT ACCOUNTING POLICIES(continued)





Impairment
of Long-Lived Assets





Long-lived
assets are reviewed for impairment when events or circumstances suggest their
carrying value has become impaired.  Management considers assets to be
impaired if the carrying value exceeds the estimated undiscounted future
projected cash flows to result from the use of the asset and its eventual
disposition.  If impairment is deemed to exist, the assets will be
written down to fair value.  Fair value is generally determined using
a discounted cash flow analysis.





Translation
of Foreign Currencies





The
Company’s foreign operations are integrated and are translated using the
temporal method.  Under this method, the Company translates monetary
assets and liabilities denominated in foreign currencies at period-end
rates.  Non-monetary assets and liabilities are translated at
historical rates.  Revenues and expenses are translated at average
rates in effect during the period except for depreciation and amortization which
are translated at historical rates.  The resulting gains or losses are
reflected in operating results in the period of translation.





Income
Taxes





The
Company uses the asset and liability method of accounting for future income
taxes.  Under this method of tax allocation, future income tax
liabilities and assets are recognized for the estimated tax consequences
attributable to differences between the amounts reported in the consolidated
financial statements and their respective tax bases, using substantively enacted
tax rates and laws that are expected to be in effect in the periods in which the
future income tax assets or liabilities are expected to be settled or
realized.  The effect of a change in income tax rates on future income
tax liabilities and assets is recognized in income in the period that the change
occurs.  Potential future income tax assets are not recognized to the
extent that they are not considered more likely than not to be
realized.





Investment
tax credits





The
Company is eligible to receive investment tax credits (“ITCs”) related to
certain of its mineral property expenditures. On a cash basis, the ITCs are
accounted for as a reduction in the cost of mineral properties or exploration
costs in the period when related expenditures are incurred.





Loss
Per Share





Loss per
share is calculated based on the weighted average number of common shares issued
and outstanding during the year.  In years in which a loss is
incurred, the effect of potential issuances of shares under options and warrants
would be anti-dilutive and therefore basic and diluted losses per share are the
same.  Information regarding securities that could potentially dilute
basic earnings per share in the future is presented in Note 8.





Stock-Based
Compensation





The
Company has an employee stock option plan.  The Company recognizes an
expense or addition to exploration expenditures arising from stock options
granted using the fair value method.  The fair value of option grants
is established at the date of grant using a Black Scholes option pricing model
and the expense is
recognized over the option vesting period.











F-12





4.
            SIGNIFICANT ACCOUNTING POLICIES(continued)





Financial
Instruments





Section
      3855, Financial
      Instruments – Recognition and Measurementand Section 3861, FinancialInstruments – Disclosure and
      Presentation,prescribe the criteria for recognition and
      presentation of financial instruments on the balance sheet and the
      measurement of financial instruments related to those classifications.
      These sections also address how financial instruments are measured
      subsequent to initial recognition and how the gains and losses are
      recognized.





The
Company is required to designate its financial instruments into one of the
following five categories: held for trading; available-for-sale; held to
maturity; loans and receivables; and other financial liabilities. All financial
instruments are to be initially measured at fair value. Financial instruments
classified as held for trading or available-for-sale are subsequently measured
at fair value with any change in fair value recorded in net earnings and other
comprehensive income, respectively. All other financial instruments are
subsequently measured at amortized cost.





The
Company has designated its financial instruments as follows:




(i)
            Cash
      and short-term investments are classified as “Available-for-sale”.




(ii)
            Amounts
      receivable and deposits are classified as “Loans and Receivables”.These financial assets are recorded at values that approximate
      their amortized cost using the effective interest
  method.




(iii)
            Accounts
      payable and accrued liabilities are classified as “Other Financial
      Liabilities”. These financial liabilities are recorded at values
      that approximate their amortized cost using the effective interest
      method.







Comprehensive
Income





Section
1530, Comprehensive Income,introduced the financial statement “Statement of Comprehensive
Income” effective January 1, 2007 and provides guidance for the reporting and
display of other comprehensive income. Comprehensive income represents the
change in equity of an enterprise during a period from transactions and other
events arising from non-owner sources including gains and losses arising on
translation of self-sustaining foreign operations, gains and losses from changes
in fair value of available for sale financial assets and changes in the fair
value of the effective portion of cash flow hedging instruments.





General Standards on
Financial Statement Presentation





CICA Handbook Section 1400,General Standards
on Financial Statement Presentation, has been amended


to include requirements to assess and
disclose a company’s ability to continue as a going concern.
The


changes
are effective for interim and annual financial statements beginning January 1,
2008. The adoption of this standard did not have an effect on the Company for
the year ended December 31, 2008.





Accounting
Changes





Effective
January 1, 2007, the Company adopted the revised CICA Handbook Section 1506,
Accounting Changes,
which requires that: (a) a voluntary change in accounting principles can be made
if, and only if, the changes result in more reliable and relevant information,
(b) changes in accounting policies are accompanied with disclosures of prior
period amounts and justification for the change and (c) for changes in
estimates, the nature and amount of the change should be disclosed (see note
2).


F-13





4.
            SIGNIFICANT ACCOUNTING POLICIES(continued)





Capital
Disclosures





CICA Handbook Section 1535,Capital
Disclosures, establishes
standards for disclosing information about


the company's capital and how it is
managed. Under this standard the Company is required to
disclose


the
following, based on the information provided internally to the company's key
management personnel:





(i)
            qualitative information about its
      objectives, policies and processes for managing
      capital.


(ii)
            summary quantitative data about
      what it manages as capital.(iii)
            whether during the period it
      complied with any externally imposed capital requirements to which
      it is
      subject.(iv)
            when the company has not complied
      with such externally imposed capital requirements, the consequences of such
      non-compliance.











This
standard was effective for interim and annual financial statements beginning on
January 1, 2008. Disclosures required by this standard are included in Note
11.





Financial
Instruments Disclosures





In
      March 2007, the CICA issued section 3862 Financial Instruments –
      Disclosures and Section 3863 Financial Instruments –
      Presentation, which together comprise a complete set of disclosure
      and presentation requirements that revised and
      enhanced  previous disclosure requirements.  Section 3862
      requires disclosure of additional detail by financial asset and liability
      categories.  Section 3863 establishes standards for presentation of
      financial instruments and non-financial derivatives.  The standard
      deals with the classification of financial instruments, from the
      perspective of the issuer, between liabilities and equity, the
      classification of related interest, dividends, losses and gains, and the
      circumstances in which financial assets and financial liabilities are
      offset. The Company adopted this section effective January 1, 2008.
      Disclosures required by these standards are included in note
      12.





Recent
Accounting Pronouncements





Goodwill
and Intangible Assets





CICA Handbook Section 3064,Goodwill and
Intangible Assets,
establishes revised standards for recognition, measurement, presentation
and disclosure of goodwill and intangible assets. Concurrent with the introduction of this standard, the
CICA withdrew EIC 27, Revenues and Expenses during the preoperating period. As a result of the withdrawal
of EIC 27, companies will no longer be able to defer costs and revenues incurred prior to
commercial production at new mine operations. The changes are effective for interim
and annual financial statements beginning January 1, 2009.






































5.
            SHORT-TERM
      INVESTMENTS


F-14





As at
December 31, 2008 and 2007, the Company held short-term investments comprised of
the following:


December
      31, 2008Maturity
            
            Principal
      and Accrued Interest
              $12
      month term deposit
              -
      4.15% annual interest rate ($6,800,000 principal amount)
            January
      6, 2009
            
            
            7,076,83912
      month term deposit
              -
      3.45% annual interest rate ($10,000,000 principal amount)
            February
      10, 2009
            
            
            10,305,30212
      month term deposit
              -
      3.45% annual interest rate ($1,000,000 principal amount)
            February
      10, 2009
            
            
            1,030,53012
      month term deposit
              -
      3.15% annual interest rate ($2,900,000 principal amount)
            August
      12, 2009
            
            
            2,935,09821,347,769





December
      31, 2007Maturity
            
            Principal
      and Accrued Interest
              $12
      month term deposit
              -
      4.45% annual interest rate ($6,700,000 principal)
            August
      13, 2008
            
            
            6,813,462





All term
deposits are redeemable in full or portion at the Company’s option without
penalty.  Interest is paid on amounts redeemed subsequent to 30 days
from the date of investment.








6.
            MARKETABLE
      SECURITIES AND INVESTMENT





For
      the year ended December 31, 2008Cost
              $
            
            
            Other
      than temporary loss
              $
            
            
            Loss
      on equity investment
              $
            
            
            Loss
      on held for trading investment
              $
            
            
            Carrying
      Value
              $Available-for-sale
      investmentPanthera
      Exploration Inc. (a)
            
            
            499,800
            
            
            
            (474,810
            )
            
            
            -
            
            
            
            -
            
            
            
            24,990Investment
      accounted for under the equity methodBlue
      Sky Uranium Corp. (b)Common
      shares
            
            
            786,422
            
            
            
            -
            
            
            
            (68,174
            )
            
            
            -
            
            
            
            718,248Warrants
            
            
            213,578
            
            
            
            -
            
            
            
            -
            
            
            
            (117,699
            )
            
            
            95,879Total
      marketable securities and investments
            
            
            1,499,800
            
            
            
            (474,810
            )
            
            
            (68,174
            )
            
            
            (117,699
            )
            
            
            839,117





a)
            On
      June 16, 2008 the Company purchased 3,570,000 units of Panthera
      Exploration Inc. (“Panthera”) (formerly Amera Resources Corporation), a
      company with common directors, for $0.14 per unit for a total of
      $499,800.  On December 23, 2008 Panthera did a 10 for 1 rollback
      of its shares. As a result the Company now holds 357,000 shares. As at
      December 31, 2008, the quoted market value of the shares was $24,990. The
      Company has designated its marketable securities as financial assets
      available-for-sale and accordingly, changes to their fair value are
      recorded in other comprehensive income in the period they occur.
      Management has determined that the decrease in fair value of Panthera is
      other than temporary.  As a result a loss of $474,810 has been
      recorded in Other income
(expenses).


F-15





6.
            MARKETABLE SECURITIES AND
      INVESTMENT(continued)





b)
            On
      September 17, 2008 and October 24, 2008 the Company purchased 2,750,000
      and 5,583,333 Units, respectively, of Blue Sky Uranium Corp. (“Blue Sky”),
      for $0.12 per unit for a total of $1,000,000.  Each Unit
      consists of one common share and one non-transferable share purchase
      warrant. Each warrant entitles the Company to purchase one additional
      common share at a price of $0.18 per share in year one and $0.20 per share
      in year two. The fair value assigned to the warrants was $213,578. At
      December 31, 2008 the fair value of the warrants was
      $95,879.  As a result the company recorded a loss of $117,699 on
      held-for-trading investments.
              
              IMA’s
      holdings of Blue Sky is 22%.  The Company has accounted for its
      investment in common shares using the equity method and  has
      been classified as long-term.  Blue Sky has a December 31st
      year end and is under common management. During the year ended December
      31, 2008 the Company recorded a $68,174 loss resulting from equity
      accounting. As at December 31, 2008, the quoted market value of the shares
      was $416,667. The Company has determined  this decrease in value
      to be temporary and accordingly has not recorded any  impairment
      of the common share
investment




7.           MINERAL
PROPERTIES





The table
below summarizes the general exploration expenditures for the year ended
December 31, 2008, 2007 and 2006:





2008
            
            
            2007
            
            
            2006Hushamu
      property
            
            
            1,767,014
            
            
            
            -
            
            
            
            -Navidad
            
            
            -
            
            
            
            -
            
            
            
            4,491,524General
      exploration
            
            
            163,311
            
            
            
            99,589
            
            
            
            186,572General
      exploration
            
            
            1,930,325
            
            
            
            99,589
            
            
            
            4,678,096





Hushamu
Property





The
Company has entered into an Option Agreement with Western Copper Corporation
(“Western Copper”) to further explore and develop the Hushamu Property and in
which the Company has the right to acquire up to a 70% interest.  The
Hushamu porphyry style copper-molybdenum-gold deposit is located on northern
Vancouver Island, B.C.





The
Company has agreed to expend a minimum of $1.9 million in the first year of a
three year option period. Over years two and three the Company has an option to
spend an additional $13.1 million on drilling, metallurgical, and engineering
studies in the completion of a pre-feasibility report on the Hushamu deposit to
meet the required terms of the agreement.  This expenditure, a total
of $15 million, and the completion of a pre-feasibility report will earn the
Company a 49% interest in the project (Option 1).  The Company can
earn an additional 16% by funding a subsequent feasibility study by the fourth
year (Option 2) and an additional 5% can be earned upon completion of mine
permitting (Option 3) for a total interest of 70% with Western Copper retaining
a 30% participating interest in the joint venture.




















F-16





7.           MINERAL PROPERTIES(continued)





The table
below summarizes the mineral property expenditures for the year ended December
31, 2008:





Hushamu
      Property$Balance,
      beginning of the year
            
            
            -Drilling
            
            
            923,462Salaries
      and contractors
            
            
            373,178Construction
            
            
            107,235Transportation
            
            
            102,840Assays
            
            
            96,224Supplies
      and equipment
            
            
            65,933Office
            
            
            36,431Road
      building/ Trenching
            
            
            22,511Imagery
      and base maps
            
            
            17,274Geotechnical
            
            
            8,659Shipping
            
            
            6,772Communications
            
            
            6,495Balance,
      end of the year
            
            
            1,767,014


* Subsequent to year end the Company
met its $1.9 million expenditure commitment








8.           SHARE
CAPITAL





Authorized
            -  unlimited
      common shares without par value- 100,000,000
      preferred shares without par
value







Issued
      - common shares
            
            December
      31, 2008
            
            
            December
      31, 2007Number
            
            
            $
            
            
            Number
            
            
            
            $Balance,
      beginning of period
            
            
            52,132,064
            
            
            
            58,753,501
            
            
            
            52,013,064
            
            
            
            58,664,727Exercise of
      options
            
            
            -
            
            
            
            -
            
            
            
            119,000
            
            
            
            59,500Contributed surplus
      reallocated on
              exercise of
    options
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            29,274Balance,
      end of period
            
            
            52,132,064
            
            
            
            58,753,501
            
            
            
            52,132,064
            
            
            
            58,753,501





(a)           Stock
options and stock-based compensation





The
Company has established a rolling stock option plan (the “Plan”), in which the
maximum number of common shares which can be reserved for issuance under the
Plan is 10% of the issued and outstanding shares of the Company. The stock
options granted are subject to a four month hold period and exercisable for a
period of five years.





F-17





8.           SHARE CAPITAL(continued)





A summary
of the changes in the number of stock options outstanding and exercisable for
the year ended December 31, 2008 is as follows:





2008
            
            
            2007
            
            
            2006Options
              Outstanding
              and
              Exercisable
            
            
            Weighted
              Average
              Exercise
              Price
              $
            
            
            Options
              Outstanding
              and
              Exercisable
            
            
            Weighted
              Average
              Exercise
              Price
              $
            
            
            Options
              Outstanding
              and
              Exercisable
            
            
            Weighted
              Average
              Exercise
              Price
              $Balance,
              Beginning
      of year
            
            
            4,330,000
            
            
            
            2.72
            
            
            
            4,624,000
            
            
            
            2.69
            
            
            
            4,848,500
            
            
            
            2.53Granted
            
            
            250,000
            
            
            
            0.54
            
            
            
            100,000
            
            
            
            0.47
            
            
            
            283,000
            
            
            
            3.21Exercised
            
            
            -
            
            
            
            -
            
            
            
            (119,000
            )
            
            
            0.50
            
            
            
            (315,000
            )
            
            
            0.61Cancelled/Forfeited
            
            
            (680,000
            )
            
            
            2.46
            
            
            
            (160,000
            )
            
            
            3.66
            
            
            
            (187,500
            )
            
            
            2.96Expired
            
            
            (1,275,000
            )
            
            
            1.62
            
            
            
            (115,000
            )
            
            
            0.50
            
            
            
            (5,000
            )
            
            
            0.40Balance,
      end of year
            
            
            2,625,000
            
            
            
            3.12
            
            
            
            4,330,000
            
            
            
            2.72
            
            
            
            4,624,000
            
            
            
            2.69





Stock
options outstanding and exercisable at December 31, 2008 are as
follows:


Number
            
            Exercise
      Price
              $
            
            Expiry
      Date1,147,000
            
            3.10
            
            March
      24, 2009690,000
            
            4.16
            
            March
      16, 2010355,000
            
            2.92
            
            November
      16, 2010250,000
            
            0.54
            
            June
      2, 2011183,000
            
            3.21
            
            June
      22, 20112,625,000





During
the year ended December 31, 2008, the Company granted stock options to
directors, employees or consultants to acquire 250,000 (2007 – 100,000; 2006 -
273,000) common shares of the Company and recorded compensation expense of
$62,900 (2007: $34,421; 2006: $393,120) with a corresponding increase in
contributed surplus as a result.





The fair
value of stock options granted is estimated on the dates of grants using the
Black-Scholes Option Pricing Model with the following weighted average
assumptions used for the grants made during the year:





2008
            
            
            2007
            
            
            2006Risk-free
      interest rate
            
            
            3.18
            %
            
            
            4.21
            %
            
            
            4.0
            %Estimated
      volatility
            
            
            125
            %
            
            
            136
            %
            
            
            70
            %Expected
      life
            
            3
      years
            
            
            2.5
      years
            
            
            2.5
      yearsExpected
      dividend yield
            
            
            0
            %
            
            
            0
            %
            
            
            0
            %





The
weighted average fair value per stock option granted during the year was $0.25
(2007 - $0.34; 2006 - $1.76).  Option pricing models require the use
of estimates and assumptions including the expected
volatility.  Changes in the underlying assumptions can materially
affect the fair value estimates and, therefore, existing models do not
necessarily provide reliable measure of the fair value of the Company’s stock
options.








F-18





8.           SHARE CAPITAL(continued)





(b)
            Warrants





A summary
of the number of common shares reserved pursuant to the Company’s outstanding
warrants and agents warrants outstanding at December 31, 2008, 2007 and 2006 and
the changes for the years ending on those dates is as follows:


2008
            
            
            2007
            
            
            2006Balance,
      beginning of year
            
            
            3,271,070
            
            
            
            3,504,404
            
            
            
            1,900,004Issued
            
            
            -
            
            
            
            -
            
            
            
            1,604,400Expired
            
            
            (1,604,400
            )
            
            
            (233,334
            )
            
            
            -Balance,
      end of year
            
            
            1,666,670
            
            
            
            3,271,070
            
            
            
            3,504,404





Common
shares reserved pursuant to warrants and agent warrants outstanding at December
31, 2008 are as follows:





Number
            
            
            Exercise
      Price
              $
            
            Expiry
      Date1,666,670
            
            
            
            3.45
            
            September
      14, 2009








9.           CONTRIBUTED
SURPLUS





A continuity summary of contributed
surplus is presented below:





December
      31, 2008
            
            December
      31, 2007
            
            December
      31, 2006$
            
            $
            
            
            $Balance,
      beginning of period
            
            
            6,157,412
            
            
            6,152,265
            
            
            5,854,445Contributed
      Surplus as a result of stock options granted
            
            
            62,900
            
            
            34,421
            
            
            393,120Contributed Surplus reallocated
      on exercise of stock options
            
            
            -
            
            
            (29,274
            )
            
            (95,300
            )Contributed Surplus reallocated
      on expiry of warrants
            
            
            1,281,946
            
            
            -
            
            
            -Balance,
      end of period
            
            
            7,502,258
            
            
            6,157,412
            
            
            6,152,265










F-19





10.           RELATED
PARTY TRANSACTIONS





(a)
            The
      Company engages Grosso Group Management Ltd. (the “Grosso Group”) to
      provide services and facilities to the Company.  The Grosso
      Group is a private company owned by the Company, Golden Arrow Resources
      Corporation and Blue Sky Uranium Corp., each of which owns one share. The
      Grosso Group provides its shareholder companies with geological, corporate
      development, administrative and management services.  The
      shareholder companies pay monthly fees to the Grosso Group.  The
      fee is based upon a pro-rating of the Grosso Group’s costs including its
      staff and overhead costs among each shareholder company with regard to the
      mutually agreed average annual level of services provided to each
      shareholder company.  The Grosso Group services contract also
      provides that, in the event the services are terminated by a member
      company, a termination payment would include three months of compensation
      and any contractual obligations that the Grosso Group undertook for the
      company, up to a maximum of
$500,000.





During
the year ended December 31, 2008, the Company incurred fees of $619,807 (2007:
$349,143; 2006: $724,902) to the Grosso Group: $595,482 (2007: $330,305; 2006:
$764,115) was paid in twelve monthly payments and $24,325 is included in
accounts payable as a result of a review of the allocation of the Grosso Group
costs to the member companies for the period (2007 – $18,838 included in amounts
payable; 2006: $39,213 included in amounts receivable).  Also,
included in deposits is a $205,000 (2007 - $205,000; 2006 - $205,000) deposit to
the Grosso Group for the purchase of equipment and leasehold improvements and
for operating working capital.





Effective
May 31, 2008 Astral Mining Corporation withdrew as a shareholder of Grosso Group
and discontinued the use of the services and facilities provided.





Effective
September 1, 2008 Panthera withdrew as a shareholder of Grosso Group and
discontinued the use of the services and facilities provided.





(b)
            During
      the year ended December 31, 2008, the Company paid $310,558 (2007 -
      $353,283; 2006: $533,917) to companies controlled by directors and
      officers of the Company, for accounting, management and consulting
      services provided.





(c)
            Effective
      January 1, 2008 the Company entered into a consulting agreement with a
      company controlled by a director of the Company for a fee of $10,000 per
      month plus reimbursement for out-of-pocket
      expenses.  Discretionary bonuses may also be paid if approved by
      the compensation committee.  Accordingly, the total compensation
      paid to the director in the year ended December 31, 2008 was
      $120,000.  This amount is included in the total amount paid to
      directors and officers discussed in Note 10(b)
  above.





The
Company may terminate this agreement by giving the director thirty day written
notice.  In the event the Company terminates this agreement the
director may be entitled to receive the discretionary bonus.





(d)
            The
      President of the Company provides his services on a full-time basis under
      a contract with a private company controlled by the President for an
      annual fee of $250,000.  Accordingly, the total compensation
      paid to the President in the year ended December 31, 2008 was $250,000
      (2007 - $250,000; 2006 - $350,667). This amount is included in the total
      amount paid to directors and officers discussed in Note 10(b)
      above.











F-20








10.           RELATED PARTY TRANSACTIONS(continued)





In the
event the contract is terminated by the Company or as a result of a change of
control, a payment is payable to the President consisting of (i) any monthly
compensation due to the date of termination, (ii) options as determined by the
board of directors (iii) three years of monthly compensation (which may be
adjusted annually) and (iv) bonus of $461,500. If the termination had occurred
on December 31, 2008, the amount payable under the contract would be
$1,211,500.  In the event the contract is terminated by the Company as
a result of the President’s death or permanent disability while providing
services to the Company, a bonus in the amount of $461,500 plus one years fees
of $250,000 is payable.  At December 31, 2008, the Company has accrued
a total of $711,500 (2007 - $nil) related to this bonus and termination
benefits.





Effective
May 1, 2007, the Company negotiated agreements with the other shareholder
companies of the Grosso Group for the President of the Company to provide
services for a monthly fee.  The agreements may be terminated at any
time at the other companies’ discretion upon 30 days written
notice.  The Company reserves its right to restrict services provided
by the President to the other shareholder companies based on its own
requirements for the President’s services, at which time the fee would be
adjusted accordingly.  For the fiscal year ended December 31, 2008,
the Company has accrued a receivable of $59,442 from the other shareholder
companies which has been recorded as a decrease in Administrative and management
services expense. This amount is reflected in the total amount paid to directors
and officers discussed in Note 10(b) above.  The fees are reviewed and
adjusted on a periodic basis.





All of
the related party transactions and balances in these consolidated financial
statements arose in the normal course of operations and are measured at the
exchange amount, which is the amount of consideration established and agreed to
by the related parties.








11.           CAPITAL
RISK MANAGEMENT





The capital Structure of the Company
consists of equity attributable to common shareholders and includes share
capital, warrants, contributed surplus, stock options, accumulated other
comprehensive loss and deficit.





The Company manages its capital to
maximize its ability to continue as a going concern and have sufficient capital
to explore and develop mining projects.  There were no changes to the
company’s capital risk management strategy during the year ended December 31,
2008.








12.           MANAGEMENT
OF FINANCIAL RISK





The
Company’s financial instruments are exposed to certain risks, including
currency, credit and metal price risk.





Currency
Risk:  Business is transacted by the Company in a number of
currencies.  Fluctuations in exchange rates may have a significant
effect on the cash flows of the Company.  Future changes in exchange
rates could materially affect the Company’s results in either a positive or
negative direction.




















F-21





12.           MANAGEMENT OF FINANCIAL RISK(continued)





The
Company has not hedged its exposure to currency
fluctuations.  At  December 31, 2008, the Company is exposed
to currency risk through the following assets and liabilities in US dollars and
Argentina pesos:





December
      31, 2008
            
            
            December
      31, 2007
            
            
            December
      31, 2006US$
            
            
            Arg$
            
            
            US$
            
            
            Arg$
            
            
            US$
            
            
            Arg$Cash
            
            
            86,829
            
            
            
            613
            
            
            
            79,400
            
            
            
            66,256
            
            
            
            54,121
            
            
            
            206,107Other
      receivables and prepaids
            
            
            27,967
            
            
            
            -
            
            
            
            680
            
            
            
            
            
            
            
            101
            
            
            
            4,000Accounts
      payable and accrued liabilities
            
            
            (27,834
            )
            
            
            -
            
            
            
            (1,704
            )
            
            
            (30,725
            )
            
            
            (4,246
            )
            
            
            (156,438
            )





Based on
the net exposures as at December 31, 2008, and assuming that all other variables
remain constant, a 10% depreciation or appreciation of the Canadian dollar
against the US dollar and Argentinean pesos would be insignificant in the
Company’s net earnings.





Credit Risk:Financial
instruments that potentially subject the Company to a significant concentration
of credit risk consist primarily of cash, short-term investments and other
receivables.  The Company limits its exposure to credit loss by
placing its cash and short-term investments with major financial
institutions.





Metal Price Risk:The
Company’s portfolio of properties has exposure to predominantly Copper, silver
and gold. The prices of these metals, especially copper, greatly affect the
value of the Company and the potential value of its properties and
investments.








13.           INCOME
TAXES





The
recovery of income taxes shown in the consolidated statements of operations,
comprehensive income (loss) and deficit differs from the amounts obtained by
applying statutory rates to the loss before provision for income taxes due to
the following:





2008
            
            
            2007
              Restated
      – Note 2
            
            
            2006
              Restated
      – Note 2Statutory
      tax rate
            
            
            31.00
            %
            
            
            34.12
            %
            
            
            34.12
            %$
            
            
            
            $
            
            
            
            $Income
      (loss) for the year
            
            
            (4,301,910
            )
            
            
            16,678,832
            
            
            
            (8,072,884
            )Provision
      for income taxes based on statutory Canadian combined federal and
      provincial income tax rates
            
            
            (1,333,592
            )
            
            
            5,690,817
            
            
            
            (2,754,468
            )Differences
      in foreign tax rates
            
            
            -
            
            
            
            (707
            )
            
            
            (526
            )Non-deductible
      differences
            
            
            23,134
            
            
            
            26,288
            
            
            
            1,681,840Loss
      expiry
            
            
            260,760
            
            
            
            430,571
            
            
            
            428,518Non
      taxable component of Navidad recovery
            
            
            -
            
            
            
            (6,060,913
            )
            
            
            -Change
      in valuation allowance
            
            
            1,107,675
            
            
            
            (926,300
            )
            
            
            630,433Other
            
            
            (57,977
            )
            
            
            840,244
            
            
            
            14,203-
            
            
            
            -
            
            
            
            -

















F-22





13.           INCOME TAXES(continued)





The
significant components of the Company’s future tax assets are as
follows:




2008
              $
            
            
            
            2007

              $
            
            
            
            2006

              $Future
      income tax assetsOperating
      loss carryforward
            
            
            4,681,251
            
            
            
            4,307,036
            
            
            
            4,950,897Share
      issue costs
            
            
            143,509
            
            
            
            288,455
            
            
            
            509,317Resource
      deductions
            
            
            778,142
            
            
            
            268,425
            
            
            
            306,710Other
            
            
            390,839
            
            
            
            22,150
            
            
            
            45,4425,993,741
            
            
            
            4,886,066
            
            
            
            5,812,366Valuation
      allowance for future tax assets
            
            
            (5,993,741
            )
            
            
            (4,886,066
            )
            
            
            (5,812,366
            )-
            
            
            
            -
            
            
            
            -





The
Company has Canadian capital loss carryforwards of $161,172 and non-capital loss
carryforwards of $17,337,966that may be available
for tax purposes.  The Company’s capital losses do not expire and may
be carried forward indefinitely.  The non-capital losses expire as
follows:





Expiry
      Date
            
            
            $2009
            
            
            1,317,7302010
            
            
            1,545,9642014
            
            
            2,752,3242015
            
            
            4,708,7902026
            
            
            3,282,3522027
            
            
            1,503,6642028
            
            
            2,227,14217,337,966








14.           SEGMENTED
INFORMATION





The
Company is involved in mineral exploration and development
activities.  The Company is in the exploration stage and, accordingly,
has no reportable segment revenues or operating results for each of fiscal 2008
and 2007.





The
Company’s total assets are segmented geographically as follows:




December
      31, 2008Canada
              $
            
            
            Argentina
              $
            
            
            Total
              $Current
      assets
            
            
            21,761,139
            
            
            
            212
            
            
            
            21,761,351Deposit
            
            
            205,000
            
            
            
            -
            
            
            
            205,000Investment
            
            
            718,248
            
            
            
            -
            
            
            
            718,24822,684,387
            
            
            
            212
            
            
            
            22,684,599





December
      31, 2007Canada
              $
            
            
            Argentina
              $
            
            
            Total
              $Current
      assets
            
            
            25,897,160
            
            
            
            22,330
            
            
            
            25,919,490Deposit
            
            
            205,000
            
            
            
            -
            
            
            
            205,00026,102,160
            
            
            
            22,330
            
            
            
            26,124,490





F-23


15.           DIFFERENCES
BETWEEN CANADIAN AND UNITED STATES GENERALLY


ACCEPTED
ACCOUNTING PRINCIPLES





The
consolidated financial statements of the Company have been prepared in
accordance with Canadian GAAP, which differ in certain material respects from US
GAAP.





The
effects of significant measurement differences between Canadian GAAP and US GAAP
for certain items on the consolidated balance sheets, statements of operations
and deficit and statements of cash flows are as follows:


2008

                $
            
            
            
            2007

              $
            
            
            
            2006

              $Restated
      – Note 2
            
            
            Restated
      – Note 2Consolidated
      statements of operationsIncome
      (loss) for the year under Canadian GAAP and US GAAP
            
            
            (4,301,910
            )
            
            
            16,678,832
            
            
            
            (8,072,884
            )Unrealized
      losses
              on available-for-sale
      securities (ii)
            
            
            -
            
            
            
            -
            
            
            
            (3,000
            )Comprehensive
      loss (iii)
            
            
            (4,301,910
            )
            
            
            16,678,832
            
            
            
            (8,075,884
            )Basic
      and diluted income (loss) per share under US GAAP
            
            
            (0.08
            )
            
            
            0.32
            
            
            
            (0.16
            )Weighted
      average number of common shares outstanding
            
            
            52,132,064
            
            
            
            52,099,787
            
            
            
            51,263,575





2008

              $
            
            
            
            2007

              $
            
            
            
            2006

              $Restated
      – Note 2Shareholders'
      EquityBalance
      per Canadian GAAP
            
            
            21,779,756
            
            
            
            26,018,766
            
            
            
            9,246,013Accumulated
      other comprehensive income (ii)
            
            
            -
            
            
            
            -
            
            
            
            81,000Balance
      per US GAAP
            
            
            21,779,756
            
            
            
            26,018,766
            
            
            
            9,327,013





2008

              $
            
            
            
            2007

              $
            
            
            
            2006

              $Restated
      – Note 2
            
            
            Restated
      – Note 2Mineral
      propertiesBalance
      per Canadian GAAP
            
            
            -
            
            
            
            -
            
            
            
            -Transfer
      of marketable securities (ii)
            
            
            -
            
            
            
            -
            
            
            
            -Mineral
      properties and deferred costs
              expensed
      under US GAAP (i)
            
            
            -
            
            
            
            -
            
            
            
            -Balance
      per US GAAP
            
            
            -
            
            
            
            -
            
            
            
            -





2008

              $
            
            
            
            2007

              $
            
            
            
            2006

              $Restated
      – Note 2
            
            
            Restated
      – Note 2Navidad
      interestBalance
      per Canadian GAAP
            
            
            -
            
            
            
            18,500,000
            
            
            
            186,000Fair
      value adjustment
            
            
            -
            
            
            
            -
            
            
            
            81,000Balance
      per US GAAP
            
            
            -
            
            
            
            18,500,000
            
            
            
            267,000








F-24





15.           DIFFERENCES
BETWEEN CANADIAN AND UNITED STATES GENERALLY


ACCEPTED ACCOUNTING PRINCIPLES(continued)





There are
no differences for the statements cash flows between Canadian GAAP and US GAAP
for the years ending December 31, 2008, 2007 and 2006.





i)           Mineral
Properties and Deferred Costs





During
the year ended December 31, 2008, the Company changed its accounting policy
relating to mineral property exploration expenditures and it now expenses
exploration expenditures when incurred as is required for US GAAP (see note2).





ii)
            Investments





For the
2006 fiscal year, the Company’s marketable securities were classified as
available-for-sale investments under US GAAP until July 14, 2006, the date of
the Navidad judgment.  Subsequently, the marketable securities were
transferred to the Navidad interest balance (see Note 3 above).





iii)
            Comprehensive
      Income





US GAAP
requires disclosure of comprehensive income (loss) which is intended to reflect
all other changes in equity except those resulting from contributions by and
payments to owners.





iv)
            Realization
      of Navidad interest





For US
GAAP purposes the Company had previously expensed the exploration and other
costs that comprised the amount shown as Navidad interest. The Company has
recognized as income those costs in 2007 as the litigation is concluded and the
funds representing those costs have been received. (See Note 3).





Fair
Value Measurements





In
September 2006, FASB issued SFAS No. 157, “Fair Value Measurements”, which
establishes a framework for measuring fair value. It also expands disclosures
about fair value measurements and was effective for the first quarter of 2008.
This guidance is not effective until January 1, 2009.





Recently
issued US GAAP accounting standards:





i)
      In December 2007, the FASB issued SFAS 160 a standard on accounting for
      noncontrolling interests and transactions with non-controlling interest
      holders in consolidated financial statements. The standard is converged
      with standards issued by the AcSB and IASB on this subject. This statement
      specifies that non-controlling interests are to be treated as a separate
      component of equity, not as a liability or other item outside of equity.
      Because non-controlling interests are an element of equity, increases and
      decreases in the parent's ownership interest that leave control intact are
      accounted for as capital transactions rather than as a step acquisition or
      dilution gains or losses. The carrying amount of the non-controlling
      interests is adjusted to reflect the change in ownership interests, and
      any difference between the amount by which the non-controlling interests
      are adjusted and the fair value of the consideration paid or received is
      recognized directly in equity attributable to the controlling
      interest.








F-25





15.           DIFFERENCES
BETWEEN CANADIAN AND UNITED STATES GENERALLY


ACCEPTED ACCOUNTING PRINCIPLES(continued)





This
standard requires net income and comprehensive income to be displayed for both
the controlling and the non-controlling interests. Additional required
disclosures and reconciliations include a separate schedule that shows the
effects of any transactions with the non-controlling interests on the equity
attributable to the controlling interest.





The
statement is effective for periods beginning on or after December 15, 2008. SFAS
160 will be applied prospectively to all non-controlling interests, including
any that arose before the effective date. Management anticipates the adoption of
this interpretation is not expected to have an effect on the Company’s results
of operations or financial position.





ii)  In
      December 2007, the FASB issued a revised standard on accounting for
      business combinations, SFAS 141R. The major changes to accounting for
      business combinations are summarized as
follows:


§
            all
      business acquisitions would be measured at fair
  value.


§
            the
      existing definition of a business would be
  expanded.


§
            pre-acquisition
      contingencies would be measured at fair
value.


§
            most
      acquisition-related costs would be recognized as expense as incurred (they
      would no longer be part of the purchase
  consideration).


§
            obligations
      for contingent consideration would be measured and recognized at
      fairvalue
      at acquisition date (would no longer need to wait until contingency is
      settled).


§
            liabilities
      associated with restructuring or exit activities be recognized only if
      theymeet
      the recognition criteria of SFAS 146, Accounting for Costs
      Associated with Exit or Disposal Activities, as of the acquisition
      date.


§
            non-controlling
      interests would be measured at fair value at the date of acquisition (i.e.
      100% of the assets and liabilities would be measured at fair value even
      when
      an
              acquisition
      is less than 100%).


§
            goodwill,
      if any, arising on a business combination reflects the excess of the fair
      value of the acquiree, as a whole, over the net amount of the recognized
      identifiable assetsacquired
      and liabilities assumed. Goodwill is allocated to the acquirer and thenon-controlling
      interest.


§
            in
      accounting for business combinations achieved in stages, commonly called
      step acquisitions, the acquirer is to re-measure its pre-existing
      non-controlling equity investment in the acquiree at fair value as of
      the acquisition date and recognize any unrealized gain or loss in
      income.





The
statement is effective for periods beginning on or after December 15,
2008.





iii)Equity Method Investment Accounting
Considerations





In
November 2008, FASB Task Force clarified the accounting for certain transactions
and impairment considerations involving equity method investments. Topics
related to equity method investments include the initial carrying value of an
equity method investment, impairment assessment of investees intangibles and an
equity investees issuance of shares.  EITF 08-6 is effective for
fiscal years beginning on or after December 15, 2008. The Company is currently
evaluating the impact of EITF 08-6 on the Company’s consolidated financial
statements.











F-26





16.           SUPPLEMENTARY
CASH FLOW INFORMATION





2008

              $
            
            
            
            2007

              $
            
            
            
            2006

              $Financing
      activitiesShares issue
costs
            
            
            -
            
            
            
            -
            
            
            
            (95,893
            )Warrant issue
    costs
            
            
            -
            
            
            
            -
            
            
            
            (14,271
            )Warrants
            
            
            -
            
            
            
            -
            
            
            
            110,164Shares issued on exercise of
      options
            
            
            -
            
            
            
            29,274
            
            
            
            74,800Contributed
    surplus
            
            
            -
            
            
            
            (29,274
            )
            
            
            (74,800
            )-
            
            
            
            -
            
            
            
            -







2008

              $
            
            
            
            2007

              $
            
            
            
            2006

              $Change
      in non-cash working capitalOther
      receivables and prepaids
            
            
            232,393
            
            
            
            (222,195
            )
            
            
            143,287Accounts payable
            
            
            87,619
            
            
            
            (130,888
            )
            
            
            (740,199
            )320,012
            
            
            
            353,083
            
            
            
            596,912







F-27