20-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

Commission file number  0 50437

MAG Silver Corp.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

British Columbia

(Jurisdiction of incorporation or organization)

Suite 328, 550 Burrard Street, Vancouver, British Columbia, Canada, V6C 2B5

(Address of principal executive offices)

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

Title of each class

Name of each exchange on which registered

None

N/A

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

Common Shares Without Par Value

(Title of Class)

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

None

(Title of Class)

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

37,928,610 Common Shares at December 31, 2006

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

[   ]  Yes   [X]  No

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   [X]  No

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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.    

[X]  Yes   [    ]  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

[   ]  Large accelerated filer       [   ]       Accelerated filer         [X]    Non-accelerated filer

Indicate by check mark which financial statement item the registrant has elected to follow.

[X]  Item 17   [   ] 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   [X]  No

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TABLE OF CONTENTS

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INTRODUCTION AND USE OF CERTAIN TERMS

MAG Silver Corp. is a company incorporated on April 21, 1999 under the Company Act (British Columbia), which has been superseded by the Business Corporations Act (British Columbia).  As used herein, except as the context otherwise requires, the terms “Company” or “MAG” refer to MAG Silver Corp.  Our financial statements are prepared in accordance with Canadian generally accepted accounting principles with reconciliation to United States Generally Accepted Accounting Principles and are presented in Canadian dollars.  All monetary amounts contained in this Annual Report are in Canadian dollars unless otherwise indicated.

Our North American office and principal place of business is located at Suite 328, 550 Burrard Street, Vancouver, British Columbia, Canada, V6C 2B5. Our registered office is located at Suite 2100, 1075 West Georgia Street, Vancouver, British Columbia, Canada, V6E 3G2.

FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements and information, within the meaning of Section 21E of the Exchange Act, relating to the Company that are based on the beliefs and estimates of management as well as assumptions made by and information currently available to the Company.

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

Such statements reflect the Company’s current views with respect to future events and are subject to certain known and unknown risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others:

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

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

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

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

• currency fluctuations;

• risks related to governmental regulations, including environmental regulations;

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

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

• increased competition in the exploration industry;

• the Company’s lack of infrastructure;

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

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

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

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GLOSSARY

The following is a glossary of terms that appear in this Annual Report.

Ag	The elemental symbol for silver.
alluvium	Unconsolidated surficial sediments deposited by water.
alteration	Usually referring to chemical reactions in a rock mass resulting from the passage of hydrothermal fluids.
andesite	Volcanic rock, low in quartz content, generally fine grained and moderately dark coloured.
anomalous	A value, or values, in which the amplitude is statistically between that of a low contrast anomaly and a high contrast anomaly in a given data set.
basalt	Volcanic rock, low in quartz content, generally fine grained and dark coloured.
calcite	Calcium carbonate mineral.  It is a common constituent of many rock types as well as occurring in veins and alteration assemblages.
carbonate	Minerals which have the formula “X”CO3.   Calcite is the most common carbonate mineral.  Also rocks composed dominantly of carbonate minerals such as calcite.
Cascabel	Minera Cascabel, S.A. de C.V., a company incorporated pursuant to the laws of the Mexican Republic.
Common Shares	Common Shares without par value in the capital stock of the Company.
Company	MAG Silver Corp., a company under the Business Corporations Act (British Columbia).
Conglomerate	Sedimentary rock composed of gravel and coarser fragments.
CRD	Carbonate Replacement Deposit.
Cretaceous	The geological period extending from 135 million to 63 million years ago.
CSAMT	Controlled Source Audio Magneto Tellurics.
diorites	Medium-coloured intrusive igneous rocks of intermediate composition.
Don Fippi Property	The Don Fippi Property as defined in Item 4 - Information on the Company – The Don Fippi Property.
Exchange	TSX Venture Exchange.
exploration concession	A defined area for which mineral tenure has been granted by the Mexican government for a period of six years to allow exploration.  The concession may subsequently be upgraded to exploitation status.
fault	A fracture in rock where there has been displacement of the two sides.
flow	Volcanic rock comprised of flow lava.
fracture	Breaks in a rock, usually due to intensive folding or faulting.
g/T	Grams per tonne (31.1 g/T = 1.0 troy ounce/tonne).
gangue	Minerals incorporated in an orebody other than those of economic interest.
grade	The concentration of each ore metal in a rock sample, usually given as weight percent.  Where extremely low concentrations are involved, the concentration may be given in grams per tonne (g/T) or ounces per ton (oz/T).  The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit.

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graywacke	Sandstone composed largely of sand-sized rock fragments.
Guigui Property	The Guigui Property as defined in Item 4 - Information on the Company – The Guigui Property.
hydrothermal	Hot fluids, usually mainly water, in the earth’s crust which may carry metals and other compounds in solution to the site of ore deposition or wall rock alteration.
igneous	A rock formed by the cooling of molten silicate material.
intrusive	A rock mass formed below the earth’s surface from magma which has intruded into a pre-existing rock mass.
Juanicipio Property	The Juanicipio Property as defined in Item 4 - Information on the Company – The  Juanicipio Property.
kaolinite	An aluminum-silicate clay mineral.  It is a common component of hydrothermal alteration of siliceous rocks.
Lagartos	Minera Los Lagartos, S.A. de C.V., a company incorporated pursuant to the laws of the Mexican Republic, the principal of which is the Company.
MAG	MAG Silver Corp., a company under the Business Corporations Act (British Columbia).
magma	Molten rock formed within the crust or upper mantle of the earth.
Mexico or Mexican Republic	United Mexican States
mill	A facility for processing ore to concentrate and recover valuable minerals.
mineral reserve	That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. The economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study.  The study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.  A mineral reserve includes diluting materials and allowances for losses that may occur when the material is mined.
mineral resource	A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction.  The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. Industry Guide 7 does not provide for the disclosure of “mineral resource estimates”.
mineralization	Usually implies minerals of value occurring in rocks.
monzonite	An intermediate intrusive rock related to granite.
net smelter returns royalty or NSR	Payment of a percentage of mining revenues after deducting applicable smelter charges.
NSAMT	Natural Source Audio-frequency Magneto Tellurics.
ore	A natural aggregate of one or more minerals which may be mined and sold at a profit, or from which some part may be profitably separated.
outcrop	An exposure of rock at the earth’s surface.
oz/T	Troy ounces per tonne.
Policy 2.4	The Policy of the Exchange entitled “Capital Pool Companies” which sets forth the steps for listing a company on the Exchange as a “capital pool company” (which is essentially a blind pool) and the steps that company must take, including its Qualifying Transaction, to qualify for a regular listing on the Exchange.

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porphyry	Rock type with mixed crystal sizes, i.e., containing larger crystals of one or more minerals.
portal	Entrance from surface into an underground development.
pyrite	Iron sulphide mineral.
Qualifying Transaction	The transaction conducted pursuant to Policy 2.4 whereby the Company acquired significant assets, other than cash, by way of purchase, amalgamation, merger or arrangement with another company or by other means and then qualified for a regular listing on the Exchange.
quartz	Si02, a common constituent of veins, especially those containing gold and silver mineralization.
replacement	Process whereby one mineral is chemically substituted by a later mineral.
rhyolite	Volcanic rock high in quartz content, generally fine grained and light coloured.
SEC	Securities and Exchange Commission of the United States of America
serpentinite	A rock composed of serpentine, typically formed from the alteration of mafic igneous rocks.
silicification	Replacement of the constituents of a rock by quartz.
skarn	Alteration of carbonate rocks near an intrusion dominated by garnet and pyroxene minerals.
tailings	Material rejected from a mill after recoverable valuable minerals have been extracted.
Tertiary	The geological period extending from 63 million to 2 million years ago.
tonne or “T”	Metric ton = 1,000 kilograms or 1,000,000 grams.
tuffs	Volcanic rocks composed of ash, crystal and rock fragments ejected from a volcano.  May become “welded” (tightly compacted and lithifiedl) during cooling.
VAT	An acronym for “Value Added Tax” which, in Mexico, is charged on all goods and services at a rate of 15%.  Proprietors selling goods or services must collect VAT on behalf of the government.  Goods or services purchased incur a credit for VAT paid.  The resulting net VAT is then remitted to, or collected from the Government of Mexico through a formalized filing process. (In Mexico it is referred to as “IVA”)
veinlets	Small veins, generally measuring only a few millimetres in thickness, filling fractures in rocks.
veins	The mineral deposits that are found filling openings in rocks created by faults or replacing rocks on either side of faults.
volcaniclastic	Coarse-grained sedimentary rocks (sandstone or conglomerate) composed of fragments of volcanic rocks.

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PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.

KEY INFORMATION

Selected Financial Data

The following table sets forth our selected consolidated financial information, which has been derived from our consolidated financial statements included in this Annual Report prepared in accordance with Canadian Generally Accepted Accounting Principles.  Information for the 12 months ended December 31, 2006, 2005 and 2004 are derived from audited financial statements which are included elsewhere in this Report. Information for the years ended December 31, 2003 and December 31, 2002 are derived from audited financial statements that are not included in this Report.  The financial data should be read in conjunction with our consolidated financial statements and notes thereto and Item 5 - Operating and Financial Review and Prospects.

	12 months ended Dec. 31, 2006	12 months ended Dec. 31, 2005	12 months ended Dec. 31, 2004	12 months ended Dec. 31, 2003	12 months ended Dec. 31, 2002
Revenue	$Nil	$Nil	$Nil	$Nil	$Nil
Total Expenses	$4,075,160	$1,891,270	$800,896	$915,007	$123,536
Net Loss	$(3,866,567)	$(1,810,838)	$(733,897)	$(837,539)	$(122,631)
Basic and Diluted Loss per Share	$(0.10)	$(0.06)	$(0.03)	$(0.06)	$(0.08)
Weighted Average Common Shares Outstanding	37,055,631	28,353,901	24,578,037	14,455,369	1,500,000
Consolidated  Balance Sheet
Total Assets	$18,930,558	$18,075,406	$9,774,297	$8,534,794	$408,125
Total Liabilities	$350,368	$393,621	$61,837	$208,018	$58,880
Working Capital	$3,585,789	$7,320,292	$2,360,343	$4,920,182	$108,472
Shareholders’ Equity	$18,580,190	$17,681,785	$9,712,460	$8,326,776	$349,245

Under U.S. GAAP, all amounts in the foregoing table remain the same except the following:

Net Loss	$(7,862,028)	$(2,757,486)	$(2,710,519)	$(4,058,279)	$(160,433)
Basic and Diluted Loss per Share	$(0.21)	$(0.10)	$(0.11)	$(0.28)	$(0.11)
Total Assets	$8,870,626	$12,010,935	$5,139,133	$5,876,252	$370,323
Shareholders’ Equity	$8,520,258	$11,617,314	$5,077,296	$5,668,234	$311,443

On May 31, 2007, the Interbank rate of exchange for converting Canadian dollars into United States dollars equalled 1.0699 Canadian dollars for one United States dollar.  The following table presents a history of the high and low exchange rates of Canadian dollars into United States dollars for the previous six months.

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Month	High	Low
May 2007	1.1135	1.0699
April 2007	1.1584	1.1067
March 2007	1.1811	1.1529
February 2007	1.1853	1.1585
January 2007	1.1824	1.1649
December 2006	1.1653	1.1417

The following table presents a five-year history of the average annual exchange rates of Canadian dollars into United States dollars, calculated by using the average of the exchange rates on the last day of each month during the given year.

Year	Average Exchange Rate
2006	1.1344
2005	1.2116
2004	1.3016
2003	1.4012
2002	1.5705

 Risk Factors

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

1.

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

2.

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

3.

The Company is dependent on its key personnel, some of whom have not entered into written agreements with the Company and whom are not insured by the Company. The Company is dependent upon the continued availability and commitment of its key management and consultants, whose contributions to immediate and future operations of the Company are of central importance.  The Company relies on its President, Dan MacInnis, and its other officers, none of whom has entered into a written employment agreement with the Company, for the day-to-day operation of the Company, its projects and the execution of the Company’s business plan.  The Company also relies heavily on Dr. Peter Megaw for the planning, execution and assessment of the Company’s exploration programs.  Dr. Megaw was formerly an arm’s length consultant to and is currently a director of and consultant to the Company and he is paid a fee for his consulting services bas ed on fair market rates and his submission of invoices for services rendered. The Company has not obtained “key man” insurance for any of its management or consultants. The loss of either Dan MacInnis or Dr. Megaw may have a temporary negative impact on the Company until they were replaced.

4.

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

5.

The Company’s directors and officers may have conflicts of interest which may not be resolved in favour of the Company, which in turn may adversely affect the Company. None of the Company’s directors or officers devotes their full time to the affairs of the Company. All of the directors and officers of the Company are also directors, officers and shareholders of other natural resource or public companies, as

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a result of which they may find themselves in a position where their duty to another company conflicts with their duty to the Company.  None of the Company’s constating documents or any of its other agreements contains any provisions mandating a procedure for addressing such conflicts of interest. There is no assurance that any such conflicts will be resolved in favour of the Company.  If any of such conflicts are not resolved in favour of the Company, the Company may be adversely affected. See Item 6. Directors, Senior Management and Employees for details of other companies that the Company’s officers and directors are involved with.

Risk Factors Relating to Title

6.

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

7.

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

8.

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

Risk Factors Relating to the Company’s Property Interests

9.

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

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10.

The properties in which the Company has an interest are in Mexico.  The Company’s property interests are located in Mexico.  Any changes in governmental laws, regulations, economic conditions or shifts in political attitudes or stability in Mexico are beyond the control of the Company and may adversely affect its business. See Item 4. Information on the Company – Business Overview – Carrying on Business in Mexico.

11.

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

12.

Environmental regulations are becoming more onerous to comply with and the cost of compliance with environmental regulations and changes in such regulations may reduce the profitability of the Company’s operations.  The Company’s operations are subject to environmental regulations promulgated by government agencies from time to time.  Environmental legislation provides for restrictions and prohibitions of spills, release or emission of various substances produced in association with certain mining industry operations, such as seepage from tailing disposal areas, which could result in environmental pollution.  Failure to comply with such legislation may result in the imposition of fines and penalties.  In addition, certain types of operations require submissions to and approval of environmental impact assessments.  Environmental legislation is evolving in a manner which means stricter standards and enforcement, fi nes and penalties for non-compliance are more stringent.  Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees.  The cost of compliance with environmental regulations and changes in such regulations may reduce the profitability of the Company’s operations. See Item 4. Information on the Company – Business Overview – Carrying on Business in Mexico – Environmental Regulation.

13.

Mexican Foreign Investment and Income Tax Laws apply to the Company.  Under the Foreign Investment Law of Mexico, there is presently no limitation on foreign capital participation in mining operations; however, the applicable laws may change in a way which may adversely impact the Company and its ability to repatriate profits.  Under Mexican Income Tax Law, dividends paid out of “previously taxed net earnings” are not subject to Mexican taxes if paid to a foreign investor.  Otherwise, such dividends paid to a foreign resident corporation are subject to the Mexican corporate tax rate, which presently is 29 percent over a gross up basis (amount of the dividend times 1.4085), payable by the Mexican company.  Currently, there is no withholding tax on dividends paid by a Mexican company to a foreign shareholder.

14.

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

15.

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

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Risk Factors Relating to Mining Generally

16.

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

17.

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

18.

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

19.

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

Risk Factors Relating to Financing

20.

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

21.

Funding and property commitments will result in dilution to the Company’s shareholders.  It is likely any additional capital required by the Company as described in Risk Factor #20 above will be raised through the issuance of additional equity which will result in dilution to the Company’s shareholders. Further, as described in Item 4. Information on the Company – Business Overview, the Company, from time to time, is required to issue Common Shares to earn its interests in properties. Such property share issuances will also result in dilution to the Company’s shareholders.

22.

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

23.

Lack of funding to satisfy contractual obligations may result in the Company’s loss of property interests.  The Company may, in the future, be unable to meet its share of costs incurred under agreements

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to which it is a party and the Company may have its property interests subject to such agreements reduced as a result or even face termination of such agreements.  The Company has options to acquire interests in properties in Mexico and in order to obtain ownership of such properties, it must make payments to the current owners and incur certain exploration expenditures on those properties. In order to secure ownership of these properties, additional financing will be required. Failure of the Company to make the requisite payments in the prescribed time periods will result in the Company losing its entire interest in the subject property and the Company will no longer be able to conduct certain aspects of its business as described in this Annual Report. The Company may not have sufficient funds to: (a) make the minimum expenditures to maintain its properties in good standing under Mexican law; and (b) make the minimum exp enditures to earn its interest in such properties.  In such event, in respect of any of the properties, the Company may seek to enter into a joint venture or sell the subject property or elect to terminate its option. See Item 4 - Information on the Company - Business Overview and Item 5 - Operating and Financial Review and Prospects – Tabular Disclosure of Contractual Obligations for details of the property payments the Company is required to make to earn its interests.

Miscellaneous Risk Factors

24.

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

25.

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

26.

The Penny-Stock Rule may limit trading in the Company’s Common Shares.  In October 1990, Congress enacted the “Penny Stock Reform Act of 1990.” “Penny Stock” is generally any equity security other than a security (a) that is registered or approved for registration and traded on a national securities exchange or an equity security for which quotation information is disseminated by The National Association of Securities Dealers Automated Quotation (“NASDAQ”) System on a real-time basis pursuant to an effective transaction reporting plan, or which has been authorized or approved for authorization upon notice of issuance for quotation in the NASDAQ System, (b) that is issued by an investment company registered under the Investment Company Act of 1940, (c) that is a put or call option issued by Options Clearing Corporation, (d) that has a price of five dollars (US) or more, or (e) whose issuer has net tangible as sets in excess of $2,000,000(US), if the issuer has been in continuous operation for at least three years, or $5,000,000(US) if the issuer has been in continuous operation for less than three years, or average revenue of at least $6,000,000(US) for the last three years.

The Company’s Common Shares are presently considered “penny stock” under these criteria. Therefore, the Common Shares are subject to Rules 15g-2 through 15g-9 (the “Penny Stock Rules”) under the Exchange Act. The “penny stock” trading rules impose duties and responsibilities upon broker-dealers and salespersons effecting purchase and sale transactions in the Company’s Common Shares, including determination of the purchaser’s investment suitability, delivery of certain information and disclosures to the purchaser, and receipt of a specific purchase agreement from the purchaser prior to effecting the purchase transaction.  Compliance with the “penny stock” trading rules affect or will affect the ability to resell the Company’s Common Shares by a holder principally because of the additional duties and responsibilities imposed upon the broker-dealers and salespersons recommending and effecting sale and purchase transactions in such securities.  In addition, many broker-dealers will not effect transactions in penny stocks, except on an unsolicited basis, in order to avoid compliance with the “penny stock” trading rules.  Consequently, the “penny stock” trading rules may materially limit or restrict the number of potential purchasers of the Company’s Common Shares and the ability of a holder to resell our stock.

So long as the Common Shares are within the definition of “Penny Stock” as defined in Rule 3a51-1 of the Exchange Act, the Penny Stock Rules will continue to be applicable to the Common Shares. Unless and until the price per share of Common Shares is equal to or greater than $5.00(US), or an exemption from the rule is otherwise available, the Common Shares may be subject to substantial additional risk disclosures and document and information delivery requirements on the part of brokers and dealers effecting

15

transactions in the Common Shares. Such additional risk disclosures and document and information delivery requirements on the part of such brokers and dealers may have an adverse effect on the market for and/or valuation of the Common Shares.

27.

Classification as a Passive Foreign Investment Company has adverse income tax consequences for United States shareholders.  The Company believes it is a Passive Foreign Investment Company (“PFIC”), as that term is defined in Section 1297 of the Internal Revenue Code of 1986, as amended, and believes it will be a PFIC in the foreseeable future. Consequently, this classification will result in adverse tax consequences for U.S. holders of the Company’s Common Shares. For an explanation of these effects on taxation, see Item 10. Additional Information – United States Federal Income Tax Consequences. U.S. shareholders and prospective holders of the Company’s Common Shares are also encouraged to consult their own tax advisers.

28.

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

ITEM 4.

INFORMATION ON THE COMPANY

History and Development of the Company

The Company was originally incorporated under the Company Act (British Columbia) on April 21, 1999 under the name “583882 B.C. Ltd.”.  On June 28, 1999, in anticipation of becoming a capital pool company, the Company changed its name to “Mega Capital Investments Inc.”  On April 22, 2003, the Company changed its name to “MAG Silver Corp.” to reflect its new business upon the completion of its Qualifying Transaction.  Effective March 29, 2004, the Company Act (British Columbia) was replaced by the Business Corporations Act (British Columbia). Our North American office and principal place of business is located at Suite 328, 550 Burrard Street, Vancouver, British Columbia, Canada, V6C 2B5 (phone:  604-630-1399).

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

The Company’s Common Shares were listed and posted for trading on the Exchange on April 19, 2000 under the symbol “MGA”.  Concurrent with the Company’s name change to MAG Silver Corp. on April 22, 2003, the trading symbol was changed to “MAG”.

The Company’s reporting currency is the Canadian dollar and all amounts in this discussion and in the consolidated financial statements are expressed in Canadian dollars, unless identified otherwise.  The Company reports its financial position, results of operations and cash flows in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”).  The Company’s significant accounting policies are set out in Note 2 of the audited consolidated financial statements.

The Company does not have an agent in the United States.

The Qualifying Transaction

On April 5, 2001, the Company entered into a letter of intent to acquire all of the issued and outstanding share capital of Advanced Disc Manufacturing Corporation (“ADMC”), a private British Columbia start-up company

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

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

In August 2002, the Company entered into an arms’ length agreement dated August 8, 2002 (the “Lagartos Agreement”) with Ing. Porfirio Cesar Augusto Padilla Lara, Dr. Peter Megaw and Dr. Carl Kuehn (collectively, the “Vendors”) pursuant to which the Company agreed to acquire (the “Acquisition”) 98% (later amended to include 99% registered ownership and beneficial ownership of the remaining 1%) of the issued and outstanding common shares of Lagartos.  Lagartos is a private company incorporated under the laws of the Mexican Republic in the mineral exploration business, as described below.  As consideration for the Acquisition, the Company agreed to pay the Vendors the sum of US$5,000, and to further pay the sum of US$50,000 for the reimbursement of funds advanced to secure the Juanicipio Option (described below under “The Juanicipio Property”), plus applicable purchase and transfer costs. The A cquisition of beneficial ownership of 100% of Lagartos was completed on January 15, 2003. The Company’s Qualifying Transaction was completed on April 15, 2003, with a concurrent financing, which raised gross proceeds of $5,750,000.  See Item 4 – Information on the Company – Business Overview – The Juanicipio Property for further information.

Expenditures

To December 31, 2006, approximately $2,125,000 had been spent by the Company on the Juanicipio Property.

To December 31, 2006 the Company has incurred $2,082,845 in exploration costs on the Don Fippi Property.

To December 31, 2006 the Company has incurred $1,376,293 in exploration costs on the Guigui Property.

To December 31, 2006, approximately $149,000 has been spent on the Sierra de Ramirez Property.  

To December 31, 2006 the Company has incurred exploration expenditures of $314,778 on the Adargas Property.

To December 31, 2006 the Company has incurred $1,213,475 in exploration expenditures on the Cinco de Mayo Property.

To December 31, 2006, approximately $2,197,360 has been spent on the Lagartos Property.

As at March 31, 2007, $11,196,134 has been advanced by the Company as an intercorporate loan to Lagartos, with no fixed terms of repayment, for acquisition costs of mineral rights of $2,339,765 and exploration expenditures of $8,192,256. The balance of $664,113 is made up of cash, receivables, and other operating and administration activities.

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

Business Overview

The Company is in the mineral acquisition, exploration and development business. The Company is in the exploration stage and there is no assurance that a commercially viable mineral deposit exists on any of our properties. Further exploration will be required before a final evaluation as to the economic and legal feasibility of any of the Company’s properties is determined. Even if the Company completes its exploration program and is

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successful in identifying a mineral deposit, it will have to spend substantial funds on further drilling and engineering studies before it will know if it has a commercially viable mineral deposit or reserve.

Carrying on Business in Mexico

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

Mining Regulation

The exploration and exploitation of minerals in Mexico may be carried out by Mexican citizens or Mexican companies incorporated under Mexican law by means of obtaining concessions (currently covering exploration and exploitation).  Concessions are granted by the Mexican federal government for a period of fifty years from the date of their recording in the Public Registry of Mining.  The term of mining concessions previously issued by the Mexican federal government (for exploration and/or exploitation) was automatically extended by the enactment of the recent amendments to the Mexican mining law.  Holders of concessions may, within the five years prior to the expiration of such concessions, apply for their renewal for the same period of time.  Failure to apply prior to the expiration of the term of the concession will result in termination of the concession.  Concessions are subject to annual work requirements and payment of surface taxes which are assessed and levied on a semi-annual basis.  Such concessions may be transferred or assigned by their holders, but such transfers or assignments must comply with the requirements established by the Mexican Mining Law and be registered before the Public Registry of Mining in order to be valid against third parties.

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

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

Foreign Investment Regulation

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

Environmental Regulation

Mexico has federal and state laws and regulations relating to the protection of the environment, including regulations concerning water pollution, air pollution, noise pollution and hazardous substances.  The principal environmental legislation in Mexico is the Ley General del Equilibrio Ecológico y la Protección al Ambiente (the “General Law of Ecological Balance and Environmental Protection” or the “General Law”), which provides for general environmental rules and policies, with specific requirements set forth in regulations on air pollution, hazardous substances, environmental impact and others (the “Environmental Regulations”).  Additionally, there are a series of “Mexican Official Norms” that establish ecological and technical standards and requirements on various environmental related matters (the “Ecological Standards”).

The Secretaría de Medio Ambiente y Recursos Naturales (the “Ministry of the Environment and Natural Resources” or “SEMARNAT” for its initials in Spanish) is the federal agency in charge of monitoring compliance with and enforcing the General Law, the Environmental Regulations and the Ecological Standards (collectively the “Environmental Laws”).  On enforcement matters the SEMARNAT acts mainly through the Procuraduría Federal

18

de Protección al Ambiente (the “Federal Bureau of Environmental Protection” or “PROFEPA” for its initials in Spanish) and in certain cases through other governmental entities under its control.

Environmental Laws also regulate environmental protection in the mining industry in Mexico.  In order to comply with these laws, a series of permits, licences and authorizations must be obtained by a concession holder during the exploration and exploitation stages of a mining project.  Generally, these permits and authorizations are issued on a timely basis after the completion of an application by a concession holder.  To the best of the Company’s knowledge, all of the Company’s property interests are currently in compliance with the Environmental Laws.

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

Currency

The official monetary unit of Mexico is the peso. The currency exchange rate freely floats and the country has no currency exchange restrictions.  Nevertheless, following the devaluation of the Mexican peso in December, 1994, uncertainties continue with respect to the financial situation of Mexico.  See Item 3 - Key Information – Risk Factors, specifically those risk factors dealing with currency fluctuation and inflation.

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

Year	Average Exchange Rate
2006	9.6025
2005	8.9918
2004	8.68913
2003	7.73190
2002	6.15751

Value Added Tax

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

The Juanicipio Property

Pursuant to an agreement dated July 18, 2002 as amended December 19, 2002 between Lagartos and Ing. Martin Bernardo Sutti Courtade I (“Sutti”), of Zacatecas, Mexico (the “Juanicipio Agreement”), Sutti granted to Lagartos an option (the “Juanicipio Option”) to acquire a 100% interest in the Juanicipio Property.  Sutti subsequently assigned his interest to Minera Venus, S.A. de C.V.  

Minera Venus, S.A. de C.V. was owned as to 99% by Lexington Capital Group Inc. and as to 1% by Jose Ruiz Lopez. Lexington Capital Group Inc. was owned as to 100% by Strategic Investments Resources Ltd.  Pursuant to a stock purchase agreement dated May 29, 2003 between the Company and Strategic Investments Resources Ltd., on July 16, 2003, for consideration of US$250,000 and 200,000 Common Shares of the Company at a price of $0.90 per share for a deemed value of $180,000, the Company acquired 100% of the issued shares of Lexington Capital Group Inc., thereby acquiring 99% ownership of the Juanicipio Property (with the remaining 1% held by Jose Ruiz Lopez). As a result of the acquisition of Lexington Capital Group Inc. by the Company, the Company did not have to incur any more of the originally required option payments and work commitments.  The Company subsequently merged and amalgamated Minera Venus, S.A. de C.V. into Lagartos and term inated the Juanicipio Agreement, thereby eliminating its obligations under the original Juanicipio Agreement to make any further option payments, fulfill any further work commitments or pay any royalty.

Pursuant to a letter of intent dated March 17, 2005 and a formal agreement effective July 1, 2005 (the “Agreement”) with Industrias Peñoles, S.A. de C.V. (“Peñoles”), the Company and Lagartos have granted to Peñoles or any of its

19

subsidiaries an option to earn a 56% interest in the Juanicipio Property in Mexico in consideration for Peñoles: (a) conducting US$5,000,000 of exploration on the property over four years as follows: (i) minimum US$750,000 in year 1, including a minimum of 3,000 metres of diamond drilling; (ii) US$1,000,000 in year 2; (iii) US$1,250,000 in year 3; and (iv) US$2,000,000 in year 4; and (b) Peñoles purchasing US$500,000 of Common Shares of the Company within 30 business days after the Agreement becomes effective at a price calculated based on the average closing price of the Company’s Common Shares for the 10 trading days prior to the purchase (which has been done); and (c) Peñoles purchasing US$500,000 of Common Shares of the Company within 30 business days after the first anniversary of the execution of the Agreement, taking into account the average closing price of the Company’s Common Shares for the 10 trading days prio r to such purchase (which has been done).

At December 31, 2006, Peñoles had spent US$3,360,000 and had completed 18,320 metres of diamond drilling on the Juanicipio Property. Peñoles invested US$500,000 in MAG by subscribing for a total of 621,577 Common Shares at a price of C$0.967 on signing, and on February 27, 2006 invested a further US$500,000 in MAG by subscribing for a total of 245,716 Common Shares at a price of C$2.35, to continue the contract into the second year. This second year includes a commitment for Peñoles to spend a minimum of US$1,000,000 on exploration on the Juanicipio Property. Drilling was re-started in August 2006 on a series of holes located 1.8 km west of the discovery hole JI-05-16.  In August 2006 Peñoles and MAG announced that the surface rights to an area covering the east-west projection of the Valdecañas Vein had been purchased for approximately US$1.40M.  Drilling on the discovery resumed in October 2006 and is continu ing into the first quarter of 2007 with four operating drill rigs.

The Don Fippi Property (Batopilas)

Under the terms of a November 18, 2002 option agreement (the “Don Fippi Agreement”) between the Company, Lagartos and Minera Bugambilias, S.A. de C.V. (“Bugambilias”), Bugambilias granted to Lagartos an option (the “Don Fippi Option”) to acquire a 100% interest in the Don Fippi Property.

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

Lagartos also agreed to pay to Bugambilias a 4.5% NSR.  

To December 31, 2006 the Company has incurred $2,082,845 in exploration costs on the Don Fippi Property.

All properties acquired by Lagartos, Bugambilias or any of their affiliates within the borders of the Don Fippi Property will become part of the Don Fippi Property and be included under the Don Fippi Agreement.

The Guigui Property

Under the terms of a November 18, 2002 option agreement (the “Guigui Agreement”) between the Company, Lagartos and Minera Coralillo, S.A. de C.V. (“Coralillo”), Coralillo granted to Lagartos an option (the “Guigui Option”) to acquire a 100% interest in the Guigui Property.  

On April 20, 2005 the Guigui Agreement was amended whereby the Company acquired a 100% interest in the Guigui Property through a one time final payment of 750,000 Common Shares.  The purchase eliminated the Company’s prior obligations to make further cash payments of US$450,000, incur further work expenditures of approximately US$1,840,000 and issue 604,003 additional Common Shares under the original Guigui Agreement.

Lagartos also agreed to pay to Coralillo a 2.5% NSR.

To December 31, 2006 the Company has incurred $1,376,293 in exploration costs on the Guigui Property.

All properties acquired by Lagartos, Coralillo or any of their affiliates within the borders of the Guigui Property will become part of the Guigui Property and be included under the Guigui Agreement.

Sierra de Ramirez  Property

Pursuant to an arm’s length agreement (the “Sierra de Ramirez Agreement”) dated as of December 14, 2003 among the Company, Lagartos and Minera Rio Tinto, S.A. de C.V. (“Rio Tinto”), Rio Tinto granted to Lagartos an option

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(the “Sierra de Ramirez Option”) to acquire a 100% interest in an exploration concession covering 4,443 hectares located in the Sierra de Ramirez district in Durango, Mexico (the “Sierra de Ramirez Property”), subject to a maximum 3% net smelter returns royalty.  

During the period ended December 31, 2006, the Company and Rio Tinto amended the terms of the original Sierra de Ramirez Agreement.  Under the amended terms, the Company will issue to Rio Tinto 20,000 Common Shares of the Company (issued) and make scheduled cash payments totalling US$1,300,000 ($75,000 paid) to December 14, 2010, with a final payment of US$650,000 of which up to US$500,000 may be paid in Common Shares of the Company.  Under the amended terms, all exploration work commitments were also eliminated.

Adargas Property

Pursuant to an arm’s length agreement (the “Adargas Agreement”) dated as of February 26, 2004 among the Company, Lagartos and Cascabel, Cascabel granted to Lagartos an option (the “Adargas Option”) to acquire a 100% interest in the Adargas property (the “Adargas Property”), subject to a 2.5% net smelter returns royalty.

During the year ended December 31, 2005, the Company and Cascabel amended the terms of the original Adargas Agreement.  Under the amended terms, half of each of the remaining property payments totalling US$775,000 due on or before July 26, 2009 may be paid in Common Shares at a deemed price per share equal to the average trading price of the Company’s Common Shares for 30 calendar days prior to the date of the payment and exploration expenditures of approximately a further US$742,000.  To that end the Company paid cash of US$62,500 and issued 30,840 Common Shares (2005 – US$37,500 and issued 59,830 Common Shares) for the property payment due July 26, 2006.

To December 31, 2006, the Company had incurred $314,778 in exploration costs on the Adargas Property.  

The Company terminated the Adargas Agreement in May 2007.

Cinco de Mayo Property

Pursuant to an arm’s length agreement (the “Cinco de Mayo Agreement”) dated as of April 15, 2004 among the Company, Lagartos and Cascabel, Cascabel granted to Lagartos an option (the “Cinco de Mayo Option”) to acquire a 100% interest in the Cinco de Mayo property (the “Cinco de Mayo Property”), subject to a 2.5% net smelter returns royalty.  

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

To December 31, 2006 the Company has incurred US$1,058,000 in exploration expenditures on the Cinco de Mayo Property.

Lagartos Property

The Company has acquired exploration concessions on mining claims (Lagartos) on the Fresnillo trend to the northwest and southeast of the Juanicipio Property.  These exploration concessions enable the Company to explore the mining claims covered by the concessions to December 2009, subject to the Company paying any applicable annual tax or other regulatory charges.

Organizational Structure

The Company is the registered owner of 99% of the issued Class I shares of Lagartos. The remaining 1% of the issued Class I shares of Lagartos is held by Dave Pearce, a director of the Company, in trust for the Company. This results in the Company effectively having 100% beneficial ownership of Lagartos. The registered and records office of Lagartos is located at Paseo de Los Tamarindos 60, Bosques de Las Lomas, 05120 Mexico, D.F., Mexico.

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

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Name of Subsidiary	Jurisdiction of Organization	Percentage of Voting Securities Owned of Controlled
Minera Los Lagartos, S.A. de C.V.	Mexican Republic	100%*

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

Property, Plants and Equipment

The Company’s administrative offices are located in leased premises at Suite 328, 550 Burrard Street, Vancouver, British Columbia, Canada V6C 2B5. The Company has no significant plant or equipment for its operations.  Equipment used for exploration or drilling is rented or contracted as needed.

THE JUANICIPIO PROPERTY

Certain disclosure in this section is based on a November 19, 2002 report entitled “The Geology and Exploration Potential of the Juanicipio Property, Fresnillo District, Zacatecas, Mexico” prepared by Clancy J. Wendt (“Wendt”), P.G., of Pincock, Allen and Holt, of Lakewood, Colorado; a June 30, 2006 report entitled “Independent Technical Report, Juanicipio Silver Project, Zacatecas State, Mexico” prepared by Stephen Wetherup, B.Sc., P.Geo., of Caracle Creek International Consulting Inc. of Vancouver, British Columbia; and a February 16, 2007 report entitled “Comments on the Juanicipio joint venture exploration program, Zacatecas, Mexico” prepared by David Ross, M.Sc., P.Geo., of Scott Wilson RPA, of Toronto, Ontario.

Property Description and Location

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

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The Juanicipio Property covers approximately 7,679 hectares (18,967 acres) and is in the northeastern part of the Sierra Valdecañas, a 13 km by 30 km long mountain range that lies immediately west of Fresnillo.  

The property lies on the western edge of the Mexican Altiplano or “Mesa Central”.  The Altiplano is that portion of central northern Mexico lying north of the Trans-Mexico Volcanic Belt, between the Sierra Madre Oriental and Sierra Madre Occidental.  

Water is abundant at depth and water rights for mine development should be part of the mineral rights. Power is located a few miles from the main part of the property and is available.

Accessibility

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

Ownership

The Juanicipio Property was originally titled to Juan Antonio Rosales of Zacatecas on August 9, 1999.  The Juanicipio Property was sold by Juan Antonio Rosales to Sutti. Pursuant to the Juanicipio Agreement, Sutti granted to Lagartos an option to acquire a 100% interest in the Juanicipio Property. Sutti then assigned his interest to Minera Venus, S.A. de C.V. As described above, the Company acquired ownership of Lexington Capital Group Inc., which in turn owned 99% of Minera Venus, S.A. de C. V., with the remaining 1% owned by Jose Ruiz Lopez, resulting in the Company indirectly owning 100% of the Juanicipio Property (note: 1% of the issued Class I shares of Lagartos is held by Dave Pearce, a director of the Company, in trust for the Company according to Mexican statute).

History

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

Geological Setting

District Geology

The Fresnillo District section consists of the lower Cretaceous rocks composed of calcareous graywacke with interbedded shales and limestones.  The limestones are unconformably overlain (perhaps in overthrust contact) by the Chilitos Fm., composed of marine andesitic volcaniclastic sediments, andesite tuffs and flows, and mafic intrusive bodies.  The section is capped by the Tertiary basal conglomerates and volcaniclastics and overlying rhyolite ash-flow tuffs.  Everything older than the Fresnillo Fm. is intruded by andesite dikes and a quartz-monzonite porphyry. The pre-Tertiary section has been folded, tilted (N55W, 30SW) and complexly thrusted.

Juanicipio Geology

The stratigraphy of the Juanicipio area is very similar to that of the adjacent Fresnillo District. The (apparently) oldest rocks seen to date at Juanicipio are fragments of graywacke seen on dumps in the Cerro Colorado area.  These appear similar to the upper Valdecañas Graywackes of the Proaño Group seen in the main portion of the Fresnillo District.

The next oldest rocks are thinly bedded calcareous shales (lower) and andesitic volcaniclastic rocks. These rocks are poorly resistant to weathering and crop out sparingly beneath materials sloughed off the bold outcrops of volcanic rocks along Linares Canyon and at Piedras.  The uppermost surface of the Chilitos is an irregular unconformity,

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locally marked by deep weathering.  This surface is buried by Tertiary volcaniclastic paleo-alluvium, surface debris, and a variety of tuffs welded and unwelded.

Environmental Surveys

The only environmental surveys done on the Juanicipio Property are those required for drill permitting.  These surveys involve preparing inventories of floral and faunal species and assessments of the impact of road building for drilling.  Drilling permits were granted to Sunshine Mining by SEMARNAT on the basis of these studies.  The permits have been regenerated in the name of Lagartos. With the signing of the agreement with Peñoles, the permits are now issued and are under the review of Peñoles.

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

At present the construction of drill roads and drill pads are the only disturbances found at Juanicipio and an active program of road reclamation is being conducted by the operator Peñoles under the auspices of SEMARNAT and the Mexican National permitting process.

Mineral Resources and Reserves

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

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

The silver rich veins encountered in holes JI03-01 and a wedge off of hole JI03-01 (JI03-01A) averaged approximately 6.9 g/t Au, 467 g/t Ag, 0.1% Zn over 2.99 m including 10.9 g/t Au and 689 g/t Ag over 2.00 m and 0.7 g/t Au, 401 g/t Ag, 0.1% Pb over 1.7 m respectively. These veins display several stages of brecciation and quartz sealing, local rhythmic microcrystalline quartz-pyrargyrite banding on the millimetre scale and open-space cox-comb textures and vugs. In hole JI03-01, the drill encountered a sizeable void probably about 1-1.5 m in width when it reached the mineralized vein which demonstrates the extensional nature of these structures. Of particular interest is the amount of gold contained in these intersections (6.8 g/t and 0.7 g/t) as well as in the Pb-Zn veins as gold is not common in the veins near Fresnillo and when present (Santo Niño Vein) is usually low (i.e. <0.5 g/t Au).

In late 2005, Peñoles discovered high-grade silver-gold mineralization in the Valdecañas Vein when Hole 16 intercepted 1,798 g/t Ag, 2.91 g/t Au, 3.43% Pb, and 5.51% Zn over 6.35 m. Since then, Peñoles obtained the permitting for definition drilling and road construction and has completed 10 diamond drill holes on the Valdecañas Vein discovery. The mineralization is now known to strike for more than 350 m, extend from 300m to 650 m below surface for an approximate down-dip distance of 450 m. Mineralized intercepts range from 1.0m to 12m  core length. True thickness is estimated to range between 0.7 and 10.0 metres. The amount of gold in the system appears to be higher than other mines in the district.

The Juanicipio Property remains at an early definition drilling stage.  No data has yet been generated from which to estimate resources and reserves.

Interpretation and Conclusions

Valdecañas lies 2.5 kilometres southwest from the principal production San Carlos Vein and 2.5 kilometres northwest from the Saucito Vein, currently undergoing preproduction development with construction of a 600m shaft and a 2,200 metre decline. Geologically and mineralogically the Valdecañas vein has affinities to the Santo Niño Vein, at one time the principal production vein at Fresnillo.  

The drilling to date clearly demonstrates that Valdecañas is a low-sulphidation vein typical of the Fresnillo District. However, the Valdecañas and the Juanicipio Veins (discovered by MAG in 2003), contain significantly higher gold

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grades (2-4 grams gold per tonne) than the average veins (0.5 grams gold per tonne) in the principal production parts of the district. Mineralization observed in drill core consists of precious metal rich, banded or brecciated quartz-pyrargyrite-acanthite-polybasite-galena-sphalerite veins. The Valdecañas vein has undergone multiple mineralizing events as evidenced by various stages of brecciation and quartz sealing, local rhythmic microcrystalline quartz-pyrargyrite banding and open-space cox-comb textures and vuggy silica. The vein exhibits the characteristic metal zoning of the principal veins at Fresnillo, observed as a change from silver and gold rich zones at the top to increased base metals in the deeper intersections. Notably, the gold rich mineralization cuts across the silver rich zones, which in turn cut earlier base-metal dominant stage indicating complex multi-stage mineralization combining stages seen separately in other parts of the district.  &nbs p;Overall, the precious metals rich zone has an interval of 350 m in vertical height, which is typical of major producing veins in the district although it lies slightly lower in elevation than the comparable precious metals zones being mined elsewhere in the district. Within ten to twenty metres of the vein, the wall rocks are progressively pervasively silicified and cut by quartz veinlets carrying pyrite-sphalerite-galena sulphide minerals. Alteration in the volcanoclastic /sedimentary host rock farther away from the vein is characterized by weak pyritization, moderate clay alteration, and calcite veining.   

Work Program

Drill Targets

Six major target structures were identified and were drilled in 2003 in a Phase I program, based upon their orientation, alteration history, geochemistry and geophysics: the Fe Oxide Pit Structure, Zonge Structure “A”, Zonge Structure “B”, Zonge Structure “C”, South Target, and Zonge Structure “D”. From this, several drill targets were delineated and MAG merely continued this work by funding a seven hole, 6146.16 metre drill program in 2003 and a two hole, 1448.41 metre program in 2004.

The 2003 drilling results confirmed that Fresnillo style silver and gold rich mineralization continued into Juanicipio and indicated that the exploration techniques and exploration model being used was indeed correct. In 2004, MAG drilled two additional diamond drill holes on targets generated by the 2003 drilling results.

In late 2004 MAG was approached by Peñoles who expressed a keen interest in the formation of a joint venture with the Company on the Juanicipio Property. MAG elected to pursue this proposal with Peñoles because of their strong interest and valuable understanding of the Fresnillo Silver Camp. Working closely with Peñoles would be a great boost to MAG and its property holdings in the district (see “Item 4 – Information on the Company - The Lagartos Property”).

Exploration over the previous six years by Peñoles in the Fresnillo District had focused on tracing the discovery of a series of new gold-silver-rich veins to the west of the mine area. Peñoles has also been expanding production at the Fresnillo mine with the recent development of the high-grade silver San Carlos vein system. Peñoles’ current exploration campaign resulted in the “Saucito” silver-gold vein discovery lying near the eastern boundary of the Juanicipio Property. MAG’s 2003-2004 exploration drilling intersected several vein structures with significant silver and gold values lying along the projection of the Saucito vein group. The initial joint venture exploration effort focused on testing the Juanicipio Property for new veins comparable to the new discoveries at Fresnillo/Saucito by Penoles.

A formal agreement with Peñoles was signed with an effective anniversary date of July 1, 2005.

Exploration work by Peñoles was initiated in August 2005 and by December 31, 2006 Peñoles was been deemed to have completed its commitments for year one and had committed to continue under the terms of the Agreement.

The principal features of the Agreement are:  

1.

Peñoles can earn a 56% interest in Juanicipio upon completion of a US$5,000,000 exploration program on or before the end of year 4 of the Agreement.  To December 31, 2006 Peñoles has spent approximately US$3,360,000 and completed 18,320 metres of diamond drilling.

2.

Peñoles was obligated to incur exploration expenditures of at least US$750,000 in year one, including a minimum of 3,000 metres of diamond drilling and Peñoles fulfilled these obligations.  

3.

A flexible and staged exploration program is included in the Agreement.  Exploration work will be supervised by a technical committee comprised of three representatives from Peñoles and two from MAG.  

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Peñoles and MAG are obliged to share their information in the district.  Part of the geological and exploration work will be conducted by MAG consultants and in-house personnel.   

4.

Exploration results from Juanicipio will be published as appropriate on an ongoing basis, with both companies to agree on the content.

5.

On signing of the Agreement Peñoles subscribed for a required US$500,000 private placement for a total of 621,577 Common Shares of the Company at a price of C$0.967 per share.  Later, on February 27, 2006, Peñoles subscribed for a second required US$500,000 private placement for a total of 245,716 Common Shares at a price of C$2.35 per share.

6.

Peñoles was obligated to incur further exploration expenditures of at least US$1,000,000 in year two and Peñoles has completed this obligation.

At the end of 2005 Peñoles had completed 7 diamond drill holes for a total of about 7,562 metres of drilling.  In early 2006 the Company announced that a new, high grade silver/gold vein had been intersected in two holes at Juanicipio.  On May 9, 2006 the Company announced that Peñoles was commencing further exploration drilling on the Juanicipio project in an area 1.8 km west of the new discovery.  In August 2006 the Company announced that Peñoles had purchased the surface rights to an area covering the projection of the new discovery for approximately US$1.4 million.  Subsequent to the land purchase drilling commenced on the “Valdecañas Vein” in October and by year end 2006 Peñoles had drilled another 10,758 metres and completed a total of US$3.36 million in exploration expenditures.  Assay results released in November 2006 through early 2007 for this drilling have confirmed that the Valdecañas vein is a significant high grade silver-gold vein discovery.

By mid to year end 2007 Peñoles is expected to have completed sufficient drilling to provide the basis for a resource calculation measured in terms of tonnes and grade. Work planned for 2007 will also include preliminary metallurgical studies; rock mechanic studies; mineralogical and fluid inclusion work; a 400 line kilometre airborne magnetic and electromagnetic survey and 3D modeling of the Valdecañas vein.  

To December 31, 2006, approximately $2,125,000 had been spent by the Company on the Juanicipio Property.

THE DON FIPPI PROPERTY

Certain disclosure in this section is based on a November 19, 2002 report entitled “The Geology and Exploration Potential of the Don Fippi Property, Batopilas District, Chihuahua, Mexico” prepared for the Company by Wendt.

Property Description and Location

The Don Fippi Property comprises seven exploration claims covering approximately 3,511 ha. in the Batopilas Mining District in southwestern Chihuahua State of Mexico (the “Don Fippi Property” or “Don Fippi”).

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

Accessibility, Climate, Local Resources, Infrastructure and Physiography

There is a good quality 70 km unpaved road connecting Batopilas to the paved highway that leads to Creel and thence to the cities of La Junta, Cuauhtemoc and Chihuahua 300 km to the east.  The main road runs along the river and is in very good condition through the town of Batopilas.  Conditions deteriorate south of the town, but the road is passable south to Satevo and west to Camuchin.  A few spur roads run from the main road to the area above the Porfirio Diaz Tunnel.  Access to the balance of the area is by foot or horseback.  Underground access is extensive through the Santo Domingo, San Miguel, Peñasquito and Pastrana mines.  The Porfirio Diaz Tunnel is caved about 1.5 km from the portal, leaving the back 2.5 km accessible only through stopes leading from the Peñasquito Level. Locals note that the tunnel has caved in the same place before and that past rehabilitation efforts have taken only a few day s.

Both water and power are available at the property.

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Ownership

On October 24, 1997, title to the Don Fippi Property vested with Bugambilias.  The Internal Property was acquired by the holders thereof as older claims expired and were liberated under Mexican mining law.  On November 18, 2002, Bugambilias granted to Lagartos an option on the Don Fippi Property. In 2005 the Company acquired a 100% interest in the Don Fippi (Batopilas) subject to royalties payable to Bugambilias.

History

The Batopilas (Don Fippi) project area covers approximately 4,800 hectares and is centered on the historic Batopilas Silver District. High-grade native silver outcrops in the Batopilas district were discovered around 1630 and production records begin in 1632.  The Batopilas District is located deep within the famous Copper Canyon country of south western Chihuahua State. Batopilas produced an estimated 200-300,000,000 ounces of silver between 1632 and 1920 from ore shoots of very high grade crystalline native silver hosted in calcite veins.

The Company has generated the first modern detailed geological and structural map of the district and is combining it with a number of modern geophysical and geochemical exploration techniques to locate new ore shoots quickly and effectively.

Geological Setting

Regional Geology

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

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

Batopilas District Geology

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

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

Mineralization and Alteration

Batopilas District Silver Mineralization

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

Exploration

Exploration by Bugambilias

Bugambilias began its exploration with a comprehensive literature search and data acquisition phase.  The resulting data have been compiled, digitized and registered to a common UTM grid and elevation model.

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Much of the historic data was incorporated into a mapping project conducted by Cascabel for the Mexican Mineral Resources Council (COREMI), now known as the Servicio Geologico Mexicano (SGM) (Mexican Survey) in 2000.  

Very little in the way of geochemistry and geophysics have been done in the past and much of the future work will be to complete these efforts to define targets for future work.

Environmental Surveys

Old workings and prospect pits dot the surface of the Don Fippi Property.  Most dumps, and all tailings were originally deposited on the banks of the Rio Batopilas, and 80 years of flooding have long since carried them away.

No environmental surveys have been done in the district by Bugambilias.

Mineral Resource and Mineral Reserves

The Don Fippi Property remains at an early exploration stage.  No data has yet been generated from which to estimate resources and reserves.

Exploration Program and Techniques

In general, the proposed exploration program has the principal goal of determining whether new geologic information and modern geophysical, geochemical and remote sensing techniques can locate blind high-grade native silver pods.    

A two-stage pre-drilling exploration program was undertaken in 2004 and 2005.  Phase I began with continued acquisition and compilation of available data for the district.  This included detailed structural analysis.  This was followed by detailed surface and underground geologic mapping and structural analysis.  

The surface work was complemented by underground mapping and sampling.  Some areas in the district required and will require some minor mine rehabilitation and mucking out of minor caved areas to ensure access.  The Porforio Diaz Tunnel (“PDT”) was re-opened back to the Roncesvalles Fault zone to re-establish flow-through ventilation and allow the mine to “breathe” during the mapping and sampling program in and along the main PDT level. Examination of the upper levels along the Roncesvalles was carried out in 2006.

Work Program

Because of the necessity of developing an effective set of exploration techniques for this large and topographically challenging district, MAG in 2004 selected a limited area in the central part of the district for initial exploration based on a combination of favorable geology, surface and underground access.  The area lies in a largely unexplored area across a major fault (the “Roncesvalles Fault”) and near a heavily mined area with excellent underground access via the 2.4 km long PDT.  The area is also accessible via one of the district’s few surface roads.

The Roncesvalles Fault was considered to have been a barrier to mineralizing fluids (several major veins were mined to it and stopped) despite the fact that numerous shallow Spanish colonial era workings occur beyond the structure.  In 2003 and 2004, MAG reopened and rehabilitated the PDT, performed extensive underground mapping and sampling and used the PDT for underground geophysical studies.  A simultaneous surface based mapping, sampling and NSAMT geophysical program was also executed and used as the basis for a district and detailed structural analysis of the area.  

The combined results have indicated several zones within the “focus area” where structures are favorably oriented and strong NSAMT anomalies coincide with the most favorable structures.  Preliminary drilling targets were indicated by these studies, and drilling permits were obtained.  Detailed NSAMT work was completed in early 2005 to refine these anomalies prior to drilling.  

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

MAG announced in January, 2006 that significant high-grade silver mineralization had been intersected in initial drilling at its 100% owned Batopilas Silver Project in Chihuahua State, Mexico. Hole 02 intersected the Don Juan with 1.70 metres (5.6 feet) of 2,358 grams per tonne silver (75.8 ounces per ton). The intersection is also described as part of a 3.0 metre (9.8 feet) zone locally rich in the silver bearing mineral acanthite (argentite).

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A second intercept, with visible native silver, was intersected approximately 22 metres (72 feet) deeper and assayed 132 grams per tonne silver (4.2 ounces) over 1.70 metres (5.6 feet).  This is a 3.0 metre wide breccia zone with visible native silver and lead and zinc sulphides. The richest native-silver bearing 0.20 metre of this intercept ran 721 grams per tonne silver (23 ounces).

Three holes were drilled in the vicinity of Hole 02. All four intercepts define a vein exhibiting a distinct geochemical signature containing silver along with anomalous arsenic, molybdenum, cobalt, nickel, lead and zinc. Although the high grade intercept was not repeated, the new vein remains open along strike in both directions and at depth.

This occurrence will be further evaluated during Phase Two drilling expected to start in the spring of 2007. The Don Juan zone is broadly coincident with the western limit of a well defined NSAMT geophysical anomaly and provides direct evidence to support using this same approach in other areas.

MAG completed Phase One of its Batopilas drilling program in April, 2006 at which time the rig was demobilized.  The rig was remobilized for the next phase of drilling in mid February 2007. A total of 12 holes were drilled for 3,025 metres.

The primary objectives of this program were threefold: to test the NSAMT geophysical method; to identify new structures previously not recognized; and to evaluate any mineralized structures identified. An additional benefit of this first program was to develop a geochemical database on the multi-element signature of classic Batopilas style mineralization. Two areas were selected for this first-stage evaluation: west of Roncesvalles Fault Zone and south of the San Martin Mine; and the north end of the historic Pastrana Vein that has not been worked since the 1860’s.

The first seven holes focused in the area of detailed NSAMT geophysics. Five of the holes tested a well defined NSAMT low resistivity zone and two holes targeted a NW trending structure hosting the San Martin Nuevo adit, a prospect containing native silver that was briefly worked in the early 1970’s.

The second hole, BA05-02, intercepted 1.7 metres of 2,357 grams per tonne Ag (75.8 opt) as well as a second 1.7 metre intercept further down the hole containing 132 grams per tonne Ag (4.2 opt). An undercut hole BA06-05 encountered 1.8 m of 118 grams per tonne Ag (3.8 opt) forty metres below the high-grade intercept. Subsequently Hole BA06-06, located 40 metres to the north-northwest encountered 3.0 metres of 27 grams per tonne (0.9 ounces).  All three intercepts define a coherent north 07^o  west striking, 78^o southwest dipping vein that shows a distinct geochemical signature containing high silver along with anomalous arsenic, molybdenum and plus or minus anomalous cobalt and nickel.

The “Don Juan” vein has not been tested to the south-southeast and remains open along strike in both directions and at depth. It will be further evaluated during Phase Two drilling which was initiated in mid February 2007.

San Martin Nuevo Drilling

Two holes, BA05-03 and BA06-04 were designed to test the area around and beneath the San Martin Nuevo workings. These showed multiple intercepts of the signature Batopilas chemistry of Ag-As-Mo-Pb-Zn; however, the best intercepts encountered in this area were around 1.0 metre zones in the 11 to 40 gram per tonne Ag range, or roughly 0.4 to 1.3 ounce per tonne. This is consistent with the “poddy” nature of high-grade Batopilas ore.

Pastrana Drilling

Five holes BA06-08 through BA06-012 focused on the Pastrana Vein to evaluate this historic past producing structure beyond its productive zones. Drilling to date has identified the northern extension of Pastrana Vein with 4 intersections over a strike length of 140 metres and a vertical distance of 40 metres. The best intercept was in Hole 10 with 0.73 metres of 47 grams per tonne Ag (1.5 opt).

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

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Future Plans

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

The net result of this work coupled with the results of the geochemical soil and silt program helped identify a number of targets that are to be tested in the 2007 program.

These are identified as: the Dolores structure outside of the diorite to the north of Dolores mine; the Roncesvalles mine area to the north and at depth where it crosses Arroyo de las Minas; the Pastrana vein and offsets to the north; and the north side of Cerro de Las Animas including Animas Mine area. Further drilling is warranted where the Don Juan Vein is open in all directions with best drill section being the furthest south-southeast in the direction of significant past producing mines including Arbitrios and Todos Santos.

To December 31, 2006, approximately $2,083,000 has been spent on the Don Fippi Property.

THE GUIGUI PROPERTY

Certain disclosure in this section is based on a November 19, 2002 report entitled “The Geology and Exploration Potential of the Guigui Silver, Lead, Zinc Project, Santa Eulalia District, Chihuahua, Mexico” prepared for the Company by Wendt.

Property Description and Location

The Guigui Property comprises four exploration and three exploitation claims, as defined by the Mexican mining law, covering approximately 4,553 ha. of land between and south of the East and West Camps of Santa Eulalia Mining District in central Chihuahua State of Mexico (the “Guigui Property” or “Guigui”).

It is located 23 kilometres east of Chihuahua City and three kilometres by improved dirt road.  The district occupies the approximate center of the north-northwest elongate, fault-bounded Sierra Santa Eulalia (also called Sierra Santo Domingo) whose peaks rise up to 700 m above the surrounding plains. Water and power are available locally and are near the property boundary.

The Santa Eulalia District is divided into two portions called the West and East Camps, based on a combination of geography, production, and style of mineralization.  The West Camp lies on the western flank of the range and the East Camp lies on the eastern fringe of the range.  The 2.5 km wide intervening zone is known as the Middle Camp.  The Middle Camp has numerous mineralized showings and small mines, but has not been systematically explored.  The Guigui Property covers the entire area south of the East and West Camps and a significant portion of the southeastern Middle Camp.

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Mexican Highway 15, connecting Chihuahua City to Mexico City, runs along the west side of the range, within about 4 km of the western side of the Guigui Property.  A two-lane paved road cuts off Highway 15 and leads to the town of Santa Eulalia (also known as Aquiles Serdan).  Good quality paved and hard surfaced roads lead north and east from Santa Eulalia to the Buena Tierra, Potosi, and San Antonio Mines, or south into Guigui, which is crossed by a series of well-maintained ranch roads.

Ownership

Cascabel initially filed for the Guigui claims in 1992 and all such claims were subsequently transferred to Coralillo in 2000.  On November 18, 2002, Coralillo granted to Lagartos an option in respect of the Guigui Property. In 2005 the Company acquired a 100% interest in the Guigui Property subject to royalties payable to Coralillo.

History

There appears to have been little work done in the Guigui area prior to 1986, except for minor prospecting by unknown individuals.  

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Work completed between 1991 and 2002 included:

●

detailed geologic mapping of the Guigui Property, with emphasis on mapping volcanic stratigraphy, structures cutting the volcanics and alteration.  Geochemical samples were taken of all structures and mineralized outcrops.  This was accomplished via Landsat image analysis, 1:40,000 black and white air-photo analysis, and 1:10,000 scale geologic outcrop mapping.

●

geophysical surveys to locate the intrusive centre and to determine the thickness of the volcanic cover.  The surveys included gravimetrics, ground magnetics, CSAMT and NSAMT.

●

defining and permitting of drilling targets based on geology, geochemistry and geophysics.  SEMARNAT approved 44 drilling sites, with permission for an initial 12-hole program in 1998.  These permits have been renewed annually and remain in effect.

Geological Setting

Geologic work that has been performed on the property consists of detailed geology mapping, geochemical sampling of outcrops, structures, and mineralized areas, geophysical surveys, and permitting of drill targets.

The Santa Eulalia District contains continuous, zoned mineralization and alteration concentrated on the east and west flanks of a southerly-plunging anticline.  Mineralization occurs in the same stratigraphic interval in close temporal and spatial relationship to distinctive felsite sills and dikes.   

Exploration efforts to test the mineralized zones have included reconnaissance and detailed geologic and alteration mapping, geochemical sampling, and Gravity, Magnetics and Audio Magneto Tellurics (CSAMT and NSAMT) surveys.

These geologic and geophysical results were the basis for permitting a 6-12 hole-drilling program in 1998.  However, a significant additional area (>400 hectares in the Guigui 2, 3 and 4 claims) has been recently added to the claim package and it is recommended to advance the newly acquired ground to the same level of knowledge prior to drilling.  This should include detailed geologic outcrop mapping with particular attention paid to the areas between Guigui and known mineralization and the approximately 1 km long portion of the San Antonio Graben that lies within Guigui 2.  This mapping should be accompanied by geochemical sampling of all mineralized and altered outcrops.  Additional NSAMT and/or CSAMT geophysical lines should be run over targets identified by the above geologic mapping and consideration should be given to geophysically refining the previously identified targets within Guigui prior to drilling.  

Environmental Surveys

The only environmental surveys done on the Guigui Property to date are those required for drill permitting.  These include inventories of floral and faunal species and an assessment of the impact of road building for drilling.

The only surface disturbances in the claim are small prospect pits from which there has been no production and three old fluorite workings.  There are no inherited environmental liabilities from these disturbances.

Drilling

No drilling had been done within Guigui proper prior to 2003.  However, the 12 initial targets permitted for Advanced Projects remain to be drilled.  The permits are in the name of Cascabel and have been renewed annually since 1998.

Work Program

A six hole, 4,500 metre program was initiated in 2003 and continued into 2004.  In four holes, a range of intrusions, breccias, and visually distinctive alteration were intersected under the volcanic capping in the central Guigui area, but no significant mineralization was encountered. The presence of intrusive rocks is however, considered to be significant and will require further follow-up.

Significantly, two holes drilled 1,200 metres south and along the major graben structure that hosts the San Antonio Mine to the east of the district, cut 30-100 metres of manganoan-calcite cemented breccia in turn cut by narrow sulphide veinlets. Hole 5 returned a narrow intercept that assayed 3.5 ounces per ton of silver and 5.60% lead and

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4.3 % zinc over 0.40 metres.  More significantly, Hole 6 returned with an 8.3 metre intercept of 4.2 ounces per ton silver. Most telling is that these intersections were within a 30 to 100 metre wide zone of manganoan-calcite (alteration) brecciation containing abundant veinlets and stringers of silver, lead and zinc minerals. The presence of base metal and silver mineralization within a broad alteration halo, not unlike the upper reaches of the East Camp deposits, is considered to be a most important development.

MAG carried out a three hole (07, 08, 09) drill program along the San Antonio Graben in the eastern portion of Guigui in 2005.  The first two holes were designed to follow up on positive results from 2004 drilling (holes 05 and 06) in the West Fault of the graben.  Hole 07 cut the highest grade silver mineralization intersected to date within Guigui or 1.40 metres of 242 grams per tonne Silver (7.8 ounces).  The best values were associated with members of a felsite dike swarm that cores mineralization in Grupo Mexico’s San Antonio Mine approximately 1800 metres farther to the north along the same structure.  

The results from Hole 08 indicate that the dikes cut in holes 06 and 07 are sourced farther to the west within the Guigui Property.  MAG also drilled a single hole into the upper zones of the East Fault of the graben (hole 09) and cut four narrow felsite dikes with anomalous silver values.   This was a very shallow test of this target and the results are considered encouraging for subsequent drilling in this area.

We continue to cut strong indications of silver and base metal mineralization in the same structures and intrusions and within a broad alteration halo, not unlike the upper reaches of the East Camp deposits. This important development leads management of MAG to contend that these intersections demonstrate that mineralization similar to the rich deposits of the San Antonio Mine, just 1200 metres to the north of our drill area and East Camp can be traced to the south and onto MAG’s Guigui Property.

It is important to note that Grupo Mexico, the largest Mexican mining company, restarted mining operations at the San Antonio Mine in mid 2005.

MAG now controls all of the ground to the immediate south and between the East and West Camps of the Santa Eulalia Mining District, making it a significant player in any future developments in this historically silver rich district.

Limited field work was conducted at Guigui in 2006 other than surface mapping in the areas of fluorite-cemented breccia bodies located in the central portion of the Guigui Property. It is believed that these bodies represent the upper vestiges of Carbonate Replacement processes at depth.

To aid in the design of a new drill program, an 800 line kilometre airborne electromagnetic and magnetic survey was flown in late 2006. Preliminary results are very encouraging and are to be integrated in early 2007 with the substantial data base we have accumulated at Guigui. Work will be designed to follow up on this integration leading to a drill plan.

To December 31, 2006, approximately $1,376,000 has been spent on the Guigui Property.

THE SIERRA DE RAMIREZ PROPERTY

The Sierra de Ramirez District lies in eastern Durango State, approximately 80 km west of the famous Providencia-Concepcion del Oro, Zacatecas District.  Sierra de Ramirez is a typical Mexican CRD target that produced an estimated 750,000 - 1,000,000 tons of very high grade (1000-3000 g/T Ag) Ag-Pb-Zn ores from Spanish Colonial times until the mid 1960s.  Until recently the land status was high fractionated.  MAG has acquired over 80% of the district under option from Rio Tinto of Chihuahua, Mexico.  Significant geotechnical work was conducted by a major company in the 1990s, but they abandoned the property during the downturn in the mineral industry and prior to drilling.  

The Sierra de Ramirez is a 7 by 15 km E-W oriented anticlinal fold composed of Jurassic Zuloaga Limestone cut by at least 2 rhyolitic plugs. Mineralization consists of Ag-Pb-Zn replacement veins in the western part of the area and mantos hosted in distinct carbonate strata in the central and eastern portions.  Small amounts of skarn are known to exist proximal to the rhyolite areas. Exploration of the district will involve the unraveling of the overall controls and metal zoning to best define the most favorable areas for further exploration.  

Initially MAG executed district-scale mapping and sampling in 2004, with a focus on determining the size of the mineralized zone(s) and confirming existing concepts of district metal zoning.  The resulting district-scale metal

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ratio zoning patterns revealed three principal mineralization centers.  On a positive note, two of them were found to extend well outside the limits of MAG’s original 4,443 hectare land position.  MAG subsequently filed claim to an additional 11,167 hectares of land, including a vacated claim internal to their original holding, bringing our holdings in the district to over 15,500 hectares.  

Inclement weather and other priorities resulted in very little field work in 2006.

Sierra de Ramirez is the least developed carbonate replacement property but one with a great deal of potential. In recognition of that, MAG contracted a 1,400 line kilometre airborne magnetic and electromagnetic survey (AEM) that was completed in mid-February 2007.  The preliminary results have provided a number of direct drill targets and will no doubt be a significant enhancement to targets generated by our geochemical and geological work to date. Field programs aimed and defining specific drill targets will be carried out in mid 2007.

In order to make up for lost time due to weather and access delays in the past we were able to renegotiate the terms of our option agreement with Rio Tinto to earn a 100% interest in the property. In effect we were able to roll the agreement back two years and continue with the payment schedule as outlined in the original agreement. This allowed us the time to fly the airborne survey and conduct the appropriate follow up programs.  Drilling could begin by late 2007.

To December 31, 2006, approximately $149,000 has been spent on the Sierra de Ramirez Property.

THE ADARGAS PROPERTY

MAG acquired its option to earn an interest in the Adargas property from Cascabel, who worked the property under contract from 1991 to 1998.  Over $250,000 was spent in surface and underground mapping, geophysics and drilling.  One of two diamond drill holes recorded 0.30 m of Zn-Pb-Ag bearing massive sulfides at the intersection of a strong CSAMT anomaly. This anomaly was also interpreted to be the inferred 200 m down-plunge projection of the principal Adargas Dike-contact chimney orebody.  With the industry downturn in the late 1990’s, interest in the property faded and it was subsequently abandoned. Cascabel reacquired the property in 2002 and MAG has unrestricted use of all existing core and data.   

Management is of the view that the targets recently identified at Adargas are deep and high risk in nature.  Promising exploration results on other projects have taken priority over Adargas.  Efforts to joint venture the property have been unsuccessful to date.  Subsequent to year end, on May 17, 2007, the Company terminated its option on the property according to the terms of the Adargas Agreement and all deferred acquisition and exploration costs associated with the property were written off.  To December 31, 2006, the Company had incurred $432,061 in acquisition costs and $314,778 in exploration costs on the Adargas Property.

THE CINCO DE MAYO PROPERTY

Cinco de Mayo is a 2,500 hectare CRD prospect located in north-central Chihuahua, Mexico.  Cinco de Mayo lies directly along the same major deep crustal break that underlies these important CRD/skarn systems and shares many of the key features of the distal parts of Santa Eulalia.

Regional Setting

Cinco de Mayo is one of MAG’s four Carbonate Replacement Deposit Style properties and is located in Northern Chihuahua State, Mexico.Carbonate Replacement Deposits (CRD’s) are the second largest contributor of Mexico’s historic silver production, almost 40% after epithermal veins. The acquisition of this property evolved from a review of data collected during 15 years of systematic exploration and a study of the geologic characteristics of the CRDs prospects in Chihuahua by Dr. Peter Megaw and Cascabel. This compilation revealed key features that set the important CRD systems like Santa Eulalia, Naica, Bismark, and San Pedro Corralitos apart from the numerous small CRD showings and Mississippi Valley Deposits that occur elsewhere in the region.   CRDs form a spectrum ranging from stock contact skarns, through dike and sill contact skarns and massive sulfides, to massive sulfide chimneys and mantos, with large systems rang ing from 25 to 100 million tons of high-grade ores. Mexico’s CRDs occur along the intersection of the Laramide-aged Mexican Thrust Belt and the Tertiary volcanic plateau of the Sierra Madre Occidental, a zone where structurally prepared carbonate host rocks were invaded by metals-rich intrusive bodies.  

At Cinco de Mayo the regional story is very strong: the project lies on the western bounding fault of the Chihuahua Trough which hosts major CRDs like Santa Eulalia (MAG’s Guigui Property), Naica, San Pedro Corralitos and

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Terrazas. This gives rise to a thick carbonate section to host mineralization and a major regional zone of weakness for both ground preparation and intrusive emplacement.

Local Geology

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

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

Exploration Program

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

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

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

MAG also claimed approximately 2,500 hectares of open ground to the north of its original land package under option along a major regional fault zone revealed through detailed satellite image analysis.

MAG’s 2006 drill program at Cinco de Mayo once again moved a project from a conceptual model to drilling new lead, zinc and silver mineralization.  The area of the program is a broad valley covered by recent soils (alluvial), so all of the targets drilled were buried (blind) geophysical and geochemical anomalies that were consistent with our exploration model.

MAG conducted 45.1 line Km of NSAMT surveys on lines running northwest parallel to the Cinco de Mayo ridge and northeast across the ridge and parallel to the outcropping jasperoid vein swarms. In general the NSAMT data show a great deal of “texture” that is consistent with the regional understanding and with the details of our exploration model. The data show a profound northwest-southeast linearity and strong “electrical” contrasts along the northeast-southwest lines.

MAG has also completed a major biogeochemical sampling program. Copper and zinc show the best definition, revealing a strong anomaly to the northeast of the manto mineralization located on the nearby ridge and apparent linear patterns in the anomalies that line up with the jasperoid vein swarms. In general, the biogeochemistry shows the strongest and most coherent anomalies at the north and south ends of ridge, especially on its northeast flanks

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(where there are also more prospect pits). There are also a series of anomalies on the SW side of the ridge that correspond closely with jasperoid veinlet swarms.

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

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

The results from the first 9 holes (3,975 metres) drilled at Cinco de Mayo were very noteworthy.  Six of the nine holes were drilled over a strike length of 2.0 km along a very prominent NW trending fault zone that cuts strongly folded massive limestone and limestone-rich sedimentary rocks.  Structurally controlled replacement style massive to semi-massive sulphide mineralization occurring within broad mineralized and altered zones was intercepted in all six of the holes. Mineralization is open in all directions. At least trace mineralization was encountered in the remaining 3 holes.

The intersections occur within broader zones of dispersed lead, zinc and iron sulphides developed in the surrounding sedimentary rocks.  For example, the intercept in Hole 7 occurs within a 65 metre wide zone of stringer and dispersed lead and zinc sulphides. In addition, Hole 09 intersected over 68 metres of strong hornfels (alteration related to an igneous heat source) with widespread associated dispersed and veinlet zinc and lead sulphide mineralization. Hole 09 lies at the northernmost end of the 2 km long drilling pattern and was drilled on a geophysical anomaly detected in the initial processing of a 450 line kilometre airborne electromagnetic and magnetic survey. This structure can be traced for kilometres in either direction with this detailed magnetic survey. Significantly, intersecting hornfels in the Hole 09 airborne survey anomaly suggests that buried mineralization-related igneous heat sources can be detected geophysically, which will be a valuable ingred ient in focusing ongoing exploration programs.

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

To December 31, 2006, approximately $1,213,475 has been spent on the Cinco de Mayo Property.

THE  LAGARTOS PROPERTY

Consistently elevated gold values from MAG’s 2003 Juanicipio drilling have suggested that a larger scale zoning may be in place than had previously been considered for the Fresnillo/Juanicipio/Lagartos district. MAG subsequently examined surrounding areas for possible extensions to the system(s), both in outcrop and under cover.  Satellite image and structural analysis of the region indicated areas of strong alteration similar to that drilled at Juanicipio. This alteration is also coincident with a very prominent regional structure that hosts at least three, one billion-plus ounce silver deposits.  In response, MAG acquired over 125,000 hectares of new claims, the “Lagartos Property Package”, on the most promising of areas using the Fresnillo/Juanicipio model. Preliminary work involved regional mapping and an orientation NSAMT geophysical survey as a possible first pass reconnaissance tool.

In 2004, the areas with the strongest alteration and NSAMT responses were mapped in detail and sampled. In addition, detailed NSAMT, SWIR (Short-Wave Infrared) surveying and an in-depth structural analysis were carried out.   The most promising area was identified about 35 km from Juanicipio (Lagartos NW) and two holes were drilled through covered terrain and targeted on the combined results of geophysics and geology. The best hole intersected 65 metres of strong advanced argillic alteration followed by 700 metres of strong silicification with abundant pyrite.  The drilling also significantly encountered several narrow mineralized structures, the best of which ran 1.3 g/T Au over nearly 1.5 metres.     

The results indicate that we are within a high-level portion of a major epithermal system (i.e. Fresnillo) only 30 km along the structural trend from the Fresnillo silver district. Anomalous values of gold (up to 1.3 g/t), silver, mercury, antimony, and arsenic are found throughout the holes and add to the significance that an epithermal system is in place.

Having confirmed that MAG has located a “buried” epithermal system (at Cerro Cacalote) within highly prospective terrain, our next step will be to quickly identify areas and/or vectors to where we can best concentrate our

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exploration efforts. We will accomplish this through ongoing and planned programs of geochemistry (bio-geochemistry) and geophysics.

At Cerro Cacalote, within the Lagartos NW land package, detailed biogeochemistry sampling carried out in 2005 outlined three distinct silver, lead, zinc and copper biogeochemical anomalies. These are in the order of four to eight kilometres long and are coincident with similar structural vein controls of the adjoining Fresnillo silver mine district. The anomalies fall exactly on the targeted structures identified from the high resolution satellite images and geological mapping.  Given the position and intensity of the multi-element anomalies and their location on trend with the world’s largest silver mine, these areas are immediate drill targets.

MAG also continued to enlarge its land position by claiming strategically located properties in 2005 as they became eligible for acquisition.  To that end, MAG added an additional 12,534 hectares to its Lagartos SE land package east of the El Saucito discovery and west of the Zacatecas District.

Exploration work on the Lagartos Property is still in its early stages.  Zones of advanced argillic alteration and silicified Tertiary volcanic rocks have been identified on the two large Lagartos claim blocks from satellite imagery and have been confirmed through first pass geological, geochemical sampling and drilling.

Work in the Lagartos Northwest area, 35 km to the northwest of Fresnillo, in 2005 and 2006 focused on a zoned alteration centre, very similar to that seen at Juanicipio, surrounded by alluvial cover. Biogeochemical and ground magnetic surveys of the flanking covered areas revealed linear magnetic anomalies parallel to the Fresnillo Silver Trend with overlapping and concentric biogeochemical silver, lead, zinc and copper anomalies. These structures and their associated metal anomalies can be traced for distances approaching eight kilometres. The drill program was designed to test structural intersections and geochemical anomalies in settings similar to those found at Juanicipio and Fresnillo.

A 13 hole drill program, totaling 7,364 metres, was carried out on these combined anomalies in 2006. All of the holes encountered strongly altered volcanic rocks under shallow alluvial cover, and three intersected the “Guerrero Terrane” rocks that host the veins at Fresnillo and Juanicipio. One hole, drilled through alluvial cover 4 kilometres from the nearest outcrop, cut 3.5 metres grading 14 to 49 grams per tonne (0.5 to 1.5 ounces per tonne) silver.

The results indicate that silver mineralization is associated with this alteration centre and that our exploration methods are helping to “see through” alluvial cover. Additional exploration in the northwest is clearly justified.

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

Work at San Gabriel in 2006 (Lagartos SE) identified a number of significant vein structures that appear exposed at a very high level where further work is focused. A 2,200 line kilometre airborne survey is expected to be completed in early 2007 and will contribute to designing a drill program for the North Zacatecas area in mid 2007.

To December 31, 2006, approximately $2,197,360 has been spent on the Lagartos Property.

NONE OF THE EXPLORATION CONCESSIONS IN WHICH THE COMPANY HOLDS AN INTEREST ARE KNOWN TO CONTAIN COMMERCIAL QUANTITIES OF MINERALS OR PRECIOUS GEMS. ALL EXPLORATION PROGRAMS PROPOSED FOR ANY EXPLORATION CONCESSIONS IN WHICH THE COMPANY HAS AN INTEREST ARE EXPLORATORY IN NATURE.

Management reviews the carrying value, for accounting purposes, of mineral rights and deferred exploration costs as described in Item 5 - Operating and Financial Review and Prospects.

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ITEM 4A.

UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

The Company’s main objective is to acquire mineral properties, finance their exploration and, if warranted, develop and bring them into commercial production either directly or by way of joint venture, option agreements or through a combination of the foregoing.  The Company is aiming to develop its exploration concessions to a stage where they could be exploited at a profit.  At that stage, its operations would to some extent be dependent upon the world market price of any minerals mined.

The Company had total deferred exploration costs and mineral rights of $14,963,069 at December 31, 2006 compared to $10,321,579 at December 31, 2005, $7,310,714 at December 31, 2004, $3,372,220 at December 31, 2003, and $116,552 at December 31, 2002.  During Fiscal 2001 and most of 2002, the Company focused on the identification and completion of a Qualifying Transaction in industries other than mineral exploration and development (See Item 4 - Information on the Company).  In August 2002, the Company entered into an agreement to acquire interests in exploration concessions and an operating subsidiary in Mexico.  During 2003, the Company commenced the exploration of its exploration concessions in Mexico.  This commencement of business in Mexico resulted in the Company incurring the deferred exploration costs described above.  The Company currently has no cash flow from operations and the recoverability of deferred explor ation costs and mineral rights is dependent upon the existence of economically recoverable reserves, securing and maintaining title and beneficial interest in the properties, the ability to obtain the necessary financing to meet its obligations under various option agreements and the completion of the development of its properties, future profitable production, or alternatively, upon its ability to dispose of its interests on an advantageous basis.  As a result, there is substantial doubt about the ability of the Company to continue as a going concern.  

Future write-downs of properties are dependent on many factors, including general and specific assessments of mineral resources, the likelihood of increasing or decreasing the resources, land costs, estimates of future mineral prices, potential extraction methods and costs, the likelihood of positive or negative changes to the environment, taxation, labour and capital costs.  We cannot assess the monetary impact of these factors at the current stage of our properties.  The dollar amounts shown as exploration concession interests are direct costs of maintaining and exploring properties.  These amounts do not necessarily reflect present or future values.

Additional financing will be required for further exploration and development of our properties.  Although we have been successful in the past in raising funds, there is no assurance that we will be able to raise the necessary funds to meet our funding obligations.

The Company has not been required to make any material expenditure for environmental compliance to date.  The operations of the Company may in the future be affected from time to time in varying degrees by changes in the environmental regulations.  Both the likelihood of new regulations and their overall affect upon the Company vary greatly and are not predictable.  See Item 3 - Key Information - Risk Factors.

Operating Results

The discussion and analysis in this section compares the operating results of the year ended December 31, 2006 to the year ended December 31, 2005, and the year ended December 31, 2005 to the year ended December 31, 2004 and should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto provided at Item 17 - Financial Statements.  At the present time, the Company’s expenditures consist of primarily exploration costs, professional fees, listing and sustaining fees, and general and administrative expenditures. The Company presently has no production from its interests in exploration concessions and has no significant revenue items.

Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

Interest income for the year ended December 31, 2006 amounted to $208,593 as compared to $80,432 in 2005. Cash on hand during 2006 on average was higher than in 2005 and as a result, interest income was also higher in 2006.

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During 2006 the Company again focused its exploration efforts in Mexico. The Company conducted exploration programs in seven projects for $4,016,728 in 2006, while $1,429,307 was spent on the same seven projects in 2005. Additional work was also completed and paid for by joint venture partner Peñoles on the Company’s Juanicipio project (see Financial Statement Note 7(a) Mineral Rights and Deferred Exploration Costs). Exploration concession acquisition costs of $646,029 were incurred in 2006 as compared to $1,581,558 in 2005. Of the acquisition costs incurred in 2006, $7,567 was incurred by the issuance of 3,363 Common Shares at the price of $2.25 per Common Share; $141,864 was incurred by the issuance of 61,680 Common Shares at the price of $2.30 per Common Share; and $55,000 was incurred by the issuance of 20,000 Common Shares at the price of $2.75 per Common Share. The balance was paid in cash.

Expenses for the year ended December 31, 2006 totalled $4,075,160 compared to $1,891,270 in 2005.  The single largest variance year on year was a non-cash charge in 2006 of $2,341,159 for Stock Compensation Expense relating to the issuance of 1,670,000 incentive stock options.  In 2005 there was an issuance of 1,240,000 incentive stock options and this expense was $611,353.  Accounting and legal fees in 2006 amounted to $300,978 versus $294,964 in 2005.

Telephone and Office expense increased to $365,880 in 2006 from $252,257 in 2005 as the Company conducted more business in 2006. Management and Consulting fees increased in 2006 to $485,993 versus $415,117 in 2005.  In 2006 the Company’s President was paid $139,500 in compensation (2005 - $149,900).  Arm’s length individuals were also paid for services related to legal contract completions, project management, corporate administration and geological services.

In 2006 Travel expenses totalled $212,168 (2005 - $169,993). Travel expenses related to visiting the Company’s properties and business contacts in Mexico, to the attendance of trade shows, and general broker and financier meetings.  Filing Fees paid to the Exchange and the British Columbia Securities Commission in 2006 were $48,782 (2005 - $42,254) while Shareholder Relations expense was $288,687 (2005 – $109,803).  The Company’s VP Corporate Development handled Shareholder Relations duties “in house” during 2005 and 2006.

Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004

Interest income for the year ended December 31, 2005 amounted to $80,432 as compared to $66,999 in 2004. Cash on hand during 2005 on average was higher than in 2004 and as a result, interest income was also higher in 2005.

During 2005 the Company again focused its exploration efforts in Mexico. The Company conducted exploration programs in seven projects for $1,429,307 in 2005, while $1,976,622 was spent on the same seven projects in 2004. Additional work was also completed and paid for by joint venture partner Peñoles on the Company’s Juanicipio project (see Financial Statement Note 7(a) Mineral Rights and Deferred Exploration Costs). Exploration concession acquisition costs of $1,581,558 were incurred in 2005 as compared to $1,961,872 in 2004. Of the acquisition costs incurred in 2005, $12,713 was incurred by the issuance of 13,382 Common Shares at a price of $0.95 per Common Share, $1,215,000 was incurred by the issuance of 1,500,000 Common Shares at a price of $0.81 per Common Share, $91,397 was incurred by the issuance of 119,660 Common Shares at a price of $0.764 per Common Share and $8,712 was incurred by the issuance of 12,446 Common Shares at a price of $0.70 per Common Share and $9,467 was incurred by Common Shares allotted but not issued in 2004 that were issued in 2005 (9,191 Common Shares at a price of $1.03 per Common Share). The balance was paid in cash.

Expenses for the year ended December 31, 2005 totalled $1,891,270 compared to $800,896 in 2004.  The single largest variance year on year was a non-cash charge in 2005 of $611,353 for Stock Compensation Expense relating to the issuance of 1,240,000 incentive stock options.  In 2004 there were no incentive stock options issued and this expense was Nil.  Accounting and legal fees in 2005 amounted to $294,964 versus $198,330 in 2004.  During 2005 professional fees were higher than in 2004 as the Company was negotiating and preparing for the Peñoles joint venture transaction in Mexico as well as for other property option related contracts and settlements.  

Telephone and Office expense increased to $252,257 in 2005 from $190,910 in 2004 as the Company conducted more business in 2005. Management and Consulting fees increased substantially in 2005 to $415,117 versus $173,444 in 2004.  The increase came as a result of the Company hiring a full-time President and a VP Corporate Development.  In 2005 the Company’s President was paid $149,900 in compensation (2004 - $93,870).  Arm’s length individuals were also paid for services related to legal contract completions, project management, corporate administration and geological services.

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In 2005 Travel expenses totalled $169,993 (2004 - $52,839). Travel expenses related to visiting the Company’s properties and business contacts in Mexico, to the attendance of trade shows, and general broker and financier meetings.  Filing Fees paid to the Exchange and the British Columbia Securities Commission in 2005 were $42,254 (2004 - $41,163) while Shareholder Relations expense was $109,803 (2004 – $81,277).  The Company’s VP Corporate Development handled Shareholder Relations duties “in house” during 2005.  Other items related to general and administrative categories totalled an aggregate credit amount of $4,471, including a foreign currency exchange gain of $29,506. In 2004 these other expense items totalled $62,933 including a foreign currency exchange loss of $48,349.

Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003

Interest income for the year ended December 31, 2004 amounted to $66,999 as compared to $77,468 in 2003.  Cash on hand during 2004 on average was lower than in 2003 and as a result, interest income was also lower in 2004.  

During 2004 the Company continued to focus its acquisition and exploration efforts in Mexico.  The Company conducted exploration programs on seven projects for $1,976,622 in 2004, while $2,019,740 was spent on four properties in 2003.  Exploration concession acquisition costs of $1,961,872 were incurred in 2004 as compared to $1,235,928 in 2003.  Of the acquisition costs incurred in 2004, $880,467 was incurred by the issuance of 628,905 Common Shares at a price of $1.40 per Common Share, $300,000 was incurred by the issuance of 150,000 Common Shares at a price of $2.00 per Common Share, $88,812 was incurred by the issuance of 80,738 Common Shares at a price of $1.10 per Common Share, and $309,473 was incurred by the issuance of 499,150 Common Shares at a price of $0.62 per Common Share, while the balance was paid in cash.

Expenses for the year ended December 31, 2004 totalled $800,896, compared to $915,007 in 2003.  The Company was very active in both 2003 and 2004 and the amount of exploration expense in each year was similar.  Accounting and legal fees in 2004 amounted to $198,330 versus $250,954 in 2003.  During 2003 these professional fees were higher than in 2004 as the Company was actively pursuing the completion of a Qualifying Transaction and a financing by way of a public offering in Canada.  The Company also completed the 100% acquisitions of Minera Los Lagartos, S.A. de CV and Lexington Capital Group Inc.  The Lagartos acquisition was completed on January 15, 2003.  The main assets held in Lagartos are its interests in the Juanicipio, Don Fippi and Guigui properties located in Mexico.  The Lexington acquisition was completed on July 16, 2003.  Lexington’s sole asset is its indirect interest in the Juanicipio I claim.  The Company has consolidated the financial position and results of operations in its financial statements for both Lagartos and Lexington since their acquisition in 2003.  

Telephone and Office expense increased to $190,910 in 2004 from $94,185 in 2003.  The Company operated and occupied full time office premises, with administrative services, for the whole year in 2004 for the first time.  Management and Consulting fees totalled $173,444 in 2004 (2003 - $183,912), of which $93,870 was paid to the Company’s President (2003 - $97,325).  The balance was paid to arm’s length individuals for services related to legal contract completions, project management, corporate administration and geological services.

Other significant expense items in 2004 were Travel – $52,839 (2003 - $130,732); Filing Fees paid to the Exchange and the British Columbia Securities Commission - $41,163 (2003 - $54,924); and Shareholder Relations - $81,277 (2003 – $61,359).  Other items related to general and administrative categories totalled an aggregate amount of $62,933 (2003 - $63,633).  Travel expenses related to visiting the Company’s properties and business contacts in Mexico, to the attendance of trade shows, and general broker and financier meetings.

Lagartos

Lagartos was incorporated in September 2001 and commenced operations in June 2002 when negotiations commenced leading to the Juanicipio Agreement.  Lagartos then entered into the Don Fippi Agreement and the Guigui Agreement.  The results of operations of Lagartos are consolidated into the financial statements of the Company commencing January 15, 2003.

Critical Accounting Policies

The Company’s accounting policies are set out in Note 2 of the accompanying Consolidated Financial Statements.  There are two policies that, due to the nature of the mining business, are more significant to the financial results of the Company.  These policies relate to the capitalizing of mineral exploration expenditures and the use of estimates.

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Under Canadian GAAP, the Company defers all costs relating to the acquisition and exploration of its exploration concessions.  Any revenues received from exploration of these concessions are credited against the costs of the concession.  When commercial production commences on any of the Company’s properties, any previously capitalized costs would be charged to operations using a unit-of-production method.

Management reviews the carrying value, for accounting purposes, of mineral rights and deferred exploration costs on at least a quarterly basis for evidence of impairment.  This review is generally made with reference to the project economics, including the timing of the exploration work, work programs proposed, exploration results achieved by the Company and others in the related area of interest and any changes in the status of the property.  When the results of this review indicate that a condition of impairment exists, the Company estimates the net recoverable amount of the deferred exploration costs and related mining rights by reference to the potential for success of further exploration activity and the likely proceeds to be received from a sale or assignment of rights.  When the carrying values of mineral rights or deferred exploration costs are estimated to exceed their net recoverable amounts, a provision is made for the decline in the value.

When assessing for evidence of impairment, the Company also refers to the other factors relevant for companies in the extractive industries.  These factors include unfavourable changes in the property (including disputes as to title), inability to access the site, environmental restrictions on exploration or development and political instability in the region in which the property is located.  Furthermore, the Company concludes an event of impairment has occurred when any of the following conditions exist:

a.

the Company’s work program on a property has significantly changed such that previously-identified resource targets or work programs are no longer being pursued;

b.

exploration results are not promising and no more work is being planned in the foreseeable future; or

c.

remaining lease terms are insufficient to conduct necessary exploration work.

The existence of uncertainties during the exploration stage and the lack of definitive empirical evidence with respect to the feasibility of successful commercial development of any exploration property does create measurement uncertainty concerning the calculation of the amount of impairment.  The Company relies on its own or independent estimates of further geological prospects of a particular property and also considers the likely proceeds from a sale or assignment of the rights.  The latter will often be indicated by offers that the Company or others have received for exploration rights in the same or similar geological area.  In many cases, the identified condition of impairment will result in a determination that no further exploration activity be performed and the amount of the writedown is the entire carrying value of the interest.

Under US GAAP, the Company currently expenses all costs relating to the exploration of mineral properties.  At such time as a final bankable feasibility indicates that a property has a commercially mineable deposit, development costs for that property would be capitalized.  When commercial production commences on any such property, any previously capitalized costs would be charged to operations using a unit-of-production method.  Furthermore, effective in 2004, the costs of acquisition of exploration concession rights are considered to have the characteristics of tangible assets as specified in EITF 04-2: “Whether Mineral Rights are Tangible or Intangible Assets.” As a result, under US GAAP, the Company is capitalizing the cost of the exploration concession rights acquired until there is either evidence that they have become impaired, or commercial production is achieved.

The Company’s financial statements are based on the selection and application of significant accounting policies, some of which require management to make estimates and assumptions.  Estimates are based on historical experience and on our future expectations that are believed to be reasonable; the combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results are likely to differ from our current estimates and those differences may be material.  

Differences between Canadian and United States Generally Accepted Accounting Principles

During the year ended December 31, 2006, net loss under Canadian GAAP was $3,866,567 compared to a net loss of $7,862,028 under US GAAP.  The difference relates principally to the expensing of exploration costs of $3,995,461 under US GAAP which are capitalized as part of deferred exploration costs under Canadian GAAP.

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During the year ended December 31, 2005, net loss under Canadian GAAP was $1,810,838 compared to a net loss of $2,757,486 under US GAAP.  The difference relates principally to the expensing of exploration costs of $1,429,307 under US GAAP which are capitalized as part of deferred exploration costs under Canadian GAAP, net of the impact of the use of the fair value method to record stock compensation expense for employees and directors under Canadian GAAP.

During the year ended December 31, 2004, net loss under Canadian GAAP was $733,897 compared to a net loss of $2,710,519 under US GAAP.  The difference relates principally to the expensing of exploration costs of $1,976,622 under US GAAP which are capitalized as part of deferred exploration costs under Canadian GAAP.

During the year ended December 31, 2003, net loss under Canadian GAAP was $837,539 compared to a net loss of $4,058,279 under US GAAP.  The difference relates to the expensing of exploration costs of $2,019,740 under US GAAP which are capitalized as part of resource property interests under Canadian GAAP, the recording of amortization expense of $601,000 related to exploration concession rights acquired from Lagartos and the recording of compensation of $600,000 relating to Common Shares held in escrow for which the conditions of their release have been satisfied during the period.

There were no differences in the Company’s financial statements between Canadian GAAP and US GAAP for the year ended December 31, 2001.

Under Canadian GAAP, exploration costs are capitalized until such time as management determines that the value of the interests in resource properties are impaired or commercial production of the mineral resource properties commences.  Under US GAAP, all costs relating to the exploration of mineral properties are expensed until such time as a final bankable feasibility indicates that a property has a commercially mineable deposit, after which development costs for that property would be capitalized.  

Under US GAAP, the satisfaction of conditions for the release of escrow shares is compensatory in nature.  Under Canadian GAAP, the Company’s Common Shares issued with escrow restrictions are recorded at their issue price and are not revalued upon their release from escrow.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, Share-Based Payment, which revised SFAS No. 123, Accounting for Stock-Based Compensation.  SFAS No. 123R will supersede APB Opinion 25, Accounting for Stock Issued to Employees.  SFAS No. 123R requires measurement and recording to the financial statements of the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award.  Additionally, SFAS No. 123R requires the benefits of tax deductions different from recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature.  SFAS No. 123R will become effective for all registrants as of the first fisca l year beginning after June 15, 2005. Therefore, the required effective date is January 1, 2006.

In December 2004, the FASB issued SFAS 153, Exchanges of Non-Monetary Assets - An Amendment of APB Opinion No. 29.  The guidance in APB No. 29, Accounting for Non-Monetary Transactions, is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged.  The guidance in that Opinion, however, included certain exceptions to that principle.  This Statement amends APB No. 29 to eliminate the exception for exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance.  A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  This Statement will be effective for fiscal periods beginning after June 15, 2005.  Earlier application is permitted for non-monetary asset exchanges incurred during fiscal years beginning after the date this Statement is issued.  The Company believes this Statement will have no impact on the financial statements of the Company once adopted.

In March 2005, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment, which provides guidance on the interaction between SFAS No. 123R and certain SEC rules and regulations, as well as on the valuation of share-based payments. SAB No. 107 provides interpretive guidance related to valuation methods (including assumptions such as expected volatility and expected term), first time adoption of SFAS No. 123R in an interim period, the classification of compensation expense and disclosures subsequent to adoption of SFAS No. 123R.  We are currently evaluating the impact of SAB No. 107 on our consolidated financial statements.

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In March 2005, the FASB ratified Emerging Issues Task Force Issue No. 04-6, Accounting for Stripping Costs Incurred during Production in the Mining Industry, (“EITF 04-6”) which addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be included as a component of inventory to be recognized in Costs Applicable to Sales in the same period as the revenue from the sale of inventory.  As a result, capitalization of stripping costs is appropriate only to the extent product inventory exists at the end of a reporting period and the carrying value is less than the net realizable value. Adoption of EITF 04-6 will have no impact on the consolidated financial statements of the Company once adopted.

In March 2005, the FASB issued Interpretation 47 (“FIN 47”), Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB No. 143.  FIN 47 clarifies that the term “conditional asset retirement obligation” as used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity.  The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. FIN 47 requires a liability to be recognized for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 was effective for fiscal years ending after December 15, 2005.  The adoption of FIN 47 did not have a material impact on our c onsolidated financial position, results of operations or cash flows.

In May 2005, the FASB issued SFAS Statement No. 154, Accounting Changes and Error Corrections (“SFAS 154”).  SFAS 154 is a replacement of Accounting Principles Board Opinion No. 20 (“APB 20”) and FASB Statement No. 3.  SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error.  SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and we adopted this standard on January 1, 2006.  We do not expect that the adoption of SFAS 154 will have a material impact on our consolidated results of operations, financial condition and cash flows.

In June 2005, the FASB issued Staff Position Paper (“FSP”) 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments, superseding EITF 03-1.  FSP 115-1 will replace the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF 03-1 with references to existing other-than-temporary impairment guidance.  FSP 115-1 is effective for reporting periods beginning after December 15, 2005.  Adoption of FSP 115-1 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

On July 14, 2005, the FASB issued an exposure draft of a proposed Interpretation, Accounting for Uncertain Tax Positions - an Interpretation of FASB Statement No. 109.  The proposed interpretation would require companies to recognize the best estimate of an uncertain tax position only if it is probable of being sustained on audit by the taxation authorities.  Subsequently, the tax benefit would be derecognized (by either recording a tax liability or decreasing a tax asset) when the probable threshold is no longer met and it is more likely than not that the tax position will not be sustained.  The proposed Interpretation would be effective for years ending after December 15, 2005 and treated as a change in accounting policy.  It would require companies to assess all uncertain tax positions and only those meeting the probable threshold at the transition date would continue to be recognized.  The difference between t he amount previously recognized and the amount recognized after applying the proposed Interpretation would be recorded as the cumulative-effect adjustment in the 2005 statement of earnings (restatement is not permitted).  The comment period ended September 12, 2005.  The Company does not expect the proposed Interpretation to have a material impact on its results.

In September 2005, the EITF reached a consensus on Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty (EITF 04-13). The EITF concluded that entities that enter into inventory purchase and sales transactions with the same counterparty, in contemplation of one another, should combine the transactions and treat them as non-monetary exchanges involving inventory. The consensus is effective for new inventory arrangements entered into, or modifications or renewals of existing inventory arrangements occurring, in interim or annual reporting periods beginning after March 15, 2006. The adoption of EITF 04-13 did not have any impact on the Company’s operating results or financial positions.

In October 2005, the FASB issued FASB Staff Position FAS 123(R)-2, Practical Accommodation to the Application of Grant Date as Defined in FAS 123(R) (“FSP 123(R)-2”).  FSP 123(R)-2 provides guidance on the application of grant date as defined in SFAS No. 123(R).  In accordance with this standard a grant date of an award exists if (a) the award is a unilateral grant and (b) the key terms and conditions of the award are expected to be communicated to an individual recipient within a relatively short time period from the date of approval. We will adopt this standard when

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we adopt SFAS No. 123(R), and do not anticipate that the implementation of this Statement will have a significant impact on our results of operations.

In February 2006, the FASB issued Statement of Financial Accounting Standard No. 155, Accounting for Certain Hybrid Financial Instrument (SFAS 155), an amendment of SFAS 140 and SFAS 133. SFAS 155 permits the Company to elect to measure any hybrid financial instrument at fair value (with changes in fair value recognized in earnings) if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounted for separately under SFAS 133. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irreversible. This Statement will be effective for all instruments acquired, issued, or subject to a remeasurement event occurring after the beginning of the Company’s first fiscal year that begins after September 15, 2006. The Company expects that the adoption of SFAS 155 will have no impact on its operating results or financial position.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). This interpretation clarifies the recognition threshold and measurement of a tax position taken on a tax return, and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact that adoption of FIN 48 will have on its financial condition or results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS 157). This statement defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements.  SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company expects that adoption of SFAS 157 will not have a material effect on its financial condition or results of operation.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statement No. 87, 88, 106 and 132R” (SFAS 158). This Statement requires an employer to recognize in its statement of financial position an asset of a plan’s over funded status or a liability for a plan’s under funded status, measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions), and recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. The Company expects that adoption of SFAS 158 will have no impact on its financial condition or results of operations.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 permits existing public companies to record the cumulative effect of initially applying this approach in the fiscal year ending after November 15, 2006 by recording necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings.  The Company expects that adoption of SAB 108 will not have a material impact on its financial condition and results of operations.

Liquidity and Capital Resources

Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

Cash and cash equivalents at December 31, 2006 amounted to $3,506,930 as compared to $7,560,193 at December 31, 2005. Exploration expenditures during the year ended December 31, 2006 on the Company’s projects in Mexico were $3,995,461 (2005 - $1,429,307).  Mineral property acquisition costs totalled $646,029 (2005 - $1,581,558) of which $441,598 (2005 - $253,736) was in cash and $204,431 (2005 - $1,327,822) was by issuance of 85,043 (2005 – 1,654,679) Common Shares.  General and administrative expenses were $4,075,160 (2005 - $1,891,270) including a non-cash charge of $2,341,159 (2005 - $611,353) for stock compensation expenses.  Corporate activity levels in 2006 were greater than in 2005, once again resulting in higher general and administrative costs.  Funds received during the year were primarily from the issue of equity: warrant exercises amounted to $1,275,079 (2005 - $1,046,566), stock option exercises were $366,870 (2005 - $22,750), and the net proceeds from Common Shares issued by way of private placement were $577,433 (2005 - $6,771,672).  The Company’s cash on hand also generated interest income of $208,593 (2005 - $80,432). Accounts payable and accrued liabilities relating to general corporate expenses and exploration expenditures totalled $350,368 at December 31, 2006 (2005 - $393,621).

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Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004

Cash and cash equivalents December 31, 2005 amounted to $7,560,193 as compared to $1,866,360 at December 31, 2004. Exploration expenditures during the year ended December 31, 2005 on the Company’s projects in Mexico were $1,429,307 (2004 - $1,976,622). Mineral property acquisition costs were $1,581,558 (2004 - $1,961,872) of which $253,736 (2004 - $373,653) was in cash and $1,327,822 (2004 - $1,578,752) was by issuance of 1,654,679 (2004 – 1,358,793) Common Shares.  General and administrative expenses were $1,891,270 (2004 - $800,896) including a non-cash charge of $611,353 (2004 – Nil) for stock compensation expenses.   General and administrative expenses were higher in 2005 due to increased corporate activity.  Funds received during the year were primarily from the issue of equity: warrant exercises were $1,046,566 (2004 - $480,562), stock option exercises were $22,750 (2004 - $50,800), and the net proceeds f rom private placements of Common Shares were $6,771,672 (2004 - $Nil). The Company’s cash on hand generated interest income of $80,432 (2004 - $66,999).  Accounts payable and accrued liabilities relating to general corporate expenses and exploration expenditures totalled $393,621 at December 31, 2005 (2004 - $61,837). The Company was actively drilling in Mexico near the end of December 2005, resulting in higher payables at December 31, 2005 versus 2004.

The Company and its subsidiary Lagartos entered into a formal agreement (the “Agreement”) dated October 10, 2005 with effect as of July 1, 2005 with Industrias Peñoles, S.A. de C.V. (“Peñoles”) whereby Peñoles or any of its subsidiaries have acquired an option to earn a 56% interest in the Juanicipio Property in Mexico in consideration for Peñoles: (a) conducting US$5,000,000 (minimum US$750,000) of exploration on the property over four years as follows: (i) US$750,000 in year 1 (completed); (ii) US$1,000,000 in year 2 (committed as of February 2006); (iii) US$1,250,000 in year 3; and (iv) US$2,000,000 in year 4; and (b) Peñoles purchasing US$500,000 of Common Shares of the Company within 30 business days after the signing of the initial letter of intent (the “LOI”) becomes effective at a price calculated based on the average closing price of the Company’s Common Shares for the 10 tradi ng days prior to the purchase (which has been done); and (c) Peñoles purchasing US$500,000 of Common Shares of the Company within 30 business days after the first anniversary of the execution of the LOI, taking into account the average closing price of the Company’s Common Shares for the 10 trading days prior to such purchase (completed February 2006).  This Agreement with Peñoles both provides the Company with additional working capital and funds further exploration and development of the Juanicipio Property.

To the end of the 2005 year Peñoles had completed seven diamond drill holes for a total of about 5,747 metres of drilling and spent approximately US$622,440 in work on the Juanicipio Property. In early 2006 the Company announced that a new, high grade silver/gold vein had been intersected in two holes at Juanicipio. On May 9, 2006, the Company announced that Peñoles was commencing further drilling on the project.

The Company has sufficient free working capital to meet present requirements and execute its business plan.  The Company expects it will need to raise additional funding by way of the issuance of equity in the next twelve to eighteen months.  However, there is no assurance that additional funding will be available to the Company and the Company may again become dependent upon the efforts and resources of its directors and officers for future working capital.

Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003

Cash and cash equivalents at December 31, 2004 amounted to $1,866,360 as compared to $4,795,822 at December 31, 2003.  Exploration expenditures during the year ended December 31, 2004 related to exploration on the Company’s projects in Mexico were $1,976,622 (2003 - $2,019,740).  Mineral property acquisition costs were $1,961,872 (2003 – $1,235,928) of which $373,653 (2003 – $705,928) was in cash and $1,588,219 (2003 – $530,000) was by issuance of 1,358,793 (2003 – 900,000) Common Shares.  General and administrative expenses were $800,896 (2003 – $915,007)   Funds received during the year were primarily from the issue of equity related to warrant exercises for $480,562 (2003 - $3,068,996) and stock option exercises for $50,800 (2003 - $26,000).  The Company’s cash on hand generated interest income of $66,999 (2003 – $77,468).  Accounts payable and accrued liabilities rela ting to legal fees, finance fees, agency fees and exploration expenditures totalled $61,837 at December 31, 2004 (2003 - $208,018).

During 2003 the Company took steps to acquire 100% of Lexington Capital Group Inc.  Lexington’s sole asset is its indirect interest in the Juanicipio I claim.  In 2003 the Company also acquired 100% of Minera Los Lagartos, S.A. de CV.  The main assets held in Lagartos are its interests in the Juanicipio, Don Fippi and Guigui properties located in Mexico.  As a result of these acquisitions in 2003, the Company effectively acquired 100% of the Juanicipio Property and therefore extinguished all of the originally required option payments and work commitments to occur after such acquisition.  (See Item 4 - Information on the Company –The Juanicipio Property)

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Research and Development, Patents and Licenses

This section is not applicable to the Company.

Trend Information

Other than the obligations under the Company’s property option agreements set out in Item 4 - Information on the Company – Business Overview and Item 5 - Operating and Financial Review and Prospects – Tabular Disclosure of Contractual Obligations, there are no identifiable trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, the Company’s liquidity either increasing or decreasing at present or in the foreseeable future.  The Company will require sufficient capital in the future to meet its acquisition payments and other obligations under property option agreements for those properties it considers worthy to incur continued holding and exploration costs upon.  The need to make such payments is a “Trend” as it is unlikely that all such obligations will be eliminated from the Company’s future business activities.  The Company intends to utilize cash on hand in order to meet its obligations under property option agreements until at least March 31, 2009. It is unlikely that the Company will generate sufficient operating cash flow to meet these ongoing obligations in the foreseeable future. Accordingly, subsequent to March 31, 2009, the Company may need to raise additional capital by issuance of equity.  At this time the Company has no plan or intention to issue any debt in order to raise capital for future requirements.

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

Off-Balance Sheet Arrangements

The Company does not utilize off-balance sheet arrangements.

Tabular Disclosure of Contractual Obligations

Payments due by period

Contractual Obligations	Total	Less than 1 year	1-3 Years	3-5 Years	More than 5 years
Sierra de Ramirez Property(1)	US$1,225,000	US$125,000	US$425,000	US$675,000	Nil
Adargas Property(2)	US$1,517,000	US$417,000	US$1,100,000	Nil	Nil
Cinco de Mayo Property(3)	US$775,000	US$175,000	US$600,000	Nil	Nil
TOTAL	US$3,517,000	US$717,000	US$2,125,000	US$675,000	Nil

⁽¹⁾ Of the final payment in the amount of US$650,000 due December 14, 2010, up to US$500,000 may be paid in Common Shares of the Company.  See Item 4 - Information on the Company - The Sierra de Ramirez Property.

⁽²⁾ Comprised of US$742,000 in exploration work requirements and US$775,000 in option payments. Half of each of the remaining option payments may be paid in Common Shares at a deemed price per share equal to the average trading price of MAG’s Common Shares for 30 calendar days prior to the date of the payment. See Item 4 - Information on the Company - The Adargas Property.

⁽³⁾ Comprised of US$775,000 in option payments. Half of each of the remaining option payments may be paid in Common Shares at a deemed price per share equal to the average trading price of MAG’s Common Shares for 30 calendar days prior to the date of the payment.  See Item 4 - Information on the Company - The Cinco de Mayo Property.

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ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

The following table sets forth all of our current directors and executive officers, with each position and office held by them.  Each director’s term of office expires at the next annual general meeting of shareholders of the Company.

All of our directors and senior management own, as a group, 4,820,423 Common Shares or 12.71% of all of the outstanding Common Shares as at May 31, 2007.

Name, Age, Position Held and Place of Residence	Director since	Principal Occupation During the Past Five Years
Daniel T. MacInnis, 55 Director, President & Chief Executive Officer British Columbia, Canada	February 1, 2005	February 2005 to present, President of the Company; October 2003 to February 2005, VP Exploration, Sargold Resources Corp., Sardinia, Italy; from 1999 to October 2003, Mr. MacInnis ran D. MacInnis Exploration and Consulting in Reno, Nevada. Worked within the Noranda / Hemlo / Battle Mountain Gold group from 1974 to 1999
Peter K. Megaw, 54 Director Tucson, Arizona, USA	February 6, 2006	President of IMDEX/Cascabel and co-founder of Minera Cascabel S.A. de C.V. since 1988, a geological consulting company; Co-founder and principal holder of Minera Coralillo S.A. de C.V., the vendor of  the Guigui Property; Co-founder and principal of Minera Bugambilias S.A. de C.V., the vendor of the Don Fippi Property; Consulting geologist for the Company since 2003;  Director of Candente Resources since 2004.
David G.S. Pearce, 52 Director & Audit Committee Member British Columbia, Canada	June 11, 1999	1999 to April 2003, President of the Company; 1992 to present, President of Mega Capital Corp., an investment holding company with real estate and equity holdings in the United States and Canada; 2003 to present, Director and Chief Financial Officer of Max Resource Corp.; June 1995 to present, President of Function Gate Hardware Ltd. and Function Gate Holdings Ltd.; 1992 to present, director of Kruger Capital Corp., a publicly trading company which finances real estate development; 1990 to present, President of Palmer Beach Properties, a private real estate development and investment company with real estate, retail and equity holdings in Canada.
Eric H. Carlson, 48 Director & Audit Committee Member British Columbia, Canada	June 11, 1999	July 1994 to present, President and CEO, Anthem Properties (1993) Ltd. (formerly Anthem Properties Corp.), a property development company; 1992 to present, President of Kruger Capital Corp.
R. Michael Jones, 43 Director & Audit Committee Member British Columbia, Canada	March 31, 2003	President and Director of Platinum Group Metals Ltd. from February 2000 to present, a platinum focused company with a deposit interest in South Africa and exploration properties in Canada; director and advisor to West Timmins Mining Inc. from 2006 to present; Director of Jerico Exploration from June 2004 to present; previously Vice President of Corporate Development for Aber Resources Ltd. from September 1997 to September 1999.

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Jonathan Rubenstein, 58 Director British Columbia, Canada	February 26, 2007	Mr. Rubenstein practiced law until 1993 and has been a mining executive since that time; 1983 to present, director of Cumberland Resources, a TSX listed mining company with gold deposit in Nunavut; 2000 to present, a director of  Redcorp Ventures, a TSX listed mining company developing the Tulsequah Chief sulphide deposit in British Columbia; and 2006 to present, director of  Aurelian Resources, a TSX listed mining company with a gold discovery in Ecuador.
Gordon Neal, 52 Vice President, Corporate Development British Columbia, Canada	N/A	December 1, 2003 to present, Vice-President, Corporate Development of the Company; from 2006 to present, a director of Zappa Resources; previously President of Neal MacInerney Investor Relations.
Frank Hallam, 46 Chief Financial Officer British Columbia, Canada	N/A	Chief Financial Officer of the Company since April 30, 2003; 2002 to present, Chief Financial Officer and Director of Platinum Group Metals Ltd., a platinum focused company with a deposit interest in South Africa and exploration properties in Canada; 2005 to present, Director of Jerico Resources Inc.; 1996 to present, CFO Callinan Mines Ltd.; 1994 to 2002, Chief Financial Officer and Director of Tan Range Exploration Corp., a gold exploration company focused on East Africa; 1998 to 2004, Chief Financial Officer and Director of Derek Resources Corporation; previously Chartered Accountant with Coopers and Lybrand (now PricewaterhouseCoopers).
Jody Harris, 38 Corporate Secretary British Columbia, Canada	N/A	Corporate Secretary of the Company since May 8, 2007;  February 2006 to March 2007, Investor Relations Specialist of PAKIT Inc.; March 2004 to October 2005, Administrator/Office Manager of Silverado Gold Mines Ltd.; February 2000 to March 2002, Administrative Assistant of Rapid Transit Project 2000 Ltd.

The business background and principal occupations of our officers, directors, and senior management for the preceding five years are as follows:

Daniel T. MacInnis (Age 55)

Mr. MacInnis is currently the Company’s President and CEO. Mr. MacInnis is a registered professional geoscientist (P.Geo.) with almost thirty years of global experience in the exploration industry.  Working within the Noranda/Hemlo and Battle Mountain Gold organizations, he held a number of senior management positions in Saudi Arabia, Ireland, Canada and the United States. This included Director of Exploration for North and Central America for Battle Mountain Gold. Most recently he was Vice President of Exploration for Sargold Resources Corporation in Italy. Mr. MacInnis has extensive global experience in property acquisitions and joint venture negotiations and exploration. A number of significant mineral discoveries have been made under the guidance of Mr. MacInnis. Discoveries include gold and base metal deposits in the US, Canada, Ireland and Mexico. Mr. MacInnis is a graduate of Saint Francis Xavier University with a BSc. in Geolog y.

Peter K. Megaw (Age 54)

Dr. Megaw was added to the board of directors in January 2006. His initial involvement in Mexican geology was through his MS research at the University of Texas at Austin, and later his Ph.D. work at the University of Arizona. The latter was an in-depth exploration-focused geological/geochemical study of the Santa Eulalia Ag-Pb-Zn District, Chihuahua and Carbonate Replacement Deposits (CRDs) in general. Peter has become a well-known individual in the Mexican mining industry. He has given seminars on the legal, logistical, and geological realities of mining exploration in Mexico to over 25 major and junior companies over the last 15 years. Peter’s primary exploration foci are CRDs, Vein Deposits and Porphyry Copper Deposits. He specializes in property evaluation and acquisition for clients through collaboration with his associates in Cascabel.  Dr. Megaw has been president of IMDEX/Cascabel

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and co-founder of Cascabel since their inception in 1988. Dr. Megaw is also co-founder and principal of Minera Coralillo S.A. de C.V., the vendor of the Guigui Property and Co-founder and principal of Minera Bugambilias S.A. de C.V., the vendor of the Don Fippi Property.  He is also a director of Candente Resources.

Dr. Megaw will devote approximately 10% of his time towards the Company’s affairs. He has not entered into a non-competition or non-disclosure agreement with the Company.

David G.S. Pearce (Age 52)

Since 1982, Mr. Pearce has been President of Mega Capital Corp., an investment holding company with real estate and equity holdings in the United States and Canada. Mr. Pearce co-founded, jointly with Robert C. Thornton, Mega Entertainment Corp., a subsidiary of Mega Capital Corp., which had video retail operations in 29 locations and was sold to Rogers Cable in June 1994. Mr. Pearce has also been President of Palmer Beach Properties Inc. since January 1990, which is an investment company with real estate, retail and equity holdings in Canada. Since June 1995, Mr. Pearce has been President of both Function Gate Hardware Ltd., which owns and operates a home hardware store in Whistler, British Columbia, and Function Gate Holdings Ltd., a real estate development company operating in Whistler, British Columbia. He is also a director of Max Resource Corp.

Mr. Pearce has been a director of Kruger Capital Corp., a public company listed on the Exchange and involved in ownership and financing of commercial real estate since December 1992.

Mr. Pearce devotes approximately 10% of his time towards the Company’s affairs. He has not entered into a non-competition or non-disclosure agreement with the Company.

Eric H. Carlson (Age 48)

Mr. Carlson has over 17 years of real estate investment, development, and management experience. Mr. Carlson has been President and Chief Executive Officer of Anthem Properties Corp. (“Anthem”) since July 1994.  Anthem is an investment group that specializes in the acquisition and management of Class B retail, multi-family residential and office properties in high growth markets in Canada and the United States.  Mr. Carlson has also been President and a director of Kruger Capital Corp. since December 1992.  Mr. Carlson is a Chartered Accountant and holds a Bachelor of Commerce degree from the University of British Columbia.

Mr. Carlson devotes approximately 10% of his time towards the Company’s affairs. He has not entered into a non-competition or non-disclosure agreement with the Company.

R. Michael Jones (Age 43)

Mr. Jones graduated from the University of Toronto in 1985 with a Bachelor of Applied Sciences Degree in Geological Engineering. He is a professional engineer licensed in Ontario, Canada. He has worked in the mining industry since 1985 and is currently the President of Platinum Group Metals Ltd., a Director of West Timmins Gold Inc. and a director of Jerico Exploration.  His experience includes exploration and mining development and production in public companies since 1985.

Mr. Jones devotes approximately 20% of his time towards the Company’s affairs. He has not entered into a non-competition or non-disclosure agreement with the Company.

Jonathan Rubenstein (58)

Mr. Rubenstein was appointed to the Board February 26, 2007. In 2001 Mr. Rubenstein was one of the founders of Canico Resources Corp., where he served as a Director and as Vice President & Corporate Secretary as the company acquired, explored and developed its Onça Puma nickel deposit in Brazil. Mr. Rubenstein was instrumental in the negotiations for the 2005 acquisition of Canico by CVRD of Brazil for $941 million. As Vice President, Corporate Affairs for Sutton Resources, he also played a key role in negotiating the $525 million takeover of that company by Barrick Gold Corporation in 1999. He had practiced law until 1993 and has been a mining executive since that time. He is currently a director of Cumberland Resources, Redcorp Ventures and Aurelian Resources.

Gordon K. Neal (Age 52)

Mr. Neal was the founder of Neal McInerney Investor Relations, which grew to be the second largest Investor Relations firm in Canada with international offices serving a Financial Post 500 and Forbes 100 client base. During

48

his time as President of this firm he marketed more than $4 billion of debt and equity to institutional investors in Canada, the United States and Europe. Mr. Neal is currently a director of Zappa Resources and has been a consultant to TVX Gold, Glamis Gold, Santa Elina Gold and Hillsborough Resources.

Frank R. Hallam (Age 46)

Mr. Hallam is a former auditor with Coopers and Lybrand (now PricewaterhouseCoopers). He has extensive experience at the senior management level with several publicly-listed resource companies.  Mr. Hallam is the former President, CEO and director of New Millennium Metals Corp. In addition to serving as Chief Financial Officer and director of the Company, Mr. Hallam serves as the Chief Financial Officer and director of Platinum Group Metals Ltd., is the Chief Financial Officer and a Director of West Timmins Gold Inc., is the Chief Financial Officer of Callinan Mines Ltd. and a director of Jerico Exploration.

Mr. Hallam devotes approximately 20% of his time towards the Company’s affairs. He has not entered into a non-competition or non-disclosure agreement with the Company.

Jody Harris (Age 38)

Ms. Harris was appointed Corporate Secretary on May 8, 2007.  Ms. Harris has extensive background in the mining industry in corporate administrative services.   

Compensation

The directors of the Company have not historically received any cash compensation for services rendered in their capacity as directors of the Company though such payments are expected to commence in Fiscal 2007.  Certain information about payments to particular officers and directors is set out in the following table:  

		Annual Compensation			Long Term Compensation
					Awards		Payouts
Name and Principal Position	Year Ended	Salary ($)	Bonus ($)	Other Annual Compen-sation ($)	Securities Under Options /SARs (1) Granted (#)	Restricted Shares or Restricted Share Units ($)	LTIP (2) Payouts ($)	All Other Compen-sation ($)
Daniel MacInnis(3) Director, President and CEO	2006 2005	$139,500(17) $119,000	Nil $30,000	Nil Nil	290,000(10) 360,000 (4)	Nil Nil	Nil Nil	Nil Nil
Peter Megaw Director	2006 2005 2004 2003 2002	Nil Nil Nil Nil Nil	Nil Nil Nil 50,248(24) Nil	Nil(18) $5,000 Nil Nil Nil	200,000(12) 50,000 (5) Nil Nil Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil
David G.S. Pearce Director; former President and CEO	2006 2005 2004 2003 2002	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	125,000(11) 75,000 (5) Nil 125,000 (7) Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil
Eric H. Carlson Director; former CFO	2006 2005 2004 2003 2002	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	125,000(11) 75,000 (5) Nil 125,000 (7) Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil
R. Michael Jones Director	2006 2005 2004 2003 2002	Nil Nil Nil Nil Nil	Nil $5,000 Nil Nil Nil	$2,580(19) Nil Nil $1,362 Nil	125,000(11) 100,000 (6) Nil 225,000(8) Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil
Jonathan Rubenstein(22) Director	2006	Nil	Nil	Nil	200,000(23)	Nil	Nil	Nil
Gordon Neal(14) VP Corporate Development	2006 2005 2004	Nil Nil Nil	$30,000 $10,000 Nil	$113,520 $85,950 $5,850	205,000(15) 190,000 (16) Nil	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil

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Frank Hallam CFO	2006 2005 2004 2003 2002	Nil Nil Nil $1,600 Nil	Nil $5,000 Nil Nil Nil	Nil Nil Nil Nil Nil	175,000(13) 100,000 (5) Nil 75,000 (9) Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil	Nil Nil Nil Nil Nil
Jody Harris(20) Corporate Secretary	2006	Nil	Nil	Nil	50,000(21)	Nil	Nil	Nil

Notes:

(1)

“SAR” or “stock appreciation right” means a right granted by the Company or any of its subsidiaries as compensation for employment services or office to receive cash or an issue or transfer of securities based wholly or in part on changes in the trading price of publicly traded securities of the Company.  No SARs have been issued by the Company.

(2)

“LTIP” or “long term incentive plan” means any plan that provides compensation intended to motivate performance over a period greater than one financial year, but does not include option or stock appreciation right plans or plans for compensation through shares or units that are subject to restrictions on resale.

(3)

Daniel MacInnis became the President and Chief Executive Officer of the Company on February 1, 2005.

(4)

Of these options, 250,000 are exercisable at a price of $1.06 each until February 1, 2010 and 110,000 are exercisable at a price of $1.00 each until December 1, 2010.

(5)

These options are exercisable at a price of $1.06 each until January 12, 2010.

 (6)

These options are exercisable at a price of $1.06 each until January 24, 2010.

 (7)

Of these options, 75,000 are exercisable at a price of $0.50 each until April 15, 2008 and 50,000 are exercisable at a price of $0.70 each until May 12, 2008.

 (8)

Of these options, 175,000 are exercisable at a price of $0.50 each until April 15, 2008 and 50,000 are exercisable at a price of $0.70 each until May 12, 2008.

 (9)

These options are exercisable at a price of $0.70 each until May 12, 2008.

(10)

Of these options, 100,000 are exercisable at a price of $3.00 each until February 6, 2011, 90,000 are exercisable at a price of $2.46 each until July 19, 2011 and 100,000 are exercisable at a price of $5.36 until December 14, 2011.

(11)

Each director received 75,000 options exercisable at a price of $3.00 each until February 6, 2011 and 50,000 exercisable at a price of $5.36 each until December 14, 2011.

(12)

Of these options, 150,000 are exercisable at a price of $3.00 each until February 6, 2011 and 50,000 exercisable at a price of $5.36 each until December 14, 2011.

(13)

Of these options, 100,000 are exercisable at a price of $3.00 each until February 6, 2011 and 75,000 exercisable at a price of $5.36 each until December 14, 2011.

(14)

Gordon Neal became the Vice President, Corporate Development of the Company on December 1, 2003.

(15)

Of these options, 75,000 are exercisable at a price of $3.00 each until February 6, 2011, 55,000 are exercisable at a price of $2.46 each until July 19, 2011 and 75,000 are exercisable at a price of $5.36 until December 14, 2011.

(16)

Of these options, 100,000 are exercisable at a price of $1.06 each until January 12, 2010 and 90,000 exercisable at a price of $0.75 each until August 5, 2010.

(17)

Dan MacInnis currently receives $12,844 per month for services rendered in his capacity as the President of the Company.

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(18)

Peter Megaw also receives fees from IMDEX, a company controlled by him, for consulting services he provides to MAG. During the year ended December 31, 2006, MAG paid IMDEX $141,154. Dr. Megaw also is a principal of Minera Cascabel, which received fees of $1,049,611 during the year ended December 31, 2006 as property payments from MAG and for consulting services provided to MAG. See Item 7 – Major Shareholders and Related Party Transactions.

(19)

R. Michael Jones, a director of the company, received $2,580 for consulting services during the year ended December 31, 2006.

(20)

Jody Harris was appointed Corporate Secretary of the Company on May 8, 2007.

(21)

These options are exercisable at a price of $9.40 each until March 26, 2012.

(22)

Jonathan Rubenstein joined the Board of Directors effective February 22, 2007.

(23)

These options are exercisable at a price of $8.80 each until February 23, 2012.

(24)

Peter Megaw received a performance bonus of $50,248 in December 2003.

We do not provide pension, retirement or similar benefits for directors, senior management or employees.

Board Practices

The current directors were elected to their positions at the annual meeting of shareholders held on May 8, 2007.  Each of the directors continues to serve until the next meeting of shareholders unless his office is vacated earlier in accordance with the Articles of the Company or the provisions of the Business Corporations Act (British Columbia).  Our directors are appointed annually at the annual general meeting of shareholders.  Our officers are appointed by the board and serve at the board’s pleasure. We have not entered into service contracts with any of our directors other than Daniel MacInnis.

Effective January 25, 2005, the Company entered into an employment agreement (the “Employment Agreement”) with Daniel MacInnis, the President, Chief Executive Officer and a director of the Company, pursuant to which Mr. MacInnis receives stock options and is paid a base salary of $12,844 per month to manage the day-to-day operations of the Company for an indefinite term. The Company may terminate the Employment Agreement on notice without cause upon payment of two months’ salary and provision of benefits for the earlier of two months or until Mr. MacInnis obtains comparable benefits from another source. Mr. MacInnis may terminate the Employment Agreement at any time by providing 90 days’ written notice to the Company.

In May, 2007, the Board of Directors has also appointed a governance and nominating committee composed of Eric Carlson, R. Michael Jones and Jonathan Rubenstein, each of whom are non-executive directors.   

In May, 2007, the Company established a Disclosure Committee to oversee the implementation of its Disclosure Policy and to monitor the policy’s effectiveness.  The members of the Disclosure Committee are Daniel MacInnis, Chief Executive Officer, Frank Hallam, Chief Financial Officer, and R. Michael Jones, an independent Director of the Company.    

The Audit Committee, comprised of David Pearce, Eric Carlson and R. Michael Jones, meets at least once per quarter. The audit committee also meets periodically with management and the independent auditors to review financial reporting and control matters and to assist the Board in fulfilling its oversight responsibilities. It is responsible for reviewing with the independent auditor all financial statements of the Company to be submitted to an annual general meeting of our shareholders, prior to their consideration by the Board of Directors. The current Charter for the Audit Committee was adopted by the Board on May 8, 2007.   It effectively provides that the Audit Committee will review and oversee the financial reporting and accounting process of the Company, the system of internal control and management of financial risks, the external audit process, and the Company’s process for monitoring compliance with laws and regulations and its own code of business conduct.  In performing its duties, the Audit Committee will maintain effective working relationships with the Board, management, and the external auditors and monitor the independence of those auditors. The Audit Committee will consist of a minimum of three independent directors who are financially literate. The duties of the Audit Committee include reviewing all of the Company’s interim and annual financial statements and related management discussion and analysis and press releases, recommending the external auditor for appointment by the Company’s shareholders, reviewing the external

51

auditor’s audit scope and approach, establishing “whistle blower” procedures and reviewing all related party transactions.

The Board of Directors also appointed a compensation committee composed of Eric Carlson, R. Michael Jones and Jonathan Rubenstein each of whom are non-executive directors whose recommendations are followed with regard to executive compensation.   The Compensation Committee, was established for the purpose of approving or providing the Board with recommendations relating to compensation of executive officers, succession plans for executive officers, human resources policies for executive officers, and administration of the Corporation’s compensation and benefits plans. The Compensation Committee will consist of a minimum of three independent directors who will meet at least once per year. The duties of the Compensation Committee include reviewing and recommending compensation and benefits, including incentive stock options, for all directors and executive officers of the Company and providing the related public disclosure.

Employees

As of December 31, 2006, we had a total of three (3) full-time and one (1) part-time employees/contract employees/consultants located in the Vancouver office. None of the employees are unionized.

Share Ownership

Name and Title	Share Ownership (1)	% Share Ownership
Daniel T. MacInnis Director, President and Chief Executive Officer	720,000	1.89%
Peter K. Megaw Director	968,121	2.55%
David G.S. Pearce Director and Audit Committee Member	775,000	2.04%
Eric H. Carlson Director and Audit Committee Member	1,010,400	2.66%
R. Michael Jones Director and Audit Committee Member	428,602	1.13%
Jonathan Rubenstein Director	200,000	0.53%
Gordon Neal Vice President, Corporate Development	393,300	1.05%
Frank Hallam Chief Financial Officer	275,000	0.73%
Jody Harris Corporate Secretary	50,000	0.13%
All Directors and Senior Management as a group	4,820,423	12.71%

⁽¹⁾

As of May 31, 2007, direct and indirect Common Share ownership including options described in the table below.

Stock Options

At the Company’s annual general meeting held on May 8, 2007, shareholders adopted the Company’s Stock Option Plan (2007) (the “Stock Option Plan”).  The effective date of the Stock Option Plan is March 30, 2007, being the date the Board approved the Stock Option Plan, and it will terminate March 30, 2017. The following is a summary of the Stock Option Plan.

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The maximum number of Common Shares to be reserved for issuance under the Stock Option Plan will not exceed 10% of the number of Common Shares of the Company issued and outstanding on the applicable date of grant, provided that the maximum number of options which may be granted to US persons in accordance with section 422 of the US Internal Revenue Code of 1986, as amended, is limited to 700,000. The Stock Option Plan will be administered by a stock option committee (the “Committee”) of the Company’s Board consisting of not less than two of its members. The Stock Option Plan provides that options may be granted to any employee, officer, director or consultant of the Company or a subsidiary of the Company. The options issued pursuant to the Stock Option Plan will be exercisable at a price not less than the market value of the Company’s Common Shares at the time the option is granted. Options under the Stock Option Plan will be granted for a term not to exceed five years from the date of their grant, provided that if the Company is then a “Tier 1” company listed on the TSX Venture Exchange, the term of the option will be not more than 10 years. Options granted under the Stock Option Plan will be subject to such vesting schedule as the Committee may determine.  In the event that an option is to be terminated prior to expiry of its term due to certain corporate events, all options then outstanding shall become immediately exercisable for 10 days after notice thereof, notwithstanding the original vesting schedule. Options will also be non-assignable and non-transferable, provided that they will be exercisable by an optionee’s legal heirs, personal representatives or guardians for up to six months following the death or termination of an optionee due to disability, or up to six months following the death of an employee if the employee dies within 6 months of termination due to disability.  All such options wil l continue to vest in accordance with their original vesting schedule.

The following options of the Company are presently outstanding:

Name	Position with the Company	Number of Common Shares under Option	Exercise Price	Expiry Date
Daniel T.  MacInnis	Director, President and Chief Executive Officer	100,000 90,000 100,000 110,000 250,000 650,000	$5.36 $2.46 $3.00 $1.00 $1.06	Dec 14/11 July 19/11 Feb 6/11 Dec 1/10 Feb 1/10
Peter Megaw	Director and Consultant	50,000 150,000 50,000 250,000	$5.36 $3.00 $1.06	Dec 14/11 Feb 6/11 Jan 12/10
David G.S. Pearce	Director and Audit Committee Member	50,000 75,000 75,000 50,000 250,000	$5.36 $3.00 $1.06 $0.70	Dec 14/11 Feb 6/11 Jan 12/10 May 12/08
Eric H. Carlson	Director and Audit Committee Member	50,000 75,000 75,000 75,000 50,000 325,000	$5.36 $3.00 $1.06 $0.50 $0.70	Dec 14/11 Feb 6/11 Jan 12/10 April 22/08 May 12/08
R. Michael Jones	Director and Audit Committee	50,000 75,000 100,000 148,500 50,000 423,500	$5.36 $3.00 $1.06 $0.50 $0.70	Dec 14/11 Feb 6/11 Jan 21/10 April 22/08 May 12/08
Jonathan Rubenstein	Director	200,000	$8.80	Feb 23/12
Gordon Neal	Consultant	75,000 55,000 75,000 53,000 100,000 358,000	$5.36 $2.46 $3.00 $0.75 $1.06	Dec 14/11 July 19/11 Feb 6/11 Aug 5/10 Jan 12/10
Frank Hallam	Chief Financial Officer	75,000 100,000 100,000 275,000	$5.36 $3.00 $1.06	Dec 14/11 Feb 6/11 Jan 12/10

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Jody Harris	Corporate Secretary	50,000	$9.40	Mar 26/12
Grace To	Consultant	20,000 10,000 75,000 50,000 75,000 230,000	$7.56 $4.04 $1.06 $0.70 $0.50	Jan 23/12 Mar 28/11 Jan 12/10 May 12/08 Apr 22/08
Marshal House	Consultant	15,000 20,000 30,000 20,000 85,000	$5.36 $4.04 $1.06 $0.70	Dec 14/11 Mar 28/11 Jan 12/10 May 12/08
John Foulkes	Consultant	15,000 10,000 15,000 15,000 55,000	$5.36 $4.04 $1.14 $1.06	Dec 14/11 Mar 28/11 Oct 3/10 Jan 12/10
Carrie Cojocari	Consultant	7,500 10,000 15,000 5,000 37,500	$5.36 $4.04 $1.14 $1.06	Dec 14/11 Mar 28/11 Oct 3/10 Jan 12/10
Sarah Burns	Consultant	2,500 10,000 7,500 20,000	$5.36 $4.04 $1.14	Dec 14/11 Mar 28/11 Oct 3/10
Kenneth Kuiper	Consultant	12,500 10,000 22,500	$5.36 $4.04	Dec 14/11 Mar 28/11
Rubilyn Lapiz	Employee	7,500 15,000 22,500	$5.36 $3.56	Dec 14/11 Mar 20/11
Paz Pino	Consultant	5,000 6,500 12,000	$5.36 $4.04	Dec 14/11 Mar 28/11
Darin Wagner	Consultant	20,000 10,000 30,000	$5.36 $4.04	Dec 14/11 Mar 28/11
Carl A Kuehn	Consultant	50,000	$4.04	Mar 28/11
Porfirio Padilla	Consultant	50,000	$4.04	Mar 28/11
Jim McGlasson	Consultant	50,000	$2.00	June 15/11
Gabriel Arredondo	Consultant	25,000	$3.12	Sept 1/11
Clancy Wendt	Consultant	15,000	$7.56	Jan 23/12
Contact Financial	Consultants	50,000	$7.56	Jan 23/12

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

The following table sets forth, as at April 30, 2007, certain information with respect to the beneficial ownership of our Common Shares by each shareholder known by us to be the beneficial owner of more than 5% of our outstanding Common Shares including the executive officers and directors. Unless otherwise indicated by footnote, we believe that the beneficial owners of the Common Shares listed below, based on information furnished by such owners, have sole investment and voting power with respect to such Common Shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the United States Securities and Exchange Commission and generally includes voting or investment power with respect to securities. The shareholders below have identical voting rights to the other shareholders.

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Title of Class	Identity of Holder	Date	Number of Common Shares	Percentage of Beneficially Owned
Common Shares	N/A	N/A	N/A	N/A

United States Shareholders

As of March 26, 2007 we had 51 registered shareholders with addresses in the United States representing 9.74% of the then issued and outstanding Common Shares. In addition, residents of the United States may beneficially own Common Shares registered in the names of non-residents of the United States.

Related Party Transactions

None of our directors or senior officers, and no associates or affiliates of any of them is or has been materially indebted to us or our subsidiaries at any time. None of our experts or counsel was employed on a contingent basis or owns any Common Shares, which is material to such person.

George Young received 250,000 Common Shares of the Company, R. Michael Jones received 50,000 Common Shares of the Company and Platinum Group Metals Ltd. (“PTM”), a company with a common director and common officer at that time (at the time of writing the companies now share two common directors and one common officer), received 200,000 Common Shares as finders fees in connection with the Company’s acquisition of Lagartos, which Common Shares were also held in escrow under an agreement dated April 8, 2003. These Common Shares were released from escrow as to 10% on April 21, 2003 and 15% each six months thereafter so that all such Common Shares were released by April 21, 2006.  The Company priced these Common Shares at $0.50 per share.

For the year ended December 31, 2006, Dan MacInnis, the Company’s president received $139,500 in compensation for management services (2005 - $149,900).

For the year ended December 31, 2006 a company controlled by an officer of the Company, Gordon Neal, Vice President Corporate Development, received $113,520 in compensation for consulting services (2005 - $125,950).

The Company is party to a Field Services Agreement, whereby it has contracted exploration services in Mexico with Cascabel (owned 33.3% by Peter Megaw) and IMDEX Inc. (“Imdex”).  As of January 2006, these companies have a common director with the Company.  During the year ended December 31, 2006 the Company accrued or paid Cascabel and IMDEX consulting, administration and travel fees totalling $141,154 and exploration costs totaling $1,049,611 under the Field Services Agreement.  

During the year ended December 31, 2003, the Company entered into an office services agreement with Platinum Group Metals Ltd. (“PTM”), a company with a common director and common officer at that time (at the time of writing the companies now share two common directors and one common officer). During the year ended December 31, 2006 the Company accrued or paid PTM $138,081 under the common service agreement (2005 - $133,329).

During the year ended December 31, 2004, the Company entered into an office lease agreement with Anthem Works Ltd. (“Anthem”), a company with a common director.  During the period ended December 31, 2006 the Company accrued or paid Anthem $62,333 under the office lease agreement (2005 - $62,333).

These transactions were incurred in the normal course of business and are measured at the exchange amount which was the consideration established and agreed to by the noted parties.

R. Michael Jones, a director of the company, received $2,580 for consulting services for the year ended December 31, 2006.  See Item 6 - Directors, Senior Management and Employees.

Interests of Experts and Counsel

Not Applicable.

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ITEM 8.

FINANCIAL INFORMATION

Financial Statements

Our audited consolidated financial statements which comprises our consolidated balance sheets as at December 31, 2006 and 2005 and the consolidated statements of operations, of shareholders’ equity and of cash flows for each of the years in the three year period ended December 31, 2006 and the notes to those statements and the report of independent registered chartered accountants thereon, are included under Item 17 of this Form 20-F.

Dividend Policy

The Company has not declared any dividends and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.

Significant Changes

There have been no significant changes since December 31, 2006.

ITEM 9.

THE OFFER AND LISTING

Markets and Price History

Our Common Shares have been listed and posted for trading on the TSX Venture Exchange (symbol:  MAG) since April 19, 2000.  Since then, the high-low stock range has been between $0.04 and $10.00.  The closing price of our Common Shares on May 31, 2007 was $10.35.

The annual high-low ranges for our Common Shares on the Exchange since 2002 are set out below, as well as the quarterly high-low range for the last two financial years.

Year	High	Low
2006	$6.90	$1.34
2005	$1.53	$0.62
2004	$2.45	$0.54
2003	$2.65	$0.48
2002	$0.17	$0.04
2006	High	Low
1st Quarter	$4.49	$1.34
2nd Quarter	$4.48	$1.59
3rd Quarter	$3.64	$2.11
4th Quarter	$6.90	$2.73
2005	High	Low
1st Quarter	$1.10	$0.88
2nd Quarter	$1.29	$0.73
3rd Quarter	$1.25	$0.62
4th Quarter	$1.53	$0.91

The monthly high-low ranges for our Common Shares on the Exchange since November 2006 is set out below.

Month	High	Low
May	$12.44	$9.00
April	$9.77	$7.77
March	$10.00	$8.35
February	$9.00	$7.80
January	$8.10	$5.51
December	$6.90	$4.29

At March 26, 2007, we had 41,036,394 Common Shares issued and outstanding and held by 136 owners of record.

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In January 2007, the Company applied for listing on a US stock exchange.  At the date of this Annual Report, the application is in process.

ITEM 10.

ADDITIONAL INFORMATION

Share capital

Not Applicable.

Memorandum and Articles of Association

Our Memorandum and Articles of Incorporation were filed with the Ministry of Finance and Corporate Relations, Registrar of Companies in the Province of British Columbia, Canada on April 21, 1999 under the name 583882 B.C. Ltd. with the Certificate of Incorporation No. 583882.  We were incorporated to conduct all lawful business pursuant to the laws of British Columbia and our Certificate of Incorporation and Articles do not describe a business object or purpose.

At the Company’s annual meeting of shareholders held on June 15, 2005, the Company obtained the approval of its shareholders to adopt new articles (the “New Articles”) for the Company. The new Articles became effective July 27, 2005. Generally, the New Articles may be amended by a special resolution of the shareholders approved by not less than 66 2/3% of the votes cast and by filing thereafter with the Registrar of Companies for the Province of British Columbia. The New Articles have been added to this Annual Report as Exhibit 1(c).

As at May 31, 2007 our authorized and issued capital is as follows:

Authorized:	Unlimited number of Common Shares without par value Unlimited number of preferred shares without par value
Issued:	41,352,896 Common Shares, of which Nil are held in escrow.  No preferred shares are outstanding

Common Shares

All issued and outstanding Common Shares are fully paid and non-assessable.  Each holder of record of Common Shares is entitled to one vote for each Common Share so held on all matters requiring a vote of shareholders, including the election of directors.  The holders of Common Shares will be entitled to dividends on a pro-rata basis, if, as and when declared by the board of directors.  There are no preferences, conversion rights, pre-emptive rights, subscription rights, redemption provisions, sinking fund provisions, liability for future capital calls, or restrictions on transfers attached to the Common Shares and no provisions discriminating against any existing or prospective shareholder as a result of that person owning a substantial number of Common Shares.  In the event of our liquidation, dissolution, or winding up, the holders of Common Shares are entitled to participate in our assets available for distribution after satisfaction of the claims of creditors. Provisions as to the creation, modification, amendment or variation of such rights or such provisions are contained in the Business Corporations Act (British Columbia) and the Notice of Articles and Articles of the Company do not contain any additional provisions which are more stringent than those contained in the Business Corporations Act (British Columbia). Generally, such variations require a resolution of the shareholders approved by not less than 66 2/3% of the votes cast and by filing thereafter with Registrar of Companies in the Province of British Columbia.

The Business Corporations Act (British Columbia) does not impose any limitations on the rights to own securities of the Company.

There are no provisions in the Company’s articles, charter or by-laws that would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company or any of its subsidiaries.

There are no bylaw provisions governing the ownership threshold above which shareholder ownership must be disclosed. However, the Securities Act (British Columbia) requires such disclosure by a shareholder holding more than 10% of the issued voting securities of the Company.

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Powers and Duties of Directors

The directors shall manage or supervise the management of our affairs and business and shall have authority to exercise all such powers that are not required to be exercised by our shareholders in a general meeting.

Questions to be determined at a directors meeting shall be determined by a majority vote.  The Chairman has no additional power for voting, and directors are not required to hold our Common Shares and there is no mandatory retirement age.

A director’s term of office expires immediately prior to the next annual general meeting.  In general, a director who is, in any way, directly interested in an existing or proposed contract or transaction with us, whereby a duty or interest might be created to conflict with his duty or interest as a director, shall declare the nature and extent of his interest in such contract or transaction or the conflict or potential conflict with his duty and interest as a director.  Generally, such director shall not vote in respect of any such contract or transaction and if he shall do so, his vote shall not be counted, but he shall be counted in the quorum present at the meeting at which such vote is taken.  However, notwithstanding the foregoing, directors shall have the right to vote on determining the remuneration of the directors.

The directors may from time to time on our behalf (a) borrow money in such manner and amount from such sources and upon such terms and conditions as they think fit; (b) issue bonds, debentures and other debt obligation; or (c) mortgage, charge or give other security on the whole or any part of our property and assets.

Shareholders

An annual general meeting shall be held once in every calendar year and within 15 months of the last annual general meeting at such time and place as may be determined by the directors.  A quorum at an annual general meeting and special meeting shall be two shareholders or two proxyholders representing shareholders, or a combination thereof, holding not less than 5% of the issued and outstanding Common Shares entitled to be voted at the meeting. We believe there is no limitation imposed by the laws of British Columbia or by the Notice of Articles or our other constituent documents on the right of a non-resident to hold or vote the Common Shares.

Material Contracts

During the two prior financial years, we have entered into the following material contracts, which may be inspected at the head office of the Company, Suite 328 – 550 Burrard Street, Vancouver, British Columbia, V6C 2B5, during normal business hours:

1.

Don Fippi Agreement dated November 18, 2002 as amended April 20, 2005 among the Company, Lagartos and Bugambilias.  See Item 4 - Information on the Company – Business Overview – The Don Fippi Property.

2.

Guigui Agreement dated November 18, 2002 as amended April 20, 2005 among the Company, Lagartos and Coralillo.  See Item 4 - Information on the Company – Business Overview – The Guigui Property.

3.

Agreement effective July 1, 2005 among the Company and Industrias Peñoles, S.A. de C.V. See Item 4 - Information on the Company – Business Overview – The Juanicipio Property.

4.

Stock Options dated August 5, 2005, with Gordon Neal. See Item 6 - Directors, Senior Management and Employees – Stock Options.

5.

Stock Options dated October 3, 2005, with John Foulkes, Carrie Cojocari, and Sarah Burns. See Item 6 - Directors, Senior Management and Employees – Stock Options.

6.

Service Agreement dated September 14, 2005 with Contact Financial Corporation for Investor Relations Services.  See exhibit 4 (v).

7.

Stock Options dated December 1, 2005 with Dan MacInnis. See Item 6 - Directors, Senior Management and Employees – Stock Options.

8.

Stock Options dated December 12, 2005 with Erin Airton. See Item 6 - Directors, Senior Management and Employees – Stock Options.

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9.

Stock Options dated January 10, 2006 with Ken Kuiper. See Item 6 - Directors, Senior Management and Employees – Stock Options.

10.

Stock Options dated February 6, 2006 with Frank Hallam, Eric Carlson, David Pearce, Dan MacInnis, Peter Megaw, Gordon Neal, and R. Michael Jones. See Item 6 - Directors, Senior Management and Employees – Stock Options.

11.

Stock Options dated March 20, 2006 with Rubi Lapiz. See Item 6 - Directors, Senior Management and Employees – Stock Options.

12.

Stock Options dated March 28, 2006 with Grace To, John Foulkes, Marshall House, Carrie Cojocari, Tyler Malden, Sarah Burns, Paz Pino, Erin Airton, Darin Wagner, Tony Kuehn, Porfirio Padilla,  and Ken Kuiper. See Item 6 - Directors, Senior Management and Employees – Stock Options.

13.

Stock Options dated June 15, 2006 with Jim McGlasson. See Item 6 - Directors, Senior Management and Employees – Stock Options.

14.

Stock Options dated July 19, 2006 with Dan MacInnis and Gordon Neal. See Item 6 - Directors, Senior Management and Employees – Stock Options.

15.

Stock Options dated September 1, 2006 with Gabriel Gomes.  See Item 6 - Directors, Senior Management and Employees – Stock Options.

16.

Amended Sierra de Ramirez Agreement on September 4, 2006 among the Company and Minera Rio Tinto, S.A. de C.V.  See Item 4 - Information on the Company – Business Overview – Sierra de Ramirez.

17.

Stock Options dated December 14, 2006 with Frank Hallam, Eric Carlson, David Pearce, Dan MacInnis, Peter Megaw, Gordon Neal, R. Michael Jones, John Foulkes, Marshall House, Carrie Cojocari, Sarah Burns, Paz Pino, Erin Airton, Darin Wagner, Rubilyn Lapiz and Ken Kuiper. See Item 6 - Directors, Senior Management and Employees – Stock Options.

18.

Stock Options dated January 23, 2007 with Grace To, Clancy Wendt and Contact Financial.  See Item 6 - Directors, Senior Management and Employees – Stock Options.

19.

Stock Options dated February 23, 2007 with Jonathan Rubenstein.  See Item 6 - Directors, Senior Management and Employees – Stock Options.

20.

Field Services Agreement dated March 1, 2007 Cascabel (owned 33.3% by Peter Megaw) and IMDEX Inc.  See Item 7 – Major Shareholders and Related Party Transactions and Exhibit 4 (w).

21.

Stock Options dated March 26, 2007 with Jody Harris.  See Item 6 - Directors, Senior Management and Employees – Stock Options.

Exchange Controls

The Company does not believe there are any decrees or regulations under the laws of British Columbia or Canada applicable to it restricting the import or export of capital or affecting the remittance of dividends or other payments to non-resident holders of our Common Shares, other than for the withholding of taxes. There are no restrictions under our Notice of Articles or Articles that limits the right of non-Canadian owners to hold or vote our Common Shares or to receive dividends thereon. We are organized under the laws of British Columbia. There is uncertainty as to whether the Courts of British Columbia would (i) enforce judgments of United States Courts obtained against us or our directors and officers predicated upon the civil liability provisions of the federal securities laws of the United States or (ii) entertain original actions brought in British Columbia Courts against us or such persons predicated upon the federal securities laws o f the United States.

There is no limitation imposed by the laws of Canada or our Notice of Articles or Articles on the right of a non-Canadian to hold or vote the Common Shares, other than as provided in the Investment Act (Canada) (the “Investment Act”).  The following discussion summarizes the principal features of the Investment Act for a non-Canadian who proposes to acquire the Common Shares.

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The Investment Act generally requires non-Canadian persons or entities acquiring “control” (as defined in the Investment Act) of a corporation carrying on business in Canada to either notify, or file an application for review with, Investment Canada, the federal agency created by the Investment Act. The Investment Act is applicable to, and Investment Canada may review, transactions which result in the direct or indirect acquisition of control of a Canadian business where the gross value of corporate assets, calculated in the manner prescribed, exceeds certain thresholds (generally $5,000,000 in the case of direct acquisitions and $50,000,000 in the case of indirect acquisitions), such thresholds being favourably varied by the Minister each year for WTO investors (as that term is defined in the Investment Act, including the United States), except where the activity of the business is related to uranium production, financial services, tr ansportation or culture. No change of voting control will be deemed to have occurred, for the purposes of the Investment Act, if less than one-third of the voting control of a Canadian corporation is acquired by an investor.

If an investment is reviewable under the Investment Act, an application for review in the form prescribed is normally required to be filed with Investment Canada prior to the investment taking place, and the investment may not be implemented until the review has been completed and the Minister responsible for Investment Canada is satisfied that the investment is likely to be of net benefit to Canada. If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian applicant must not implement the investment, or if the investment has been implemented, may be required to divest itself of control of the business that is the subject of the investment.

Currently 20% of our operations are in Canadian dollars.

Material Canadian Federal Income Tax Consequences

The following is a summary of the material Canadian federal income tax considerations, as of the date hereof, generally applicable to holders of our Common Shares who deal at arm’s length with us, who at all relevant times for purposes of the Income Tax Act (Canada) (the “Canadian Tax Act”) and any applicable tax treaty or convention, are not resident or deemed to be resident in Canada, and to whom such Common Shares are capital property.  Generally, our Common Shares will be considered to be capital property to a holder thereof provided that the holder does not use such Common Shares in the course of carrying on a business and has not acquired them in one or more transactions considered to be an adventure in the nature of trade.  All holders of our Common Shares should consult their own tax advisors as to whether, as a matter of fact, they hold our Common Shares as capital property for the purposes of the Canadian Tax A ct. This summary does not apply to a non-resident insurer.

This discussion is based on the current provisions of the Canadian Tax Act and the regulations thereunder, the current provisions of the Canada-United States Income Tax Convention (1980) (the “Tax Treaty”) and current published administrative practices of the Canada Revenue Agency.  This discussion takes into account specific proposals to amend the Canadian Tax Act and the regulations thereunder publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”) and assumes that all Proposed Amendments will be enacted in their present form.  No assurances can be given that the Proposed Amendments will be enacted in the form proposed, if at all.

Except for the foregoing, this discussion does not take into account or anticipate any changes in law, whether by legislative, administrative or judicial decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax considerations described herein.

THIS SUMMARY IS OF A GENERAL NATURE ONLY.  IT IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF THE CANADIAN INCOME TAX CONSEQUENCES AND SHOULD NOT BE INTERPRETED AS LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER OF OUR COMMON SHARES.  EACH HOLDER OF OUR COMMON SHARES IS THEREFORE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES.

A holder of our Common Shares will not be subject to tax under the Canadian Tax Act on the sale or other disposition of the Common Shares, provided the Common Shares are not “taxable Canadian property” to the holder.  Generally, our Common Shares will not be “taxable Canadian property” to a holder at a particular time provided that the Common Shares are listed on a prescribed stock exchange and the holder, together with persons with whom the holder does not deal at arm’s length, has not owned (or had under option) 25% or more of the issued shares of any class or series of our capital stock at any time within sixty months preceding the particular time.

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Dividends paid or deemed to be paid on our Common Shares are subject to non-resident withholding tax under the Canadian Tax Act at the rate of 25%, although such rate may be reduced under the provisions of an applicable income tax treaty or convention.  For example, under the Tax Treaty, the rate is reduced to 5% in respect of dividends paid to a company that is the beneficial owner thereof, that is resident in the United States for purposes of the Tax Treaty and that owns at least 10% of our voting stock.  In all other cases, the rate is reduced to 15% in respect of dividends paid to the beneficial owner thereof that is resident in the United States for purposes of the Tax Treaty.

Material United States Federal Income Tax Consequences

The following is a general discussion of the material United States Federal income tax law for U.S. holders that hold such Common Shares as a capital asset, as defined under United States Federal income tax law and is limited to discussion of U.S. Holders that own less than 10% of the Common Shares.  This discussion does not address all potentially relevant Federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of Federal income tax law, such as those described below as excluded from the definition of a U.S. Holder.  In addition, this discussion does not cover any state, local or foreign tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time.  In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any future legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time.  

THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY HOLDER OR PROSPECTIVE HOLDER OF COMMON SHARES OF THE COMPANY AND NO OPINION OR REPRESENTATION WITH RESPECT TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO ANY SUCH HOLDER OR PROSPECTIVE HOLDER IS MADE.  IT WAS NOT WRITTEN AND IS NOT INTENDED TO BE USED, AND CANNOT BE USED, BY ANY PERSON FOR THE AVOIDANCE OF ANY PENALTIES WITH RESPECT TO TAXES THAT MAY BE IMPOSED ON SUCH PERSON.  ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF COMMON SHARES OF THE COMPANY ARE URGED TO CONSULT THEIR OWN TAX ADVISORS ABOUT THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF COMMON SHARES OF THE COMPANY.

U.S. Holders

As used herein, a “U.S. Holder” is a holder of Common Shares of the Company who or which is a citizen or individual resident (or is treated as a citizen or individual resident) of the United States for federal income tax purposes, a corporation or partnership created or organized (or treated as created or organized for federal income tax purposes) in the United States, including only the States and District of Columbia, or under the law of the United States or any State or Territory or any political subdivision thereof, or a trust or estate the income of which is includable in its gross income for federal income tax purposes without regard to its source, if, (i) a court within the United States is able to exercise primary supervision over the administration of the trust and (ii) one or more United States trustees have the authority to control all substantial decisions of the trust.  For purposes of this discussion, a U.S. Holder d oes not include persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers and Holders who acquired their stock through the exercise of employee stock options or otherwise as compensation.

Distributions on Common Shares of the Company

U.S. Holders, who do not fall under any of the provisions contained within the “Other Considerations for U.S. Holders” section, and receiving dividend distributions (including constructive dividends) with respect to Common Shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions.  Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States Federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s United States Federal taxable income by those who

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itemize deductions.  (See more detailed discussion at “Foreign Tax Credit” below).  To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the Common Shares and thereafter as gain from the sale or exchange of the Common Shares.  Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust.  There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.

Dividends paid on the Common Shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.  A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Company (unless the Company qualifies as a “foreign personal holding company” or a “passive foreign investment company”, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company.  Because the Company expects that it will be classified as a “passive foreign investment company” as described below, this deduction will not be available to a U.S. Holder which is a corporation.  Since the Company believes it has been a Passive Foreign Investment Company in the preceding fiscal year and expects to be characterized as a Passive Foreign Investment Company in the current fiscal year, the Company will not be treated as a “qualified foreign corporation” for purposes of determining whether dividends paid to noncorporate U.S. Holders will be taxed at a maximum U.S. federal rate of 15%. The dividend rules are complex, and each U.S. Holder should consult with his or her own tax advisors regarding the dividend rules as they apply to each U.S. Holder.

Foreign Tax Credit

A U.S. Holder, who does not fall under any of the provisions contained within the “Other Considerations for U.S. Holders” section, and who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of Common Shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld.  Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax.  This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year.  There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source taxable income bears to his or its world-wide taxable income.  In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic (U.S.) sources.  Complex rules govern this classification process.  In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other classifications of income.  Dividends distributed by the Company will generally constitute foreign source “passive income” or, in the case of U.S. Holders, “financial services income” for these purposes. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific and holders and prospective hold ers of Common Shares of the Company are urged to consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Company

A U.S. Holder, who does not fall under any of the provisions contained within the “Other Considerations for U.S. Holders” section, and will recognize gain or loss upon the sale of Common Shares of the Company equal to the difference, if any, between the amount of cash plus the fair market value of any property received, and the Holder’s tax basis in the Common Shares of the Company.  This gain or loss will be capital gain or loss if the Common Shares are a capital asset in the hands of the U.S. Holder unless the Company were to become a controlled foreign corporation.  For the effect on the Company of becoming a controlled corporation, see “Controlled Foreign Company Status” below.  Any capital gain will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder.  Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year.  Deductions for net capital losses are subject to significant limitations.  For U.S. Holders which are individuals, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted.  For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

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Other Considerations for U.S. Holders

In the following circumstances, the above sections of this discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of Common Shares of the Company:

Passive Foreign Investment Company

As a foreign corporation with U.S. shareholders, the corporation could be treated as a passive foreign investment corporation (“PFIC”).  Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is “passive income,” which includes but is not limited to interest, dividends and certain rents and royalties or (ii) at least 50% of its assets held during the year produce or are held for the production of passive income.  The 50% test is based upon the average value of the corporation’s assets (or, the adjusted tax basis of its assets, if the company is not publicly traded and is a controlled foreign corporation or makes an election).  The Company believes that it has been a PFIC for each fiscal year since its incorporation, and expects to be characterized as a PFIC this fiscal year.

A U.S. Holder who holds stock in a PFIC is subject to U.S. federal income taxation of that foreign corporation under one of two alternative tax methods at the election of each such U.S. Holder.

As a PFIC, each U.S. Holder must determine under which of the alternative tax methods it wishes to be taxed.  Under one method, a U.S. Holder who elects in a timely manner to treat the Company as a Qualified Electing Fund (“QEF”), as defined in the Code, (an “Electing U.S. Holder”) will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which the Company qualifies as a PFIC on his pro-rata share of the Company’s (i) “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder and (ii) “ordinary earnings” (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the U.S. Holder’s taxable year in which (or with which) the Company taxable year ends, regar dless of whether such amounts are actually distributed.

A QEF election also allows the Electing U.S. Holder to (i) generally treat any gain realized on the disposition of his Common Shares (or deemed to be realized on the pledge of his Common Shares) as capital gain; (ii) treat his share of the Company’s net capital gain, if any, as long-term capital gain instead of ordinary income, and (iii) either avoid interest charges resulting from PFIC status altogether (see discussion of interest charge below), or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Company’s annual realized net capital gain and ordinary earnings subject, however, to an interest charge.  If the Electing U.S. Holder is not a corporation, such an interest charge would be treated as non-deductible “personal interest.”

The procedure a U.S. Holder must comply with in making a timely QEF election will depend on whether the year of the election is the first year in the U.S. Holder’s holding period in which the Company is a PFIC.  If the U.S. Holder makes a QEF election in such first year, (sometimes referred to as a “Pedigreed QEF Election”), then the U.S. Holder may make the QEF election by simply filing the appropriate documents at the time the U.S. Holder files its tax return for such first year.  If, however, the Company qualified as a PFIC in a prior year, then in addition to filing documents, the U.S. Holder may also elect to recognize as an “excess distribution” (i) under the rules of Section 1291 (discussed below), any gain that he would otherwise recognize if the U.S. Holder sold his stock on the application date or (ii) if the Company is a controlled foreign corporation (“CFC”), the Holder’s pro rata sha re of the corporation’s earnings and profits. (But see “Elimination of Overlap Between Subpart F Rules and PFIC Provisions”).  Either the deemed sale election or the deemed dividend election will result in the U.S. Holder being deemed to have made a timely QEF election.

With respect to a situation in which a Pedigreed QEF election is made, if the Company no longer qualifies as a PFIC in a subsequent year, normal Code rules and not the PFIC rules will apply.

If a U.S. Holder has not made a QEF Election at any time (a “Non-electing U.S. Holder”), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reason of a pledge) of his Common Shares and (ii) certain “excess distributions”, as specially defined, by the Company.

A Non-electing U.S. Holder generally would be required to pro-rate all gains realized on the disposition of his Common Shares and all excess distributions over the entire holding period for the Common Shares.  All gains or excess distributions allocated to prior years of the U.S. Holder (other than years prior to the first taxable year of the

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Company during such U.S. Holder’s holding period and beginning after January 1, 1987 for which it was a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income.  The Non-electing U.S. Holder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year.  A Non-electing U.S. Holder that is not a corporation must treat this interest charge as “personal interest” which, as discussed above, is wholly non-deductible.  The balance of the gain or the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance.

If the Company is a PFIC for any taxable year during which a Non-electing U.S. Holder holds Common Shares, then the Company will continue to be treated as a PFIC with respect to such Common Shares, even if it is no longer by definition a PFIC.  A Non-electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules discussed above for Non-Electing U.S. Holders) as if such Common Shares had been sold on the last day of the last taxable year for which it was a PFIC.

Under Section 1291(f) of the Code, the Department of the Treasury has issued proposed regulations that would treat as taxable certain transfers of PFIC stock by Non-electing U.S. Holders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death.

If a U.S. Holder makes a QEF Election that is not a Pedigreed Election (i.e., it is made after the first year during which the Company is a PFIC and the U.S. Holder holds shares of the Company) (a “Non-Pedigreed Election”), the QEF rules apply prospectively but do not apply to years prior to the year in which the QEF first becomes effective.  U.S. Holders are urged to consult their tax advisors regarding the specific consequences of making a Non-Pedigreed QEF Election.

Certain special, generally adverse, rules will apply with respect to the Common Shares while the Company is a PFIC whether or not it is treated as a QEF.  For example under Section 1298(b)(6) of the Code, a U.S. Holder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such stock.

The foregoing discussion is based on currently effective provisions of the Code, existing and proposed regulations thereunder, and current administrative rulings and court decisions, all of which are subject to change.  Any such change could affect the validity of this discussion.  In addition, the implementation of certain aspects of the PFIC rules requires the issuance of regulations which in many instances have not been promulgated and which may have retroactive effect.  There can be no assurance that any of these proposals will be enacted or promulgated, and if so, the form they will take or the effect that they may have on this discussion.  Accordingly, and due to the complexity of the PFIC rules, U.S. Holders of the Company are strongly urged to consult their own tax advisors concerning the impact of these rules on their investment in the Company.

Mark-to-Market Election for PFIC Stock

A U.S. Holder of a PFIC may make a mark-to-market election with respect to the stock of the PFIC if such stock is marketable as defined below.  This provision is designed to provide a current inclusion provision for persons that are Non-Electing Holders.  Under the election, any excess of the fair market value of the PFIC stock at the close of the tax year over the Holder’s adjusted basis in the stock is included in the Holder’s income.  The Holder may deduct the lesser of any excess of the adjusted basis of the PFIC stock over its fair market value at the close of the tax year, or the “unreversed inclusions” with respect to the PFIC stock (the net mark-to-market gains on the stock that the Holder included in income in prior tax years).

For purposes of the election, PFIC stock is marketable if it is regularly traded on (1) a national securities exchange that is registered with the Securities and Exchange Commission (the “SEC”), (2) the national market system established under Section 11A of the Securities Exchange Act of 1934, or (3) an exchange or market that the IRS determines has rules sufficient to ensure that the market price represents legitimate and sound fair market value.

A Holder’s adjusted basis of PFIC stock is increased by the income recognized under the mark-to-market election and decreased by the deductions allowed under the election.  If a U.S. Holder owns PFIC stock indirectly through a foreign entity, the basis adjustments apply to the basis of the PFIC stock in the hands of the foreign entity for the purpose of applying the PFIC rules to the tax treatment of the U.S. owner.  Similar basis adjustments are made to the basis of the property through which the U.S. persons hold the PFIC stock.

64

Income recognized under the mark-to-market election and gain on the sale of PFIC stock with respect to which an election is made is treated as ordinary income.  Deductions allowed under the election and loss on the sale of PFIC with respect to which an election is made, to the extent that the amount of loss does not exceed the net mark-to-market gains previously included, are treated as ordinary losses.  The U.S. or foreign source of any income or losses is determined as if the amount were a gain or loss from the sale of stock in the PFIC.

If PFIC stock is owned by a CFC (discussed below), the CFC is treated as a U.S. person that may make the mark-to-market election. Amounts includable in the CFC’s income under the election are treated as foreign personal holding company income, and deductions are allocable to foreign personal holding company income.

The rules of Code Section 1291 applicable to nonqualified funds generally do not apply to a U.S. Holder for tax years for which a mark-to-market election is in effect.  If Code Section 1291 is applied and a mark-to-market election was in effect for any prior tax year, the U.S. Holder’s holding period for the PFIC stock is treated as beginning immediately after the last tax year of the election.  However, if a taxpayer makes a mark-to-market election for PFIC stock that is a nonqualified fund after the beginning of a taxpayer’s holding period for such stock, a coordination rule applies to ensure that the taxpayer does not avoid the interest charge with respect to amounts attributable to periods before the election.

Controlled Foreign Company Status

If more than 50% of the voting power of all classes of stock or the total value of the stock of the Company is owned, directly or indirectly, by U.S. Holders, each of whom own 10% or more of the total combined voting power of all classes of stock of the Company, the Company would be treated as a “controlled foreign corporation” or “CFC” under Subpart F of the Code.  This classification would bring into effect many complex results including the required inclusion by such 10% U.S. Holders in income of their pro rata shares of “Subpart F income” (as defined by the Code) of the Company and the Company’s earnings invested in “U.S. property” (as defined by the Code).  In addition, under Section 1248 of the Code, gain from the sale or exchange of Common Shares of the Company by such a 10% U.S. Holder of Company at any time during the five year period ending with the sale or exchange is treated as o rdinary dividend income to the extent of earnings and profits of the Company attributable to the stock sold or exchanged.  Because of the complexity of Subpart F, and because the Company may never be a CFC, a more detailed review of these rules is beyond of the scope of this discussion.

Elimination of Overlap between Subpart F Rules and PFIC Provisions

A PFIC that is also a CFC will not be treated as a PFIC with respect to certain 10% U.S. Holders.  For the exception to apply, (i) the corporation must be a CFC within the meaning of section 957(a) of the Code and (ii) the U.S. Holder must be subject to the current inclusion rules of Subpart F with respect to such corporation (i.e., the U.S. Holder is a “United States Shareholder,” see “Controlled Foreign Corporation,” above).  The exception only applies to that portion of a U.S. Holder’s holding period beginning after December 31, 1997.  For that portion of a United States Holder before January 1, 1998, the ordinary PFIC and QEF rules continue to apply.

As a result of this provision, if the Company were ever to become a CFC, U.S. Holders who are currently taxed on their pro rata shares of Subpart F income of a PFIC which is also a CFC will not be subject to the PFIC provisions with respect to the same stock if they have previously made a Pedigreed QEF Election.  The PFIC provisions will however continue to apply to PFIC/CFC U.S. Holders for any periods in which they are not subject to Subpart F and to U.S. Holders that did not make a Pedigreed QEF Election unless the U.S. Holder elects to recognize gain on the PFIC shares held in the Company as if those shares had been sold.

Information Reporting and Backup Withholding

U.S. Holders may be subject to information reporting and may be subject to backup withholding, currently at up to a 28% rate, on dividends or other distributions on the Common Shares of the Company.

Backup withholding will generally not apply, however, to a U.S. Holder who:

·

furnishes a correct taxpayer identification number and certifies that he, she or it is not subject to backup withholding on the substitute Form W-9 (or substitute form); or

·

is otherwise exempt from backup withholding.

65

Non-U.S. Holders generally will not be subject to U.S. information reporting or backup withholding.  However, such holders may be required to provide certification of non-U.S. status (generally, on IRS Form W-8BEN) in connection with payments received in the United States or through certain U.S.-related financial intermediaries.

Backup withholding is not an additional tax.  Any amounts withheld from a payment to a holder under the backup withholding rules may be credited against the holder’s U.S. federal income tax liability, and a holder may obtain a refund of any excess amounts withheld by filing the appropriate claim for refund with the IRS in a timely manner and furnishing any required information.

Dividend and Paying Agents

Not Applicable.

Statement by Experts

Not Applicable.

Documents on Display

Documents concerning the Company which are referred to in this document may be inspected at the offices of MAG Silver Corp., Suite 328, 550 Burrard Street, Vancouver, British Columbia, Canada  V6C 2B5.

Subsidiary Information

A list of subsidiaries of the Company is identified in Item 4 above and in note 9 of the notes to the consolidated financial statements in Item 17.

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13.

DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES

Not Applicable.

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not Applicable.

ITEM 15T.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of December 31, 2006, the Company, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in U.S. Exchange Act Rule 13a-14(c)). The Company’s management necessarily applied its judgment in assessing such controls and procedures, which by their nature can provide only a reasonable assurance regarding management’s control objectives. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level for gathering,

66

analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SEC’s rules and forms.

In addition, the Company’s Chief Executive Officer and Chief Financial Officer have determined that the disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that are filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company is currently considered a non-accelerated filer pursuant to Rule 12b-2 of the Exchange Act. Therefore, the Company is not currently required to make statements regarding the effectiveness of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. However, the Company and its management, including its Chief Executive Officer and Chief Financial Officer, recognize that the Company will likely be required to comply with disclosure report requirements of Section 404 beginning with the fiscal year ending December 31, 2007.

There were no changes in the Company’s internal control over financial reporting or in other factors that could significantly affect the Company’s internal control over financial reporting during 2006.

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud. A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the lik elihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

The Company’s Board of Directors has determined that the Company has at least one audit committee financial expert serving on its audit committee.  The Company’s audit committee financial expert as defined by Item 16A to Form 20-F is Eric H. Carlson, a Chartered Accountant.  Mr. Carlson is “independent” as that term is defined by Section 803 of the American Stock Exchange (AMEX) Company Guide, in accordance with Rule 10A-3 under the Securities Exchange Act of 1934, as amended.

ITEM 16B.

CODE OF ETHICS

The Company has adopted a code of ethics applicable to principal executive officer, principal financial officer, and directors and officers. The code is included as an exhibit to this Annual Report and has been posted on the Company’s website at www.magsilver.com. The Company undertakes to provide a copy of such code to any person without charge on request to the Secretary of the Company at Suite 328, 550 Burrard Street, Vancouver, British Columbia, Canada V6C 2B5 Telephone: (604) 630-1399, Facsimile (604)484-4710 or email info@magsilver.com.

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees for professional services rendered by the independent registered accountants, Deloitte & Touche LLP, for the Company and for the years ending December 31, 2006 and December 31, 2005 totalled $77,200 and $72,000, respectively, as detailed in the following table.  All funds are in Canadian dollars:

67

	Year ended December 31, 2006	Year ended December 31, 2005
Audit Fees	$75,200	$70,000
Audit Related Fees	$Nil	$Nil
Tax Fees	$2,000	$2,000
All Other Fees	$Nil	$Nil
TOTAL	$77,200	$72,000

The nature of the services provided by Deloitte & Touche LLP under each of the categories indicated in the table is described below.

Audit Fees

Audit fees are those incurred for professional services rendered by Deloitte & Touche LLP for the audit of the Company’s annual financial statements and services provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees

Audit-related fees are those incurred for assurance and related services reasonably related to the performance of the audit or review of the annual statements that are not reported under “Audit Fees” above.

Tax Fees

Tax fees are those incurred for tax compliance, tax advice and tax planning professional services.  These services consisted of: tax compliance including the review of tax returns, and tax planning and advisory services relating to common forms of domestic and international taxation (i.e. income tax, capital tax, goods and services tax, payroll tax and value added tax).

All Other Fees

Fees disclosed in the table above under the item “all other fees” were incurred for services other than the audit fees, audit-related fees and tax fees described above.

Pre-Approval Policies and Procedures

It is within the mandate of the Company’s Audit Committee to approve all audit and non-audit related fees. The Audit Committee has pre-approved specifically identified audit and non-audit related services, including tax compliance and review of tax returns, as submitted to the Audit Committee from time to time. The Audit Committee is in the process of developing a pre-approval policy for non-audit related services.

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

PART III

ITEM 17.

FINANCIAL STATEMENTS

The following Financial Statements are filed as part of this Annual Report, together with the Reports of the Independent Auditors:

(1)

Report of Independent Registered Chartered Accountants

(2)

Consolidated Balance Sheets as at December 31, 2006 and 2005

68

(3)

Consolidated Statements of Operations for each of the years in the three year period ended December 31, 2006 and for the cumulative period from April 21, 1999 to December 31, 2006

(4)

Consolidated Statements of Shareholders’ Equity for each of the years in the three year period ended December 31, 2006 and for the cumulative period from April 21, 1999 to December 31, 2006

(5)

Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2006 and for the cumulative period from April 21, 1999 to December 31, 2006

(6)

Notes to the Consolidated Financial Statements

69

Independent auditors’ report

To the Shareholders of

MAG Silver Corp.

(An exploration stage company)

We have audited the consolidated balance sheets of MAG Silver Corp. (an exploration stage company) as at December 31, 2006 and 2005 and the consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three year period ended December 31, 2006 and the cumulative period from April 21, 1999 to December 31, 2006.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these 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).  These 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.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2006 and the cumulative period from April 21, 1999 to December 31, 2006 in accordance with Canadian generally accepted accounting principles.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.

Independent Registered Chartered Accountants

February 23, 2007

Comments by auditors on Canada - United States of America reporting differences

The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the consolidated financial statements.  Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the Shareholders dated February 23, 2007 is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the auditors’ report when these are adequately disclosed in the consolidated financial statements.

The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph (following the opinion paragraph) when there are changes in accounting principles that have a material effect on the comparability of the Company’s consolidated financial statements, such as the change described in Note 12 (b) to the consolidated financial statements.  Our report to the shareholders, dated February 23, 2007, is expressed in accordance with Canadian reporting standards which do not require a reference to such changes in accounting principles in the auditors’ report when the change is properly accounted for and adequately disclosed in the consolidated financial statements.

Independent Registered Chartered Accountants

February 23, 2007

70

MAG SILVER CORP.
(An exploration stage company)
Consolidated Balance Sheets
	December 31,
	2006	2005
ASSETS
CURRENT
Cash and cash equivalents	$       3,506,930	$       7,560,193
Amounts receivable (Note 11)	273,035	105,071
Interest receivable	115,227	26,412
Prepaid expenses	40,965	22,237
TOTAL CURRENT ASSETS	3,936,157	7,713,913
EQUIPMENT AND LEASEHOLDS (Note 3)	31,332	39,914
MINERAL RIGHTS (Note 7)	5,504,137	4,858,108
DEFERRED EXPLORATION COSTS (Note 7)	9,458,932	5,463,471
TOTAL ASSETS	$     18,930,558	$     18,075,406
LIABILITIES
CURRENT
Accounts payable and accrued liabilities	$         350,368	$         393,621
TOTAL LIABILITIES	350,368	393,621
SHAREHOLDERS' EQUITY
Share capital (Note 4)
Authorized - 1,000,000,000 Common Shares,
without par value
Issued and outstanding at December 31, 2006
- 37,928,610 Common Shares (December 31, 2005 -
36,191,648)	23,433,942	20,812,185
Contributed surplus (Note 5)	3,059,194	915,979
Deficit	(7,912,946)	(4,046,379)
TOTAL SHAREHOLDERS' EQUITY	18,580,190	17,681,785
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$     18,930,558	$     18,075,406
CONTINUING OPERATIONS (Note 1)
ON BEHALF OF THE BOARD
“R. Michael Jones”
Director
“ Daniel MacInnis”
Director

71

MAG SILVER CORP.
(An exploration stage company)
Consolidated Statements of Operations
				Cumulative
				amount from
				April 21,
	Year ended	Year ended	Year ended	1999 to
	December 31,	December 31,	December 31,	December 31,
	2006	2005	2004	2006
EXPENSES
Accounting and audit	$      211,168	$      127,959	$      126,837	$      657,250
Amortization	16,820	18,357	11,563	48,601
Bank charges and interest	2,214	1,827	3,021	23,347
Filing and transfer agent fees	48,782	42,254	41,163	227,368
Foreign exchange gain (loss)	12,479	(29,506)	48,349	76,809
Legal	89,810	167,005	71,493	521,960
Management and consulting fees	485,993	415,117	173,444	1,258,466
Property investigation expense	-	4,851	-	4,851
Shareholder relations	288,687	109,803	81,277	541,126
Stock compensation expense	2,341,159	611,353	-	3,027,820
Telephone and office	365,880	252,257	190,910	913,482
Travel	212,168	169,993	52,839	565,732
Write-off of advances	-	-	-	252,420
Write-off of computer software	-	-	-	2,673
	4,075,160	1,891,270	800,896	8,121,905
LOSS BEFORE THE FOLLOWING	(4,075,160)	(1,891,270)	(800,896)	(8,121,905)
INTEREST INCOME	208,593	80,432	66,999	457,087
NET LOSS FOR THE PERIOD	$(3,866,567)	$(1,810,838)	$   (733,897)	$(7,664,818)
BASIC AND DILUTED
LOSS PER SHARE	$         (0.10)	$         (0.06)	$         (0.03)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING	37,055,631	28,353,901	24,578,037

72

MAG SILVER CORP.
(An exploration stage company)
Consolidated Statements of Shareholders' Equity
							Deficit < /P>
							accumulat ed
	Common Shares		Shares	Special			during the	Total
	without par value		allotted but	warrants		Contributed	exploration	shareholders'
	Shares	Amount	not issued	Number	Amount	Surplus	stage	Equity
Issued for cash	1,500,000	$     150,000	$         -	-	$         -	$            -	$                -	$     150,000
Net loss	-	-	-	-	-	-	(4,279)	(4,279)
Balance, October 31, 1999	1,500,000	150,000	-	-	-	-	(4,279)	145,721
Net loss	-	-	-	-	-	-	(3,787)	(3,787)
Balance, December 31, 1999	1,500,000	150,000	-	-	-	-	(8,066)	141,934
Issued for cash	1,500,000	240,222	-	-	-	-	-	240,222
Net loss	-	-	-	-	-	-	(5,641)	(5,641)
Balance, December 31, 2000	3,000,000	390,222	-	-	-	-	(13,707)	376,515
Net loss	-	-	-	-	-	-	(279,639)	(279,639)
Balance, December 31, 2001	3,000,000	390,222	-	-	-	-	(293,346)	96,876
Issued for cash			-	2,400,000	375,000	-	-	375,000
Net loss	-	-	-	-	-	-	(122,631)	(122,631)
Balance, December 31, 2002	3,000,000	390,222	-	2,400,000	375,000	-	(415,977)	349,245
Issued for cash	11,500,000	5,109,766	-	-	-	-	-	5,109,766
Conversion of special warrants	2,400,000	375,000	-	(2,400,000)	(375,000)	-	-	-
Agent's administration
shares	10,000	5,000	-	-	-	-	-	5,000
Finders' fee shares	500,000	250,000	-	-	-	-	-	250,000
Issued to obtain mineral property
option rights	200,000	100,000	-	-	-	-	-	100,000
Issued on acquisition of
Lexington	200,000	180,000	-	-	-	-	-	180,000
Warrants exercised	5,183,995	3,068,996	-	-	-	-	-	3,068,996
Stock options exercised	100,000	26,000	-	-	-	-	-	26,000
Stock options granted to
consultants	-	-	-	-	-	75,308	-	75,308
Net loss	-	-	-	-	-	-	(837,539)	(837,539)
Balance, December 31, 2003	23,093,995	9,504,984	-	-	-	75,308	(1,253,516)	8,326,776
Cumulative effect of change in
accounting policy (Note 2 (j))	-	-	-	-	-	248,128	(248,128)	-
Issued to obtain mineral property
option rights	1,358,793	1,578,752	-	-	-	-	-	1,578,752
Warrants exercised	1,236,750	480,562	-	-	-	-	-	480,562
Stock options exercised	140,000	68,070	-	-	-	(17,270)	-	50,800
Shares allotted to acquire mineral
property option rights	-	-	9,467	-	-	-	-	9,467
Net loss	-	-	-	-	-	-	(733,897)	(733,897)
Balance, December 31, 2004	25,829,538	11,632,368	9,467	-	-	306,166	(2,235,541)	9,712,460
Issued for cash (Note 4 (a))	7,201,176	6,771,672	-	-	-	-	-	6,771,672
Issued to obtain mineral property
option rights	1,654,679	1,337,289	(9,467)	-	-	-	-	1,327,822
Warrants exercised	1,400,755	1,046,566	-	-	-	-	-	1,046,566
Stock options exercised	105,500	24,290	-	-	-	(1,540)	-	22,750
Stock options granted	-	-	-	-	-	611,353	-	611,353
Net loss	-	-	-	-	-	-	(1,810,838)	(1,810,838)
Balance, December 31, 2005	36,191,648	$20,812,185	$         -	-	$         -	$   915,979	$(4,046,379)	$17,681,785
Issued for cash (Note 4 (a))	245,716	577,433	-	-	-	-	-	577,433
Issued to obtain mineral property
option rights	85,043	204,431	-	-	-	-	-	204,431
Warrants exercised	944,503	1,275,079	-	-	-	-	-	1,275,079
Stock options exercised	461,700	564,814	-	-	-	(197,944)	-	366,870
Stock options granted	-	-	-	-	-	2,341,159	-	2,341,159
Net loss	-	-	-	-	-	-	(3,866,567)	(3,866,567)
Balance, December 31, 2006	37,928,610	$23,433,942	$         -	-	$         -	$3,059,194	$(7,912,946)	$18,580,190

73

MAG SILVER CORP.
(An exploration stage company)
Consolidated Statements of Cash Flows
				Cumulative
				amount from
				April 21,
	Year ended	Year ended	Year ended	1999 to
	December 31,	December 31,	December 31,	December 31,
	2006	2005	2004	2006
OPERATING ACTIVITIES
Loss for the period	$(3,866,567)	$(1,810,838)	$   (733,897)	$(7,664,818)
Items not involving cash:
Write-off of computer software	-	-	-	2,673
Write-off of advances	-	-	-	252,420
Amortization	16,820	18,357	11,563	48,601
Non-cash compensation expense	2,341,159	611,353	-	3,027,820
Changes in operating assets and liabilities
Accounts receivable	(167,963)	418,077	(261,275)	(273,034)
Interest receivable	(88,815)	(4,218)	41,933	(115,227)
Prepaid expenses	(18,729)	(9,387)	(4,100)	(40,966)
Accounts payable and accrued     liabilities	(43,253)	329,412	(146,181)	350,368
	(1,827,348)	(447,244)	(1,091,957)	(4,412,163)
INVESTING ACTIVITIES
Purchase of equipment and leasehold     improvements	(8,238)	(16,868)	(18,592)	(82,606)
Advances to Minera Los Lagartos, S.A.     de C.V.	-	-	-	(113,139)
Acquisition of Minera Los Lagartos, S.A.     de C.V.	-	-	-	(7,500)
Acquisition of Lexington Capital Group     Inc.	-	-	-	(350,000)
Mineral rights	(441,598)	(253,736)	(373,653)	(1,349,869)
Deferred exploration costs	(3,995,461)	(1,429,307)	(1,976,622)	(9,492,089)
Other	-	-	-	(252,420)
	(4,445,297)	(1,699,911)	(2,368,867)	(11,647,623)
FINANCING ACTIVITIES
Issue of share capital	2,219,382	7,840,988	531,362	19,191,716
Issue of special warrants	-	-	-	375,000
	2,219,382	7,840,988	531,362	19,566,716
INCREASE (DECREASE) IN CASH	(4,053,263)	5,693,833	(2,929,462)	3,506,930
CASH AND EQUIVALENTS, BEGINNING     OF PERIOD	7,560,193	1,866,360	4,795,822	-
CASH AND EQUIVALENTS, END OF
PERIOD (Note 2 (d))	$   3,506,930	$   7,560,193	$   1,866,360	$   3,506,930
Interest paid	$                 -	$                 -	$                 -	$        12,500
Non-cash investing and financing activities:
Issue of shares in connection with acquisition
of Minera Los Lagartos, S.A. de C.V.	$                 -	$                -	$                -	$      250,000
Issue of shares in exchange for mineral
property option rights	$      204,431	$   1,337,289	$   1,578,752	$   3,220,472
Issue of shares in connection with acquisition
of Lexington Capital Group Inc.	$                 -	$                 -	$                  -	$      180,000

74

1.

CONTINUING OPERATIONS

The Company was incorporated under the Company Act (British Columbia) on April 21, 1999 and its shares were listed on the TSX Venture Exchange on April 21, 2000.

The Company is an exploration company conducting work on mineral properties it has staked or acquired by way of option agreement principally in Mexico. The Company has not yet determined whether the properties on which it is conducting exploration contain any ore reserves that are economically recoverable. The Company defers all acquisition, exploration and development costs related to the properties on which it is conducting exploration. The recoverability of these amounts is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development of the interests, and future profitable production, or alternatively, upon the Company’s ability to dispose of its interests on a profitable basis.

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assume that the Company will realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred losses from inception and does not currently have the financial resources to sustain operations in the long-term. The Company’s ability to continue as a going concern is dependent upon its ability in the future to achieve profitable operations and, in the meantime, to obtain the necessary financing to meet its obligations and repay its liabilities when they become due. External financing, predominantly by the issuance of equity to the public, will be sought to finance the operations of the Company.

Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements and non-compliance with regulatory requirements.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and include the following significant policies outlined below.

(a)

Principles of consolidation

The financial statements of entities which are controlled by the Company through voting equity interests, referred to as subsidiaries, are consolidated.  Entities which are jointly controlled, referred to as joint ventures, are proportionately consolidated.  Variable interest entities (“VIEs”), which include, but are not limited to, special purpose entities, trusts, partnerships, and other legal structures, as defined by the Accounting Standards Board in Accounting Guideline (“AcG”) 15, Consolidation of Variable Interest Entities (“AcG 15”), are entities in which equity investors do not have the characteristics of a “controlling financial interest” or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.  VIEs are subject to consolidation by the primary beneficiary who will absorb the majority of the entities 6; expected losses and/or expected residual returns.  The Company does not believe that it has any VIEs subject to consolidation.  All significant intercompany balances and transactions have been eliminated upon consolidation.  The principal subsidiary at December 31, 2006 is Minera Los Lagartos, S.A. de C.V. which holds several properties in Mexico.

(b)

Measurement uncertainty

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reported period. Significant estimates used in preparation of these financial statements include estimates of

75

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(b)

Measurement uncertainty (Continued)

the net realizable value of mineral properties and deferred exploration costs, asset retirement obligations, stock based compensation, income tax provisions and contingencies. Actual results may differ from those estimated.

(c)

Asset retirement obligations

The Company records the present value of asset retirement obligations including reclamation costs when the obligation is incurred and it is recorded as a liability with a corresponding increase in the carrying value of the related mining assets.  The carrying value is amortized over the life of the related mining asset on a units-of-production basis commencing with initial commercialization of the asset.  The liability is accreted to the actual liability on settlement through charges each period in the statement of operations.

(d)

Financial instruments

The carrying values of cash and cash equivalents, amounts receivable, interest receivable and accounts payable and accrued liabilities reflected in the balance sheet approximate their respective fair values.

Price risk is the risk that the value of the Company’s financial instruments will vary because of fluctuations in foreign exchange rates and the degree of volatility of these rates.  Certain of the Company’s accounts receivable, accounts payable and accrued liabilities are denominated in Mexican pesos.  The Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign exchange rates.

(e)

Cash and cash equivalents

Cash and cash equivalents consist of cash and short-term money market instruments which are readily convertible into cash and have original maturities of 90 days or less.

Details of cash and cash equivalents are as follows:

	Dec. 31, 2006	Dec. 31, 2005	Dec. 31, 2004
Cash	$       406,930	$     6,210,193	$         66,360
Short-term deposits	3,100,000	1,350,000	1,800,000
	$     3,506,930	$     7,560,193	$     1,866,360

(f)

Mineral rights and deferred exploration costs

The Company is in the exploration stage with respect to its activities and accordingly follows the practice of capitalizing all costs relating to the acquisition, exploration and development of its mining rights and crediting all revenues received against the cost of the related interests. At such time as commercial production commences, these costs will be charged to operations on a units-of-production method based on proven and probable reserves. The carrying values related to abandoned interests are charged to operations at the time of any abandonment.

Mineral rights include costs to acquire options to acquire interests in unproven mineral properties.

Deferred exploration costs include direct exploration costs incurred by the Company in its effort to determine the existence of economically mineable ore including the cost of feasibility studies.

76

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(f)

Mineral rights and deferred exploration costs (continued)

Management reviews the carrying value of mineral rights and deferred exploration costs at least quarterly for evidence of impairment. This review is generally made with reference to the timing of exploration work, work programs proposed, exploration results achieved by the Company and by others in the related area of interest, and an assessment of the likely results to be achieved from performance of further exploration. When the results of this review indicate that a condition of impairment exists, the Company estimates the net recoverable amount of the deferred exploration costs and related mining rights by reference to the potential for success of further exploration activity and/or the likely proceeds to be received from sale or assignment of the rights. When the carrying values of mining rights or deferred exploration costs are estimated to exceed their net recoverable amounts, a provision is made for the decline in value.

(g)

Equipment and leaseholds

Equipment and leaseholds are recorded at cost and are amortized on the declining balance basis at the following annual rates:

Computer equipment and software

30%

Field equipment

30%

The leasehold improvements are depreciated on a straight-line basis to amortize the costs over the three year term of the related lease.

(h)

Income taxes

Future income taxes relate to the expected future tax consequences of differences between the carrying amount of balance sheet items and their corresponding tax values.  Future tax assets, if any, are recognized only to the extent that, in the opinion of management, it is more likely than not that the future income tax assets will be realized.  Future income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment or substantive enactment.

(i)

Foreign exchange translation

The accounts of the Company’s foreign operations are considered to be integrated with the operations of the Company and are translated into Canadian dollars as follows:

·

monetary assets and liabilities at the rate prevailing at the balance sheet date;

·

non-monetary assets and liabilities at historical rates; and

·

income and expenses at the average rate in effect during the year.

The resulting translation adjustment is included as a component of foreign exchange (gain) loss on the statement of operations.

77

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(j)

Stock-based compensation

Effective January 1, 2004, the Company adopted the amended recommendations of the CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments.  Under the amended standards of this Section, the fair value of all stock-based awards granted are estimated using the Black-Scholes model and are recorded in operations over their vesting periods.  The compensation cost related to stock options granted after January 1, 2004 is recorded in operations.

Previously, the Company provided note disclosure of pro forma net earnings and pro forma earnings per share as if the fair value based method had been used to account for share purchase options granted to employees, directors and officers after January 1, 2002.  The amended recommendations have been applied retroactively from January 1, 2002 without restatement of prior periods.  As a result, as of January 1, 2004, the deficit was increased by $248,128, and contributed surplus was increased by $248,128.

The total compensation expense recognized in the statement of operations for share purchase options granted during 2006 amount to $2,341,159 (2005 - $611,353). Please refer to Note 4 (b) for a summary of stock options granted in the current year and the related valuation assumptions.

For the year ended December 31, 2004, no stock options were issued, resulting in no stock-based compensation expense.

(k)

Earnings (loss) per common share

Basic earnings (loss) per share calculations are based on the weighted average number of common shares outstanding.

The Company uses the treasury stock method for the calculation of diluted earnings per share. Diluted earnings per share are computed using the weighted average number of common and common equivalent shares outstanding during the year. Common equivalent shares consist of the incremental common shares upon the assumed exercise of stock options and warrants, but are excluded from the computation if their effect is anti-dilutive.

Potentially dilutive securities totalling 5,993,287 for the period ended December 31, 2006 (3,352,800 and 2,640,487 shares arising from outstanding and exercisable stock options and share purchase warrants, respectively) and 5,739,490 shares for the year ended December 31, 2005 (2,154,500 and 3,584,990 shares arising from outstanding exercisable stock options and share purchase warrants, respectively) were not included as their effect would be anti-dilutive.

(l)

Comparative figures

Certain of the prior years’ comparative figures have been reclassified to conform with the classifications used in 2006.

78

3.

FIXED ASSETS AND LEASEHOLDS

		December 31,		December 31,
	2006			2005
		Accumulated	Net book	Net book
	Cost	depreciation	value	value
Computer equipment
and software	$       30,127	$       15,750	$       14,377	$       12,300
Field equipment	34,806	21,601	13,205	18,864
Leasehold improvements	15,000	11,250	3,750	8,750
	$       79,933	$       48,601	$       31,332	$       39,914

4.

SHARE CAPITAL

(a)

Issued and outstanding

At December 31, 2006 there were 37,928,610 shares outstanding.

During the year ended December 31, 2006 the Company issued 85,043 common shares in connection with the acquisition of mineral properties at a fair value of $204,431. During the year 944,503 share purchase warrants were exercised for proceeds of $1,275,079 and 461,700 stock options were exercised for cash proceeds of $366,870.

On March 2, 2006 the Company closed a private placement subscribed to by Industrias Peñoles S.A. de C.V. (“Peñoles”) which consisted of 245,716 common shares of MAG Silver Corp. at $2.35. This equates to an investment of $577,433 (US$500,000). See Note 7 (a)(v).

On December 22, 2005, the Company raised gross proceeds of $6,494,749 from the sale of 6,494,749 units at a price of $1.00 per unit in a brokered, non-brokered financing. Each unit consisted of one common share and one-half of one share purchase warrant, with each whole warrant entitling the holder to purchase one share at a price of $1.35 per share for a period of 18 months until June 21, 2007. The Agents were granted warrants to purchase up to 295,190 shares of the Company at a price of $1.35 in partial payment of services rendered in connection with their portion of the financing. The commission paid to the Agents was $295,190, equal to 7% of the gross proceeds of the Offering, comprising of $210,340 in cash and $84,850 in units of the offering.  Each unit consisted of one common share and one-half of one share purchase warrant.  Corporate finance fees, legal fees, TSX fees and related expenditures totalled $113,802. The net proceeds to the Company from the financing were $6,170,607.

On June 29, 2005, the Company issued 750,000 shares with a value of $607,500 to the former option holder of the Don Fippi property to complete the acquisition of the property.  See Note 7 (b).

On June 29, 2005, the Company issued 750,000 shares with a value of $607,500 to the former option holder of the Guigui property to complete the acquisition of the property.  See Note 7 (c).

79

4.

SHARE CAPITAL (Continued)

 (a)

Issued and outstanding (continued)

On May 2, 2005 the Company closed the private placement subscribed to by Industrias Peñoles S.A. de C.V. (“Peñoles”) which consisted of 621,577 common shares of MAG Silver Corp. at $0.967. This equates to an investment of $601,065 (US$500,000). See Note 7 (a)(v).

(b)

Stock options

The Company has entered into Incentive Stock Option Agreements (“Agreements”) with directors, officers and employees. The maximum number of stock options which may be granted is limited to 10% of the issued and outstanding shares.

The following table summarizes options outstanding and exercisable at December 31, 2006:

	Number outstanding	Weighted average	Weighted
	and exercisable at	remaining	average
Exercise	December 31,	contractual life	exercise
price	2006	(years)	price
$            0.50	394,500	1.29	$           0.50
0.70	220,000	1.36	0.70
0.75	53,000	3.60	0.75
1.00	110,000	0.25	1.00
1.02	25,000	3.95	1.02
1.06	878,000	3.05	1.06
1.14	37,500	3.76	1.14
1.55	10,800	4.03	1.55
3.00	650,000	4.10	3.00
3.56	15,000	4.22	3.56
4.04	199,000	4.25	4.04
2.00	50,000	4.46	2.00
2.46	145,000	4.56	2.46
3.12	25,000	4.67	3.12
5.36	540,000	4.95	5.36
	3,352,800	3.35	$           2.31

At the date the Agreements are entered into, the exercise price of each option is set at the fair value of the common shares at the date of grant.  The following table summarizes the Company’s options:

	Period ended	Weighted	Year ended	Weighted
	December 31,	average	December 31,	average
	2006	exercise price	2005	exercise price
Balance outstanding,
beginning of year	2,154,500	$         0.84	1,030,000	$         0.54
Activity during the year
Options granted	1,670,000	3.81	1,240,000	1.03
Options cancelled	(10,000)	4.04	(10,000)	1.06
Options exercised	(461,700)	0.79	(105,500)	0.22
Balance outstanding,
end of year	3,352,800	$         2.31	2,154,500	$         0.84

80

4.

SHARE CAPITAL (Continued)

(b)

Stock options (continued)

During the current year the Company granted 1,670,000 stock options, and later cancelled 10,000 of these, (December 31, 2005 – 1,240,000 and later cancelled 10,000 of these). The Company has recorded $2,341,159 (2005 - $611,353) of compensation expense relating to stock options vested to employees and consultants in the year ended December 31, 2006.

For the year ended December 31, 2006, stock-based compensation expense was determined using an option pricing model assuming no dividends are to be paid, a weighted average volatility of the Company’s share price of 86%, an annual risk free interest rate of 4.04% and expected lives of three years.  

For the year ended December 31, 2005, stock-based compensation expense was determined using an option pricing model assuming no dividends are to be paid, a weighted average volatility of the Company’s share price of 80%, an annual risk free interest rate of 3.5% and expected lives of three years.  

 (c)

Share purchase warrants

		Weighted
		average
	Number	exercise
	of warrants	price
Balance at December 31, 2004	2,429,255	0.75
Issued in connection with issuance of common
shares	3,584,990	1.35
Exercised and converted into common shares	(1,400,755)	0.75
Expired	(1,028,500)	0.75
Balance at December 31, 2005	3,584,990	1.35
Exercised and converted into common shares	(944,503)	1.35
Balance at December 31, 2006	2,640,487	$             1.35

The following table summarizes information about the warrants outstanding at December 31, 2006:

Exercise	Warrants
price	outstanding	Expiry date
$        1.35	2,640,487	June 21, 2007

(d)

Shares held in escrow

At the end of the year there are no shares held in escrow. All remaining escrow shares have been released during the year ended December 31, 2006. At April 22, 2006, the final 45,000 of the of the originally escrowed common shares issued in connection with the finders fee and 225,000 of the original 1,500,000 common shares issued to directors and officers of the company were released.

81

5.

CONTRIBUTED SURPLUS

The following table summarizes the Company’s Contributed Surplus:

	Contributed
	Surplus
Balance at December 31, 2004	$306,166
Stock options granted during the year	611,353
Stock options exercised during the year	(1,540)
Balance at December 31, 2005	915,979
Stock options granted during the year	2,341,159
Stock options exercised during the year	(197,944)
Balance at December 31, 2006	$3,059,194

6.

INCOME TAXES

The provision for income taxes reported differs from the amounts computed by applying the cumulative Canadian federal and provincial income tax rates to the pre-tax loss due to the following:

	2006	2005	2004
Statutory tax rates	34.12%	34.87%	35.60%
Recovery of income taxes computed at
statutory rates	$ 1,319,273	$    631,439	$    261,267
Non-deductible expenses	(804,815)	(215,930)	(4,116)
Lower effective tax rate on loss in
foreign jurisdictions	(7,443)	(6,363)	(1,973)
Future tax benefits not recognized in
the period that the loss arose	(507,015)	(409,146)	(255,178)
	$               -	$                -	$               -

The approximate tax effect of each type of temporary difference that gives rise to the Company’s future income tax assets are as follows:

	2006	2005
Canadian operating loss carryforwards	$   1,442,594	$   1,023,908
Mexican operating loss carryforwards	2,632,441	1,669,599
Canadian capital losses carried forward	39,125	41,649
Share issuance costs and other	131,638	192,478
Total future income tax assets	4,245,798	2,927,634
Less valuation allowance	(1,528,129)	(1,130,648)
Net future income tax assets	2,717,669	1,796,986
Future income tax liability
Excess of book value of mineral rights and deferred
exploration costs over tax values	(2,717,669)	(1,796,986)
Net future income tax assets	$                 -	$                  -

At December 31, 2006, the Company has Canadian non-capital loss carryforwards aggregating $4,654,000, expiring between 2006 and 2026, available to offset future taxable income and capital loss carryforwards of $252,000 which are available only to offset future capital gains for tax purposes and may be carried forward indefinitely.

82

6.

INCOME TAXES (Continued)

At December 31, 2006, the Company has Mexican tax loss carryforwards aggregating $9,077,382, expiring between 2012 and 2016, available to offset future taxable income.

7.

MINERAL RIGHTS AND DEFERRED EXPLORATION COSTS

	Year ended December 31, 2006
					Sierra de		Cinco de
	Juanicipio	Don Fippi	Guigui	Lagartos	Ramirez	Adargas	Mayo	Sello	Total
Acquisition costs
of mineral rights
Bal., beginning of year	$    919,458	$ 1,422,672	$ 1,571,172	$      39,629	$ 329,854	$ 289,387	$    285,936	$         -	$ 4,858,108
Incurred during year	-	-	-	134,747	197,791	142,674	142,674	28,143	646,029
Balance, end of year	$    919,458	$ 1,422,672	$ 1,571,172	$    174,376	$ 527,645	$ 432,061	$    428,610	$ 28,143	$ 5,504,137
Deferred exploration costs
Camp costs	$        9,087	$    110,259	$           608	$      62,956	$     3,117	$          -	$      53,276	$         -	$    239,303
Drilling	-	280,584	-	1,103,093	-	-	659,666	-	2,043,343
Geochemical	238	28,674	-	56,070	-	-	57,520	-	142,502
Geological	79,538	326,220	13,110	227,574	29,970	1,455	160,039	-	837,906
Geophysical	-	6,442	81,314	64,480	721	-	89,561	-	242,518
Gov't fees and licenses	9,547	23,950	8,689	263,296	17,273	1,173	34,967	-	358,894
Travel	13,725	34,052	410	6,321	838	986	10,413	-	66,745
Transport and shipping	-	-	-	-	-	-	-	-	-
Site administration	8,089	31,775	6,967	14,380	8,675	3,385	12,245	-	85,516
	120,224	841,956	111,099	1,798,169	60,594	6,999	1,077,687	-	4,016,728
Bal., beginning of year	2,026,094	1,240,889	1,265,194	399,192	88,536	307,779	135,787	-	5,463,471
	$ 2,146,318	$ 2,082,845	$ 1,376,293	$ 2,197,361	$ 149,130	$ 314,778	$ 1,213,474	$         -	$ 9,480,199
Recoveries
Recoveries during year	(21,267)	-	-	-	-	-	-	-	(21,267)
Balance, end of year	$ 2,125,051	$ 2,082,845	$ 1,376,293	$ 2,197,361	$ 149,130	$ 314,778	$ 1,213,474	$         -	$ 9,458,932

	Year ended December 31, 2005
					Sierra de		Cinco de
	Juanicipio	Don Fippi	Guigui	Lagartos	Ramirez	Adargas	Mayo	Total
Acquisition costs
of mineral rights
Balance, beginning of year	$    912,657	$    801,068	$    962,281	$   39,629	$ 171,175	$ 198,613	$ 191,127	$ 3,276,550
Incurred during year	6,801	621,604	608,891	-	158,679	90,774	94,810	1,581,558
Balance, end of year	$    919,458	$ 1,422,672	$ 1,571,172	$   39,629	$ 329,854	$ 289,387	$ 285,937	$ 4,858,108
Deferred exploration costs
Camp costs	$      10,855	$      63,793	$      12,865	$   16,009	$     2,630	$     2,672	$     9,637	$    118,461
Drilling	5,521	119,296	243,972	4,056	-	-	-	372,845
Geochemical	650	2,228	3,724	21,728	-	-	10,039	38,369
Geological	43,462	166,045	59,028	66,586	11,820	19,382	72,605	438,928
Maps, fees and licenses	133,397	49,121	46,607	56,725	12,185	1,079	25,072	324,186
Travel	6,217	18,989	5,332	3,108	-	-	1,182	34,829
Transport and shipping	6,701	4,509	779	6,466	-	-	71	18,526
Site administration	43,682	21,834	10,704	3,537	663	1,178	1,566	83,163
	250,486	445,815	383,011	178,215	27,299	24,310	120,172	1,429,307
Balance, beginning of year	1,775,609	795,074	882,183	220,977	61,238	283,468	15,615	4,034,164
Balance, end of year	$ 2,026,095	$ 1,240,889	$ 1,265,194	$ 399,192	$   88,537	$ 307,778	$ 135,787	$ 5,463,471

(a)

Juanicipio Property

The Company, through its subsidiary, Minera Los Lagartos, S.A. de C.V. (“Lagartos”), holds a 100% interest in an exploration concession on the Juanicipio property, located in the Fresnillo District, Zacatecas, Mexico.

On April 4, 2005 the Company announced the signing of a binding letter of agreement for the establishment of an exploration Joint Venture covering its wholly-owned 7,679 hectare Juanicipio Property in Zacatecas, Mexico with Industrias Peñoles, S.A. de C.V. (“Peñoles”).  A formal agreement was later signed with an anniversary date of July 1, 2005.

83

7.

MINERAL RIGHTS AND DEFERRED EXPLORATION COSTS (Continued)

(a)

Juanicipio Property

The principal features of the agreement are:  

(i)

Peñoles can earn a 56% interest in Juanicipio upon completion of a US$5,000,000 exploration program on or before the end of year 4 of the agreement.  To December 31, 2006 Peñoles has spent approximately US$3,360,000 and completed 18,320 metres of diamond drilling.

(ii)  

Peñoles was obligated to incur exploration expenditures of at least US$750,000 in year one, including a minimum of 3,000 metres of diamond drilling and Peñoles completed the obligation.

(iii)

A flexible and staged exploration program is included in the contract.  Exploration work will be supervised by a technical committee comprised of three representatives from Peñoles and two from MAG Silver.  Peñoles and MAG Silver are obliged to share their information in the district.  Part of the geological and exploration work will be conducted by MAG consultants and in-house personnel.   

(iv)

Exploration results from Juanicipio will be published as appropriate on an ongoing basis, with both companies to agree on the content.

(v)

On signing of the agreement Peñoles subscribed for a required US$500,000 private placement for a total of 621,577 shares of the Company at a price of C$0.967 per share.  Later, on March 2, 2006, Peñoles subscribed for a second required US$500,000 private placement for a total of 245,716 MAG shares, at a price of C$2.35 per share.

(vi)

Peñoles was obligated to incur further exploration expenditures of at least US$1,000,000 in year two and Peñoles has completed the obligation.

 (b)

Don Fippi Property

Under the terms of a 2003 option agreement, the Company had the right to acquire a 100% interest in mining concessions located in the Batopilas, Chihuahua district of Mexico, subject to a royalty of 4.5% of the Net Smelter returns obtained from the property. Under the terms of the agreement the Company was required to incur exploration expenditures of US$4,000,000 to April 2008 (of which approximately US$590,000 was incurred) and make scheduled payments consisting of US$550,000 in cash (of which US$100,000 was paid) and 2,100,000 common shares of the Company (of which 676,178 were issued).

In 2005, the Company negotiated a termination and sale agreement whereby the Company issued the underlying agreement holders a one time final payment of 750,000 common shares in exchange for a 100% interest in the property.  The purchase eliminated all remaining work commitments and the remaining payments of US$450,000 in cash and 673,822 in shares under the terms of the original option agreement. The property will remain subject to royalties and certain other terms of the original option agreement.  To December 31, 2006 the Company has incurred $2,082,845 in exploration costs on the property.

84

7.

MINERAL RIGHTS AND DEFERRED EXPLORATION COSTS (Continued)

 (c)

Guigui Property

Under the terms of a 2003 option agreement, the Company had the right to acquire a 100% interest in mining concessions located in the Santa Eulalia (Guigui), Chihuahua district of Mexico, subject to a royalty of 2.5% of the Net Smelter returns obtained from the property. Under the terms of the agreement the Company was required to incur exploration expenditures of US$2,500,000 to April 2007 (of which approximately US$660,000 was incurred) and make scheduled payments consisting of US$550,000 in cash (of which US$100,000 was paid) and 2,100,000 common shares of the Company (of which 745,997 were issued).

In 2005, the Company negotiated a termination and sale agreement whereby the Company issued the underlying agreement holders a one time final payment of 750,000 common shares in exchange for a 100% interest in the property.  The purchase eliminated all remaining work commitments and the remaining payments of US$450,000 in cash and 604,003 in shares under the terms of the original option agreement. The property will remain subject to royalties and certain other terms of the original option agreement.  To December 31, 2006 the Company has incurred $1,376,293 in exploration costs on the property.

(d)

Lagartos Property

The Company has acquired an exploration concession on mining claims (Lagartos) on the Fresnillo trend to the northwest and southeast of the Juanicipio property. This exploration concession enables the Company to explore the mining claim covered by the concession to December 2009, subject to the Company paying any applicable annual tax or other regulatory charges.

(e)

Sierra de Ramirez Property

On December 14, 2003 the Company entered into an option agreement to acquire a 100% interest in certain mining concessions located in the Sierra de Ramirez district in Durango, Mexico. Under the terms of the option agreement, the Company was obligated to:

(i)

make scheduled payments totalling US$1,505,000 plus applicable value added tax (of which US$330,000 has been paid or accrued) by December 14, 2008;

(ii)

incur exploration expenditures totalling US$250,000 by July 26, 2009 (of which US$138,700 has been incurred to December 31, 2006); and

(iii)

issue a finder’s fee of 25,000 common shares of the Company in three tranches (of which all are now issued).

85

7.

MINERAL RIGHTS AND DEFERRED EXPLORATION COSTS (Continued)

(e)

Sierra de Ramirez Property

During the period ended December 31, 2006, the Company and Minera Rio Tinto, S.A. de C.V. amended terms of the above referenced option agreement. Under the amended terms, the Company will issue Minera Rio Tinto, S.A. de C.V. 20,000 common shares of the Company (issued) and make scheduled cash payments totalling US$1,300,000 to December 14, 2010, with a final payment of US$650,000 of which up to US$500,000 may be paid in the common shares of the Company.  Under the amended terms all exploration work commitments were also eliminated.

(f)

Adargas Property

On February 14, 2004 the Company entered into an option agreement to acquire a 100% interest in the Adargas property (the “Adargas Property”), subject to a 2.5% net smelter returns royalty. Under the terms of the agreement, the Company was obligated to:

(i)

make scheduled payments totalling US$1,000,000 plus applicable value added tax (of which US$225,000 has been paid) by July 26, 2009;

(ii)

issue 75,000 common shares of the Company (all have been issued); and

(iii)

incur exploration expenditures totalling US$1,000,000 by July 26, 2009 (of which US$257,900 has been incurred to December 31, 2006).

During the year ended December 31, 2005, the Company and Minera Cascabel, S.A. de C.V. amended terms of the above referenced option agreement. Under the amended terms, half of each of the remaining property payments totalling US$775,000 due on or before July 26, 2009, may be paid in shares at a deemed price per share equal to the average trading price of MAG for 30 calendar days prior to the date of payment. To that end MAG paid cash of US$62,500 and issued 30,840 shares (2005 - US$37,500 and issued 59,830 shares) for the property payment due July 26, 2006.

(g)

Cinco de Mayo Property

On February 26, 2004 the Company has entered into an option agreement acquire a 100% interest in the Cinco de Mayo property (the “Cinco de Mayo Property”), subject to a 2.5% net smelter returns royalty. Under the terms of the agreement, the Company was obligated to:

(i)

make scheduled payments totalling US$1,000,000 plus applicable value added tax (of which US$225,000 has been paid) by July 26, 2009;

(ii)

issue 75,000 common shares of the Company (all have been issued); and

(iii)

incur exploration expenditures totalling US$1,000,000 by July 26, 2009 (of which US$1,058,000 has been incurred to December 31, 2006).

86

7.

MINERAL RIGHTS AND DEFERRED EXPLORATION COSTS (Continued)

(g)

Cinco de Mayo Property (continued)

During the year ended December 31, 2005, the Company and Minera Cascabel, S.A. de C.V. amended the terms of the above referenced option agreement. Under the amended  terms, half of each of the remaining property payments totalling US$775,000 (US$225,000  paid) due on or before July 26, 2009, may be paid in shares at a deemed price per share equal to the average trading price of MAG for 30 calendar days prior to the date of payment. To that end MAG paid cash of US$62,500 and issued 30,840 shares (2005 - US$37,500 and issued 59,830 shares) for the property payment due July 26, 2006.

8.

SEGMENTED INFORMATION  

The Company operates in one segment being the exploration of mineral properties in Mexico. Substantially all of the Company’s long term assets are located in Mexico and the Company’s executive and head office is located in Canada.

9.

RELATED PARTY TRANSACTIONS

For the year ended December 31, 2006 the Company’s president received $139,500 in compensation for management services (2005 - $149,900).

For the year ended December 31, 2006 a company controlled by an officer of the Company received $113,520 in compensation for consulting services (2005 - $125,950).

The Company is party to a Field Services Agreement, whereby it has contracted exploration services in Mexico with MINERA CASCABEL S.A. de C.V. (“Cascabel”) and IMDEX Inc. (“Imdex”).  As of January 2006, these companies have a common director with the Company.  During the year ended December 31, 2006 the Company accrued or paid Cascabel and IMDEX consulting, administration and travel fees totaling $141,154 and exploration costs totaling $1,049,611 under the Field Services Agreement.

During the year ended December 31, 2003, the Company entered into an office services agreement with Platinum Group Metals Ltd. (“PTM”), a company with a common director and common officer at that time (at the time of writing the companies now share two common directors and one common officer). During the year ended December 31, 2006 the Company accrued or paid PTM $138,081 under the common service agreement (2005 - $133,329).

During the year ended December 31, 2004, the Company entered into an office lease agreement with Anthem Works Ltd. (“Anthem”), a company with a common director.  During the period ended December 31, 2006 the Company accrued or paid Anthem $62,333 under the office lease agreement (2005 - $62,333).

These transactions were incurred in the normal course of business and are measured at the exchange amount which was the consideration established and agreed to by the noted parties.

87

10.

CONTINGENCIES AND COMMITMENTS

The Company’s minimum payments under its office lease agreement which was entered into during the year ended December 31, 2004, is as follows:

2007	46,750
2008	-
	$         46,750

11.

AMOUNTS RECEIVABLE

	Dec. 31, 2006	Dec. 31, 2005
Goods and services tax recoverable	$          19,949	$          26,706
Mexican value added tax ("IVA") recoverable	251,919	75,499
Other	1,167	2,866
	$        273,035	$        105,071

12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY

ACCEPTED ACCOUNTING PRINCIPLES

These consolidated financial statements have been prepared in accordance with Canadian GAAP, which differs in certain respects from US GAAP.  The material differences between Canadian and US GAAP affecting the Company’s financial statements are summarized as follows:

Consolidated Balance Sheets

	December 31,
	2006	2005
Total assets under Canadian GAAP	$ 18,930,558	$ 18,075,406
Cumulative amortization of mineral rights (a)	(601,000)	(601,000)
Decrease in mineral properties due to expensing
of exploration costs (a)	(9,458,932)	(5,463,461)
Total assets under US GAAP	$   8,870,626	$ 12,010,945
Total liabilities under Canadian and US GAAP	$      350,368	$      393,621
Shareholders' equity under Canadian GAAP	18,580,190	17,681,785
Cumulative amortization of mineral rights (a)	(601,000)	(601,000)
Cumulative mineral properties adjustment (a)	(9,458,932)	(5,463,471)
Shareholders' equity under US GAAP	8,520,258	11,617,314
Total liabilities and shareholders' equity under
US GAAP	$   8,870,626	$ 12,010,935

88

12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

Consolidated Statement of Operations and Deficit

				Cumulative
				amount from
				April 21,
	Year ended	Year ended	Year ended	1999 to
	December 31,	December 31,	December 31,	December 31,
	2006	2005	2004	2006
Net loss under Canadian GAAP	$(3,866,567)	$(1,810,838)	$  (733,897)	$  (7,664,818)
Deferred exploration costs (a)	(3,995,461)	(1,429,307)	(1,976,622)	(9,458,932)
Amortization of mineral rights (a)	-	-	-	(601,000)
Compensation expense (b)	-	-	-	(600,000)
Stock-based compensation for
employees and directors (b)	-	482,659	-	482,659
Net loss under US GAAP	$(7,862,028)	$(2,757,486)	$(2,710,519)	$(17,842,091)
Basic and diluted loss per share under
US GAAP	$        (0.21)	$        (0.10)	$        (0.11)

Consolidated Statement of Cash Flows

				Cumulative
				amount from
				April 21,
	Year ended	Year ended	Year ended	1999 to
	December 31,	December 31,	December 31,	December 31,
	2006	2005	2004	2006
Operating activities
Operating activities under
Canadian GAAP	$  (1,827,348)	$    (447,244)	$ (1,091,957)	$  (4,412,163)
Write-off of deferred exploration
costs (a)	(3,995,461)	(1,429,307)	(1,976,622)	(9,458,932)
Operating activities under US GAAP	$  (5,822,809)	$ (1,876,551)	$ (3,068,579)	$(13,871,095)
Investing activities
Investing activities under
Canadian GAAP	$  (4,445,297)	$ (1,699,911)	$ (2,368,867)	$(11,647,623)
Reclassification of deferred
exploration costs (a)	3,995,461	1,429,307	1,976,622	9,458,932
Investing activities under US GAAP	$     (449,836)	$    (270,604)	$    (392,245)	$  (2,188,691)
Financing activity
Financing activity under
Canadian and US GAAP	$     2,219,382	$    7,840,988	$       531,362	$  19,566,716

89

12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(a)

Exploration expenditures and costs of acquired mineral rights

Canadian GAAP allows exploration costs to be capitalized during the search for a commercially mineable body of ore.  Under US GAAP, exploration expenditures can only be deferred subsequent to the establishment of economically exploitable reserves.  For US GAAP purposes the Company therefore expensed its exploration expenditures.

Previously, under US GAAP, the cost of acquisition of mineral property rights were generally classified as intangible assets and were amortized over their useful life, which in the case of a mineral right on a property without proven and probable reserves, was the lesser of the period to expiry of the right and the estimated period required to develop or further explore the mineral assets.  Under Canadian GAAP, costs of acquiring mineral rights are generally considered as tangible property.  As a result, for US GAAP purposes, the Company had previously amortized the cost of the mining rights acquired in prior years on a straight line basis over the period that further exploration was expected to occur on the properties which varied from 15 months to 31 months.  In 2004 the Financial Accounting Standards Board in the U.S. concluded that mineral rights have the characteristics of tangible assets and issued EITF 04-02, Whether Mineral Righ ts are Tangible or Intangible Assets.  The effect of this new standard is that mineral rights are no longer required to be amortized to the extent they are considered tangible assets until such date as they are commercially exploited.  The Company adopted this standard effective January 1, 2004 on a prospective basis and is therefore no longer amortizing the cost of acquiring mineral property rights.

(b)

Accounting for stock-based compensation

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS 123 (R)), which requires the recognition of compensation expense for all share-based payment awards. SFAS 123 (R) requires the Company to measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost of such award will be recognized over the period during which services are provided in exchange for the award, generally the vesting period. The Company adopted SFAS 123 (R) using the modified prospective transition method. Under this method, compensation expense recognition provisions are applicable to new awards and to any awards modified, repurchased or cancelled after the adoption date. Additionally, for any unvested awards outstanding at the adoption date, compensation cost is recognized over the remaining service period. Forfeitu res are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Prior periods are not restated for comparative purposes.

During the year ended December 31, 2006, the Company recognized $2,341,159 in stock-based compensation expense or $0.01 per share.

The following weighted average assumptions were used in valuing stock options granted during the year:

	Dec. 31, 2006
Risk-free interest rate	4.04
Expected life of options	3.00
Annualized volatility	85.92
Dividend rate	0.00%

90

12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(b)

Accounting for stock-based compensation (continued)

Prior to the adoption of SFAS 123 (R), the Company recognized stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25 (APB 25) “Accounting for Stock Issued to Employees” and applied the disclosure provisions of SFAS 123, “Accounting for Stock-Based Compensation” as if the Company had applied the fair value method to measuring stock- based compensation expense. If the Company had accounted for stock-based compensation in accordance with the fair value method as prescribed by SFAS 123, net loss per share for the years ended December 31, 2005 and 2004 would have been:    

	Year ended	Year ended
	December 31,	December 31,
	2005	2004
Net loss, as originally reported	$(2,757,486)	$(2,710,519)
Adjustments:
Additional stock-based employee compensation expense
under fair value based method for all awards	(482,659)	-
Net loss, adjusted	$(3,240,145)	$(2,710,519)
Basic and diluted net income per share, as reported	$         (0.10)	$         (0.11)
Basic and diluted net loss per share, adjusted	$         (0.11)	$         (0.11)

 (c)

Accounting for derivative instruments and hedging activities

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which standardizes the accounting for derivative instruments.  SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999.  The Company does not engage in hedging activities or invest in derivative instruments.  Therefore, adoption of SFAS No. 133 has no significant financial impact.

(d)

Recent accounting pronouncements

In March 2004, the Emerging Issues Task Force (“EITF”) issued EITF 04-3, Mining Assets: Impairment and Business Combinations.  EITF 04-3 requires mining companies to consider cash flows related to the economic value of mining assets (including mineral properties and rights) beyond those assets proven and probable reserves, as well as anticipated market price fluctuations, when assigning value in a business combination in accordance with SFAS 141 and when testing the mining assets for impairment in accordance with SFAS 144.  The consensus is effective for fiscal periods beginning after March 31, 2004. The adoption of EITF 04-3 did not have a material impact on the Company’s financial position, results of operations or cash flows.

On March 30, 2005, the FASB ratified the consensus of the Emerging Issues Task Force (“EITF”) of the FASB Issue 04-6 that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of the inventory produced during the period that the stripping costs are incurred.  This consensus is effective for the first reporting period in fiscal years beginning after December 15, 2005, with early adoption permitted.  The consensus can be adopted either prospectively through a cumulative-effect adjustment or retrospectively by restating prior period financial statements.  The Company will apply this consensus on its results of operations, financial position and cash flows if and when commercial production commences.

91

12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(d)

Recent accounting pronouncements (continued)

In September 2005, the EITF reached a consensus on Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty (EITF 04-13). The EITF concluded that entities that enter into inventory purchase and sales transactions with the same counterparty, in contemplation of one another, should combine the transactions and treat them as non-monetary exchanges involving inventory. The consensus is effective for new inventory arrangements entered into, or modifications or renewals of existing inventory arrangements occurring, in interim or annual reporting periods beginning after March 15, 2006. The adoption of EITF 04-13 did not have any impact on the Company’s operating results or financial positions.

In February 2006, the FASB issued Statement of Financial Accounting Standard No. 155, Accounting for Certain Hybrid Financial Instrument (SFAS 155), an amendment of SFAS 140 and SFAS 133. SFAS 155 permits the Company to elect to measure any hybrid financial instrument at fair value (with changes in fair value recognized in earnings) if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounted for separately under SFAS 133. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irreversible. This Statement will be effective for all instruments acquired, issued, or subject to a remeasurement event occurring after the beginning of the Company’s first fiscal year that begins after September 15, 2006. The Company expects that the adoption of SFAS 155 will have no impact on its operating results or financial position.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). This interpretation clarifies the recognition threshold and measurement of a tax position taken on a tax return, and requires expanded disclosure with respect to the uncertainty in income taxes. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact that adoption of FIN 48 will have on its financial condition or results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS 157). This statement defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements.  SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company expects that adoption of SFAS 157 will not have a material effect on its financial condition or results of operation.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statement No. 87, 88, 106 and 132R” (SFAS 158). This Statement requires an employer to recognize in its statement of financial position an asset of a plan’s over funded status or a liability for a plan’s under funded status, measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions), and recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. The Company expects that adoption of SFAS 158 will have no impact on its financial condition or results of operations.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108 provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 permits existing public companies to record the cumulative effect of initially applying this approach in the fiscal year ending after November 15, 2006 by recording necessary

92

12.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

(d)

Recent accounting pronouncements (continued)

correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings.  The Company expects that adoption of SAB 108 will not have a material impact on its financial condition and results of operations.

13.

SUBSEQUENT EVENTS

Subsequent to December 31, 2006:

(a)

The Company issued 247,500 common shares at $1.35 on the exercise of warrants for proceeds of $334,125; and issued 26,000 common shares at an average price of $0.84 on the exercise of options for proceeds of $21,760;

(b)

On January 23, 2007 the Company granted 85,000 stock options to consultants of the Company at a price of $7.56 per share for a term of five years.

(c)

On February 14, 2007 the Company closed a brokered private placement for 2,550,000 units at $7.25 a unit for gross proceeds of $18,487,500. Each unit is comprised of one common share and one-half of one common share purchase warrant, with each whole warrant exercisable for one common share at a price of $10.00 for a period of 12 months until February 14, 2008. The Company paid 6.0% cash commission to the underwriters on this placement aggregating $1,109,250. Legal costs and syndicate expenses have been estimated at $95,000 as an additional cost to the Company.

(d)

On February 14, 2007 the Company closed a non-brokered private placement for 195,000 units, while a further 15,000 units were closed February 15, 2007 for a total of 210,000 at $7.25 a unit for gross proceeds of $1,522,500. Each unit is comprised of one common share and one-half of one common share purchase warrant, with each whole warrant exercisable for one common share at a price of $10.00 for a period of 12 months until February 14 and 15, 2008. The Company paid a 6.0% finder’s fee on this placement comprised of $91,350 in cash.

93

ITEM 18.

FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to Item 17 - Financial Statements.

ITEM 19.

EXHIBITS

The following Exhibits are filed with this Annual Report:

Exhibit Reference #	Name
1 (a)	*Memorandum
1 (b)	*Articles
1 (c)	New Articles of the Company effective July 27, 2005
4 (a)	*Sponsorship and Agency Agreement among the Company, Raymond James Ltd. and Pacific International Securities Inc.
4 (b)	*Lagartos Agreement dated August 8, 2002 among the Company, Cesar Augusto Porfirio Padilla Lara, Dr. Peter Megaw and Dr. Carl Kuehn and stock purchase agreement dated January 15, 2003 between the Company and each of Cesar Augusto Porfirio Padilla Lara, Dr. Peter Megaw and Dr. Carl Kuehn
4 (c)	*Juanicipio Agreement dated July 18, 2002 as amended December 19, 2002 between Lagartos and Sutti
4 (d)	*Don Fippi Agreement dated November 18, 2002 among the Company, Lagartos and Bugambilias
4 (e)	*Guigui Agreement dated November 18, 2002 among the Company, Lagartos and Coralillo
4 (f)	*Stock Purchase Agreement dated May 29, 2003 with Strategic Investments Resources Ltd.
4 (g)	*Escrow Agreement dated November 9, 1999 among certain shareholders and Pacific Corporate Trust Company
4 (h)	*Escrow Agreement dated April 8, 2003 among certain shareholders and Pacific Corporate Trust Company
4 (i)	*Incentive Stock Option Agreements dated November 9, 1999 between the Company and each of:  Dave Pearce, Eric H. Carlson, James Speakman and Robert C. Thornton
4 (j)	*Stock Options dated April 15, 2003, May 22, 2003 and July 9, 2003 with George Young, R. Michael Jones, David Pearce, Eric Carlson, Gregory Dennie, Frank Hallam, Grace To, Marshall House, John Foulkes and Carrie Cojocari
4 (k)	*Indemnity Agreements dated November 9, 1999 between the Company and each of Dave Pearce, Eric H. Carlson, James Speakman and Robert C. Thornton
4 (l)	*Indemnity Agreements dated April 15, 2003 between the Company and each of George Young and R. Michael Jones
4 (m)	***Sierra de Ramirez Agreement dated December 14, 2003 among the Company, Lagartos and Rio Tinto
4(n)	***Adargas Agreement dated February 26, 2004 among the Company, Lagartos and Cascabel
4(o)	***Cinco de Mayo Agreement dated April 5, 2004 among the Company, Lagartos and Cascabel
4(p)	****Agreement dated March 17, 2005 among the Company, Lagartos and Peñoles
4(q)	***Stock Option Plan
4(r)	Stock Option Plan (2007)
4 (s)	Juanicipio Agreement effective July 1, 2005 between the Company and Peñoles

94

4 (t)	Employment Agreement between the Company and Daniel MacInnis, signed January 25th, 2005
4 (u)	Employment Agreement between the Company and Gordon Neal, signed October 11th, 2005
4 (v)	Service Agreement dated September 14, 2005 with Contact Financial for Investor Relations Services
4 (w)	Field Services Agreement dated March 1, 2007 Cascabel and IMDEX Inc
8	List of Subsidiaries
11(a)	Code of Business Conduct and Ethics
15(a)	*The Geology and Exploration Potential of the Juanicipio Property, Fresnillo District, Zacatecas, Mexico dated November 19, 2002 prepared for the Company by Clancy J. Wendt, P.G., of Pincock, Allen and Holt, of Lakewood, Colorado
15(b)	*The Geology and Exploration Potential of the Don Fippi Property, Batopilas District, Chihuahua, Mexico dated November 19, 2002 prepared for the Company by Clancy J. Wendt, P.G., of Pincock, Allen and Holt, of Lakewood, Colorado
15(c)	*The Geology and Exploration Potential of the Guigui Silver, Lead, Zinc Project, Santa Eulalia District, Chihuahua, Mexico dated November 19, 2002 prepared for the Company by Clancy J. Wendt, P.G., of Pincock, Allen and Holt, of Lakewood, Colorado
15(d)	Audit Committee Charter
15(e)	Compensation Committee Charter
15(f)	Governance and Nomination Committee Charter
15(g)	Timely Disclosure, Confidentiality and Insider Trading Policy
31.1	Certification of Daniel T. MacInnis, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Frank Hallam, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Daniel T. MacInnis, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Frank Hallam, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Indicates an exhibit incorporated by reference from the Registration Statement on Form-20F previously submitted by the Company on October 23, 2003.

** Indicates an exhibit incorporated by reference from the Annual Report on Form 20-F previously submitted by the Company on February 12, 2004.

*** Indicates an exhibit incorporated by reference from the Annual Report on Form 20-F previously submitted by the Company on April 29, 2004.

**** Indicates an exhibit incorporated by reference from the Annual Report on Form 20-F previously submitted by the Company on June 29, 2005.

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SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Dated:

June 15, 2007

MAG Silver Corp.,

a British Columbia Company

“Daniel MacInnis”                         

Daniel T. MacInnis

President and Director

EX-1.3

Page 1

MAG SILVER CORP.
(the “Company”)

The Company has as its articles the following articles.

Full name and signature of a director or officer of the Company	Date of signing
/s/ “Daniel T. MacInnis” [Signature of Director or Officer]	June 15, 2005
Daniel T. MacInnis [Please Print Full name of Director or Officer] President (Please Print Relationship to Company)

Page 2

Incorporation number: 583882

MAG SILVER CORP.
(the “Company”)

ARTICLES

Page 3

Page 4

Page 5

Page 6

Page 7

1. 

INTERPRETATION

1.1 

Definitions

In these Articles, unless the context otherwise requires:

(1) 

“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being;

(2) 

“Business Corporations Act” means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;

(3) 

“legal personal representative” means the personal or other legal representative of the shareholder;

(4) 

“registered address” of a shareholder means the shareholder's address as recorded in the central securities register;

(5) 

“seal” means the seal of the Company, if any.

1.2 

Business Corporations Act and Interpretation Act Definitions Applicable

The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act (British Columbia), with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Business Corporations Act, the Business Corporations Act will prevail.

2. 

SHARES AND SHARE CERTIFICATES

2.1 

Authorized Share Structure

The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company.

2.2 

Form of Share Certificate

Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act.

2.3 

Shareholder Entitled to Certificate or Acknowledgment

Each shareholder is entitled, without charge, to (a) one share certificate representing the shares of each class or series of shares registered in the shareholder's name or (b) a non-transferable written acknowledgment of the shareholder's right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate and delivery of a share certificate for a share to one of several joint shareholders or to one of the shareholders' duly authorized agents will be sufficient delivery to all; and provided further that the Company is not bound to issue certificates representing redeemable shares if such shares are to be redeemed within one month of the date on which they were allotted.

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2.4 

Delivery by Mail

Any share certificate or non-transferable written acknowledgment of a shareholder's right to obtain a share certificate may be sent to the shareholder by mail at the shareholder's registered address and neither the Company nor any director, officer or agent of the Company is liable for any loss to the shareholder because the share certificate or acknowledgement is lost in the mail or stolen.

2.5 

Replacement of Worn Out or Defaced Certificate or Acknowledgement

If the directors are satisfied that a share certificate or a non-transferable written acknowledgment of the shareholder's right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgment, as the case may be, and on such other terms, if any, as they think fit:

(1) 

order the share certificate or acknowledgment, as the case may be, to be cancelled; and

(2) 

issue a replacement share certificate or acknowledgment, as the case may be.

2.6 

Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgment

If a share certificate or a non-transferable written acknowledgment of a shareholder's right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgment, as the case may be, must be issued to the person entitled to that share certificate or acknowledgment, as the case may be, if the directors receive:

(1) 

proof satisfactory to them that the share certificate or acknowledgment is lost, stolen or destroyed; and

(2) 

any indemnity the directors consider adequate.

2.7 

Splitting Share Certificates

If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder's name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.

2.8 

Certificate Fee

There must be paid to the Company, in relation to the issue of any share certificate under Articles 2.5, 2.6 or 2.7, the amount, if any and which must not exceed the amount prescribed under the Business Corporations Act, determined by the directors.

2.9 

Recognition of Trusts

Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.

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3. 

ISSUE OF SHARES

3.1 

Directors Authorized

Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell, grant options on, or otherwise dispose of or deal in the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.

3.2 

Commissions and Discounts

The Company may at any time, pay a reasonable commission or finder's fee or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person for procuring or agreeing to procure purchasers for shares of the Company.

3.3 

Brokerage

The Company may pay such brokerage fee, commission or finder's fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.

3.4 

Conditions of Issue

Except as provided for by the Business Corporations Act, no share may be issued until it is fully paid. A share is fully paid when:

(1) 

consideration is provided to the Company for the issue of the share by one or more of the following: (a) past services performed for the Company; (b) property; (c) money; and

(2) 

the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.

3.5 

Share Purchase Warrants and Rights

Subject to the Business Corporations Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

4. 

SHARE REGISTERS

4.1 

Central Securities Register

As required by and subject to the Business Corporations Act, the Company must maintain in British Columbia a central securities register. The directors may, subject to the Business Corporations Act, appoint an agent to maintain the central securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as

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the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.

4.2 

Closing Register

The Company must not at any time close its central securities register.

5. 

SHARE TRANSFERS

5.1 

Registering Transfers

Unless waived by the board generally or in a specific circumstance, a transfer of a share of the Company must not be registered unless:

(1) 

a duly signed instrument of transfer in respect of the share has been received by the Company;

(2) 

if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company; and

(3) 

if a non-transferable written acknowledgment of the shareholder's right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgment has been surrendered to the Company.

5.2 

Form of Instrument of Transfer

The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company's share certificates or in any other form that may be approved by the directors from time to time.

5.3 

Transferor Remains Shareholder

Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.

5.4 

Signing of Instrument of Transfer

If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgments deposited with the instrument of transfer:

(1) 

in the name of the person named as transferee in that instrument of transfer; or

(2)

if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.

5.5 

Enquiry as to Title Not Required

Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate

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owner or holder of the shares, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgment of a right to obtain a share certificate for such shares.

5.6 

Transfer Fee

There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors.

6. 

TRANSMISSION OF SHARES

6.1 

Legal Personal Representative Recognized on Death

In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder's interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

6.2 

Rights of Legal Personal Representative

The legal personal representative has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Business Corporations Act and the directors have been deposited with the Company.

7. 

PURCHASE OF SHARES

7.1 

Company Authorized to Purchase Shares

Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Business Corporations Act, the Company may, if authorized by the directors, redeem, purchase or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.

7.2 

Purchase When Insolvent

The Company must not make a payment or provide any other consideration to redeem, purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:

(1) 

the Company is insolvent; or

(2) 

making the payment or providing the consideration would render the Company insolvent.

7.3 

Sale and Voting of Purchased Shares

If the Company retains a share redeemed, purchased or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:

(1) 

is not entitled to vote the share at a meeting of its shareholders; 

(2) 

must not pay a dividend in respect of the share; and 

(3) 

must not make any other distribution in respect of the share.

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8. 

BORROWINGPOWERS

The Company, if authorized by the directors, may:

(1) 

borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;

(2) 

issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;

(3) 

guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

(4) 

mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

9. 

ALTERATIONS

9.1 

Alteration of Authorized Share Structure

Subject to Article 9.2 and the Business Corporations Act, the Company may by directors’ resolution or an ordinary resolution:

(1) 

create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;

(2) 

increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;

(3) 

subdivide or consolidate all or any of its unissued, or fully paid issued, shares; 

(4) 

if the Company is authorized to issue shares of a class of shares with par value: 

(a) 

decrease the par value of those shares; or

(b) 

if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

(5) 

change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or all or any of its unissued shares without par value into shares with par value;

(6) 

alter the identifying name of any of its shares; or

(7) 

otherwise alter its shares or authorized share structure when required or permitted to do so by the

Business Corporations Act.

9.2 

Special Rights and Restrictions

Subject to the Business Corporations Act, the Company may by ordinary resolution:

(1) 

create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or

Page 13

(2) 

vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued.

9.3 

Change of Name

The Company may, by a directors’ resolution or an ordinary resolution, authorize an alteration to its Notice of Articles in order to change its name or to adopt or change a translation of its name.

9.4 

Other Alterations

If the Business Corporations Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by special resolution alter these Articles.

10. 

MEETINGS OF SHAREHOLDERS

10.1 

Annual General Meetings

Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by directors’ resolution.

10.2 

Resolution Instead of Annual General Meeting

If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Business Corporations Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company's annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

10.3 

Calling of Meetings of Shareholders

The directors may, whenever they think fit, call a meeting of shareholders.

10.4 

Notice for Meetings of Shareholders

The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

(1) 

if and for so long as the Company is a public company, 21 days;

(2) 

otherwise, 10 days.

10.5 

Record Date for Notice

The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business

Page 14

Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

(1) 

if and for so long as the Company is a public company, 21 days;

(2) 

otherwise, 10 days.

If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.6 

Record Date for Voting

The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.7 

Failure to Give Notice and Waiver of Notice

The accidental omission to send notice of any meeting to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting.

10.8 

Notice of Special Business at Meetings of Shareholders

If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:

(1) 

state the general nature of the special business; and

(2)

if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders:

(a) 

at the Company's records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and

(b) 

during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

10.9 

Postponement of Meeting

Where, in accordance with the Business Corporations Act, the Company has published in the prescribed manner a notice of a general meeting, the Company may, notwithstanding such notice, postpone the general meeting to a date other than that specified in such notice. In the event of such a postponement, the Company shall publish, in the same manner prescribed for the original notice, a notice of the postponement of the meeting which notice shall include, if the date to which the meeting is postponed is known, the same information as is required by the Business Corporations Act to be included in the original notice. If the date to which the meeting is postponed is not known, the notice of postponement need state only that the meeting is postponed until further notice, provided however that once such date is known, the Company shall publish a new notice which shall comply with the Business Corporations Act. The date to which any such meeting is postponed

Page 15

shall be deemed to be the date of the meeting for the purpose of complying with any time limitations in respect of general meetings prescribed by the Business Corporations Act.

11. 

PROCEEDINGS AT MEETINGS OF SHAREHOLDERS

11.1 

Special Business

At a meeting of shareholders, the following business is special business:

(1) 

at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting;

(2) 

at an annual general meeting, all business is special business except for the following: 

(a) 

business relating to the conduct of or voting at the meeting; 

(b) 

consideration of any financial statements of the Company presented to the meeting; 

(c) 

consideration of any reports of the directors or auditor; 

(d) 

the setting or changing of the number of directors; 

(e) 

the election or appointment of directors; 

(f) 

the appointment of an auditor; 

(g) 

the setting of the remuneration of an auditor;

(h) 

business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution;

(i) 

consideration and/or approval of acts, contracts, proceedings, appointments and payments of money made by the directors since the last annual reference date;

(j) 

any other business which, under these Articles or the Business Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

11.2 

Special Majority

The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.

11.3 

Quorum

Subject to Article 11.4 and to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is two shareholders, or two proxyholders representing shareholders, or any combination thereof, holding not less than 5% of the issued shares entitled to be voted at the meeting.

11.4 

One Shareholder May Constitute Quorum

If there is only one shareholder entitled to vote at a meeting of shareholders:

(1) 

the quorum is one person who is, or who represents by proxy, that shareholder, and

Page 16

(2) 

that shareholder, present in person or by proxy, may constitute the meeting.

11.5 

Other Persons May Attend

The directors, the chief executive officer (if any), the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.

11.6 

Requirement of Quorum

No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

11.7 

Lack of Quorum

If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

(1) 

in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and

(2) 

in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

11.8 

Lack of Quorum at Succeeding Meeting

If, at the meeting to which the meeting referred to in Article 11.7(2) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

11.9 

Chair

The following individual is entitled to preside as chair at a meeting of shareholders:

(1) 

the chair of the board, if any; or

(2) 

if the chair of the board is absent or unwilling to act as chair of the meeting, the chief executive officer, if any; or

(3) 

if the chair of the board and the chief executive officer are absent or unwilling to act as chair of the meeting, the president, if any.

Notwithstanding the foregoing, with the consent of the meeting, which consent may be expressed by the failure to object of any person present and entitled to vote, the lawyer for the Company may act as chair of the meeting.

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11.10 

Selection of Alternate Chair

Subject to Article 11.9, if, at any meeting of shareholders, there is no chair of the board, chief executive officer or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board, chief executive officer and the president are unwilling to act as chair of the meeting, or if the chair of the board, chief executive officer and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director of the Company is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.

11.11 

Adjournments

The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

11.12 

Notice of Adjourned Meeting

It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.

11.13 

Decisions by Show of Hands or Poll

Subject to the Business Corporations Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.

11.14 

Declaration of Result

The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

11.15 

Motion Need Not be Seconded

No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

11.16 

Casting Vote

In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

11.17 

Manner of Taking Poll

Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:

Page 18

(1) 

the poll must be taken:

(a) 

at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and

(b) 

in the manner, at the time and at the place that the chair of the meeting directs;

(2) 

the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and

(3) 

the demand for the poll may be withdrawn by the person who demanded it.

11.18 

Demand for Poll on Adjournment

A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

11.19 

Chair Must Resolve Dispute

In the case of any dispute as to the admission or rejection of a vote, whether by show of hands or given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.

11.20 

Casting of Votes

On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

11.21 

Demand for Poll

No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

11.22 

Demand for Poll Not to Prevent Continuance of Meeting

The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.

11.23 

Retention of Ballots and Proxies

The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxyholder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

11.24 

Ordinary Resolution Sufficient

Unless the Business Corporations Act or these Articles otherwise provide, any action to be taken by a resolution of the shareholders may be taken by an ordinary resolution.

12. 

VOTES OF SHAREHOLDERS

12.1 

Number of Votes by Shareholder or by Shares

Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

Page 19

(1) 

on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and

(2) 

on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

12.2 

Votes of Persons in Representative Capacity

A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.

12.3 

Votes by Joint Holders

If there are joint shareholders registered in respect of any share:

(1) 

any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or

(2) 

if more than one of the joint shareholders is present at any meeting, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.

12.4 

Legal Personal Representatives as Joint Shareholders

Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders.

12.5 

Representative of a Corporate Shareholder

If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:

(1) 

for that purpose, the instrument appointing a representative must:

(a) 

be received at the registered office of the Company or at any other place specified, in the notice calling the meeting or accompanying information circular, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting; or

(b) 

be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting;

(2)

if a representative is appointed under this Article 12.5:

(a) 

the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and

(b) 

the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.

Page 20

Evidence of the appointment of any such representative may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

12.6 

Proxy Provisions Do Not Apply to All Companies

If and for so long as the Company is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply, Articles 12.7 to 12.15 apply to the Company only insofar as they are not inconsistent with any securities legislation in any province or territory of Canada or in the federal jurisdiction of the United States or in any states of the United States that is applicable to the Company and insofar as they are not inconsistent with the regulations and rules made and promulgated under that legislation and all administrative policy statements, blanket orders and rulings, notices and other administrative directions issued by securities commission or similar authorities appointed under that legislation.

12.7 

Appointment of Proxy Holders

Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy. If a shareholder appoints more than one proxyholder for the same meeting, he shall specify the number of shares each proxyholder is entitled to vote.

12.8 

Alternate Proxy Holders

A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

12.9 

Qualifications of Proxy Holders

Any person, having attained the age of majority, may act as proxy holder whether or not he is entitled on his own behalf to be present and to vote at the meeting at which he acts as proxy holder. The proxy may authorize the person so appointed to act as proxy holder for the appointor for the period, at any meeting or meetings, and to the extent permitted by the Business Corporations Act.

12.10 

Deposit of Proxy

A proxy for a meeting of shareholders must:

(1) 

be received at the registered office of the Company or at any other place specified, in the notice calling the meeting or the information circular sent to shareholders in respect of the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting; or

(2) 

unless the notice or information circular provides otherwise, be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting.

A proxy may be sent to the Company or its agent by written instrument, fax, email or any other method of transmitting legibly recorded messages, or by telephone or internet, or by any other method permitted under applicable securities legislation.

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12.11 

Validity of Proxy Vote

A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received:

(1) 

at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

(2) 

by the chair of the meeting, before the vote is taken.

12.12 

Form of Proxy

A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:

[name of company]
(the “Company”)

The undersigned, being a shareholder of the Company, hereby appoints [name] or, failing that person, [name], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned at the meeting of shareholders of the Company to be held on [month, day, year] and at any adjournment of that meeting.

Number of shares in respect of which this proxy is given (if no number is specified, then this proxy is given in respect of all shares registered in the name of the shareholder): _____________________

Signed [month, day, year]

[Signature of shareholder]

[Name of shareholder—printed]

12.13 

Revocation of Proxy

Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is:

(1) 

received at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

(2) 

provided, at the meeting, to the chair of the meeting.

12.14 

Revocation of Proxy Must Be Signed

An instrument referred to in Article 12.13 must be signed as follows:

(1) 

if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy;

(2) 

if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.

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12.15 

Production of Evidence of Authority to Vote

The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.

12.16 

Chair to Determine Validity

The chair of the meeting may determine whether or not a proxy, deposited for use at such meeting, which may not strictly comply with the requirements of these Articles as to form, execution, accompanying documentation, time of filing, or otherwise, shall be valid for use at such meeting and any such determination made in good faith shall be final, conclusive and binding upon such meeting.

12.17 

Resolutions in Counterparts

A resolution submitted to all shareholders entitled to vote and consented to in writing, whether by document, telegram, telex, facsimile, email or any method of transmitting legibly recorded messages, by the requisite number of shareholders required to pass such resolution will be as valid and effectual as if it had been passed at a meeting of the shareholders duly called and held. Such resolution may be in two or more counterparts which together shall be deemed to constitute one resolution in writing. Such resolution shall be filed with the minutes of the proceedings of the shareholders and shall be effective on the date stated thereon.

12.18 

Class or Series Meetings

Unless these Articles otherwise provide, and subject to the Business Corporations Act, the provisions of these Articles relating to general meetings shall apply, with the necessary changes and so far as they are applicable, to a class or series meeting of shareholders holding a particular class or series of shares of the Company.

13. 

DIRECTORS

13.1 

First Directors; Number of Directors

The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Business Corporations Act. The number of directors, excluding additional directors appointed under Article 14.8, is set at:

(1) 

subject to paragraphs (2) and (3), the number of directors that is equal to the number of the Company's first directors;

(2) 

if the Company is a public company, the greater of three and the most recently set of:

(a) 

the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

(b) 

the number of directors set under Article 14.4;

(3)

if the Company is not a public company, the most recently set of:

(a) 

the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

(b) 

the number of directors set under Article 14.4.

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13.2 

Change in Number of Directors

If the number of directors is set under Articles 13.1(2)(a) or 13.1(3)(a):

(1) 

the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number;

(2) 

if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

13.3 

Directors' Acts Valid Despite Vacancy

An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.

13.4 

Qualifications of Directors

A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.

13.5 

Remuneration of Directors

The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of the directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.

13.6 

Reimbursement of Expenses of Directors

The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.

13.7 

Special Remuneration for Directors

If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company's business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

13.8 

Gratuity, Pension or Allowance on Retirement of Director

Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

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14. 

ELECTION AND REMOVAL OF DIRECTORS

14.1 

Election at Annual General Meeting

At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:

(1) 

the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and

(2) 

all the directors cease to hold office immediately before the election or appointment of directors under paragraph (1), but are eligible for re-election or re-appointment.

14.2 

Consent to be a Director

No election, appointment or designation of an individual as a director is valid unless:

(1) 

that individual consents to be a director in the manner provided for in the Business Corporations Act;

(2) 

that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or

(3) 

with respect to first directors, the designation is otherwise valid under the Business Corporations Act.

14.3 

Failure to Elect or Appoint Directors

If:

(1) 

the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Business Corporations Act; or

(2) 

the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;

then each director then in office continues to hold office until the earlier of:

(3) 

the date on which his or her successor is elected or appointed; and

(4) 

the date on which he or she otherwise ceases to hold office under the Business Corporations Act or these Articles.

14.4 

Places of Retiring Directors Not Filled

If, at any meeting of shareholders at which there should be an election of directors, the places of any of the retiring directors are not filled by that election, those retiring directors who are not re-elected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.

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14.5 

Directors May Fill Casual Vacancies

Any casual vacancy occurring in the board of directors may be filled by the directors.

14.6 

Remaining Directors Power to Act

The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act, for any other purpose.

14.7 

Shareholders May Fill Vacancies

If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders may elect or appoint directors to fill any vacancies on the board of directors.

14.8 

Additional Directors

Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:

(1) 

one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or

(2) 

in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.

Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(1), but is eligible for re-election or re-appointment.

14.9 

Ceasing to be a Director

A director ceases to be a director when: 

(1) 

the term of office of the director expires; 

(2) 

the director dies;

(3) 

the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or

(4) 

the director is removed from office pursuant to Articles 14.10 or 14.11 .

14.10 

Removal of Director by Shareholders

The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously

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with the removal, then the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, a director to fill that vacancy.

14.11 

Removal of Director by Directors

The Company may, by directors' resolution, remove any director before the expiration of his or her term of office if the director is convicted of an indictable offence, or if the director ceases to be qualified to act as a director of a company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy.

15. 

ALTERNATEDIRECTORS

15.1 

Appointment of Alternate Director

Any director (an “appointor”) may by notice in writing received by the Company appoint any person (an “appointee”) who is qualified to act as a director to be his or her alternate to act in his or her place at meetings of the directors or committees of the directors at which the appointor is not present unless (in the case of an appointee who is not a director) the directors have reasonably disapproved the appointment of such person as an alternate director and have given notice to that effect to his or her appointor within a reasonable time after the notice of appointment is received by the Company.

15.2 

Notice of Meetings

Every alternate director so appointed is entitled to notice of meetings of the directors and of committees of the directors of which his or her appointor is a member and to attend and vote as a director at any such meetings at which his or her appointor is not present.

15.3 

Alternate for More Than One Director Attending Meetings

A person may be appointed as an alternate director by more than one director, and an alternate director:

(1) 

will be counted in determining the quorum for a meeting of directors once for each of his or her appointors and, in the case of an appointee who is also a director, once more in that capacity;

(2) 

has a separate vote at a meeting of directors for each of his or her appointors and, in the case of an appointee who is also a director, an additional vote in that capacity;

(3) 

will be counted in determining the quorum for a meeting of a committee of directors once for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, once more in that capacity;

(4) 

has a separate vote at a meeting of a committee of directors for each of his or her appointors who is a member of that committee and, in the case of an appointee who is also a member of that committee as a director, an additional vote in that capacity.

15.4 

Consent Resolutions

Every alternate director, if authorized by the notice appointing him or her, may sign in place of his or her appointor any resolutions to be consented to in writing.

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15.5 

Alternate Director Not an Agent

Every alternate director is deemed not to be the agent of his or her appointor.

15.6 

Revocation of Appointment of Alternate Director

An appointor may at any time, by notice in writing received by the Company, revoke the appointment of an alternate director appointed by him or her.

15.7 

Ceasing to be an Alternate Director

The appointment of an alternate director ceases when:

(1) 

his or her appointor ceases to be a director and is not promptly re-elected or re-appointed;

(2) 

the alternate director dies;

(3) 

the alternate director resigns as an alternate director by notice in writing provided to the Company or a lawyer for the Company;

(4) 

the alternate director ceases to be qualified to act as a director;

(5) 

his or her appointor revokes the appointment of the alternate director; or

(6) 

specified in the notice of appointment.

15.8 

Remuneration and Expenses of Alternate Director

The Company may reimburse an alternate director for the reasonable expenses that would be properly reimbursed if he or she were a director, and the alternate director is entitled to receive from the Company such proportion, if any, of the remuneration otherwise payable to the appointor as the appointor may from time to time direct.

16. 

POWERS AND DUTIES OF DIRECTORS

16.1 

Powers of Management

The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company.

16.2 

Appointment of Attorney of Company

The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or

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convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him or her.

16.3 

Remuneration of Auditor

The directors may set the remuneration of the auditor.

17. 

DISCLOSURE OF INTEREST OF DIRECTORS

17.1 

Obligation to Account for Profits

A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.

17.2 

Restrictions on Voting by Reason of Interest

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors' resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

17.3 

Interested Director Counted in Quorum

A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

17.4 

Disclosure of Conflict of Interest or Property

A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual's duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.

17.5 

Director Holding Other Office in the Company

A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.

17.6 

No Disqualification

No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor,

Page 29

purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

17.7 

Professional Services by Director or Officer

Subject to the Business Corporations Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

17.8 

Director or Officer in Other Corporations

A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.

18. 

PROCEEDINGS OF DIRECTORS

18.1 

Meetings of Directors

The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at such place, at such time and on such notice, if any, as the directors may from time to time determine.

18.2 

Voting at Meetings

Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

18.3 

Chair of Meetings

The following individual is entitled to preside as chair at a meeting of directors:

(1) 

the chair of the board, if any;

(2) 

in the absence of the chair of the board, the chief executive officer, if any, if the chief executive officer is a director, and in the absence of a chief executive officer, the president, if any, if the president is a director; or

(3) 

any other director chosen by the directors if:

(a) 

neither the chair of the board nor the chief executive officer, if a director, nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting;

(b) 

neither the chair of the board nor the chief executive officer, if a director, nor the president, if a director, is willing to chair the meeting; or

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(c) 

the chair of the board and the chief executive officer, if a director, and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting.

Notwithstanding the foregoing, with the consent of the meeting, the lawyer for the Company may act as chair of a meeting of the directors.

18.4 

Meetings by Telephone or Other Communications Medium

A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all directors who wish to participate in the meeting agree to such participation. A director who participates in a meeting in a manner contemplated by this Article 18.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

18.5 

Calling of Meetings

A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.

18.6 

Notice of Meetings

Other than for meetings held at regular intervals as determined by the directors pursuant to Article 18.1, reasonable notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors and the alternate directors by any method set out in Article 24.1 or orally or by telephone.

18.7 

When Notice Not Required

It is not necessary to give notice of a meeting of the directors to a director or an alternate director if:

(1) 

the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or

(2) 

the director or alternate director, as the case may be, has waived notice of the meeting.

18.8 

Meeting Valid Despite Failure to Give Notice

The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director or alternate director, does not invalidate any proceedings at that meeting.

18.9 

Waiver of Notice of Meetings

Any director or alternate director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to that director and, unless the

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director otherwise requires by notice in writing to the Company, to his or her alternate director, and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director or alternate director.

18.10 

Quorum

The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is deemed to be set at a majority of directors or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.

18.11 

Validity of Acts Where Appointment Defective

Subject to the Business Corporations Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer. Subject to the Business Corporations Act, all acts done at any meeting of the directors or of a committee of directors shall, notwithstanding that it be afterwards discovered that there was some defect in the qualification, election or appointment of any such directors or of the members of such committee or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly elected or appointed and was qualified to be a director.

18.12 

Consent Resolutions in Writing

A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it, whether by signed document, fax, email or any other method of transmitting legibly recorded messages, is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held. Such resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution passed in that manner is effective on the date stated in the resolution or on the latest date stated on any counterpart. A resolution of the directors or of any committee of the directors passed in accordance with this Article 18.12 is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.

18.13 

Resolutions Need Not be Seconded and Chair May Move a Motion

No resolution proposed at a meeting of directors need be seconded, and the chair of any meeting may move or propose a resolution.

19. 

EXECUTIVE AND OTHER COMMITTEES

19.1 

Appointment and Powers of Executive Committee

The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors' powers, except:

(1) 

the power to fill vacancies in the board of directors;

Page 32

(2) 

the power to remove a director;

(3) 

the power to change the membership of, or fill vacancies in, any committee of the directors; and

(4)

such other powers, if any, as may be set out in the resolution or any subsequent directors' resolution.

19.2 

Appointment and Powers of Other Committees

The directors may, by resolution:

(1) 

appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;

(2) 

delegate to a committee appointed under paragraph (1) any of the directors' powers, except: 

(a) 

the power to fill vacancies in the board of directors; 

(b) 

the power to remove a director;

(c) 

the power to change the membership of, or fill vacancies in, any committee of the directors; and

(d) 

the power to appoint or remove officers appointed by the directors; and

(3) 

make any delegation referred to in paragraph (2) subject to the conditions set out in the resolution or any subsequent directors' resolution.

19.3 

Obligations of Committees

Any committee appointed under Articles 19.1 or 19.2, in the exercise of the powers delegated to it, must: (1) conform to any rules that may from time to time be imposed on it by the directors; and (2) report every act or thing done in exercise of those powers at such times as the directors may require.

19.4 

Powers of Board

The directors may, at any time, with respect to a committee appointed under Articles 19.1 or 19.2:

(1) 

revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;

(2) 

terminate the appointment of, or change the membership of, the committee; and

(3) 

fill vacancies in the committee.

19.5 

Committee Meetings

Subject to Article 19.3(1) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 19.1 or 19.2:

(1) 

the committee may meet and adjourn as it thinks proper;

(2) 

the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;

Page 33

(3) 

a majority of the members of the committee constitutes a quorum of the committee; and

(4) 

questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote.

19.6 

Resolutions of Committees

Each committee must keep regular minutes of its transactions and cause them to be recorded in the books kept for that purpose. A resolution approved in writing by all the members of a committee will be as valid and effective as if it had been passed at a meeting of such committee duly called and constituted. Such resolution may be in two or more counterparts which together shall be deemed to constitute one resolution in writing. Such resolution must be filed with the minutes of the proceedings of the committee and will be effective on the date stated thereon.

20. 

OFFICERS

20.1 

Directors May Appoint Officers

The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.

20.2 

Functions, Duties and Powers of Officers

The directors may, for each officer:

(1) 

determine the functions and duties of the officer;

(2) 

entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and

(3) 

revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

20.3 

Qualifications

No officer may be appointed unless that officer is qualified in accordance with the Business Corporations Act. One person may hold more than one position as an officer of the Company. Any officer need not be a director.

20.4 

Remuneration and Terms of Appointment

All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors think fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.

21. 

INDEMNIFICATION

21.1 

Definitions

In this Article 21:

Page 34

(1) 

“eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;

(2) 

“eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which a director, former director or alternate director of the Company (an “eligible party”) or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director or alternate director of the Company:

(a)

is or may be joined as a party; or

(b) 

is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;

(3) 

“expenses” has the meaning set out in the Business Corporations Act.

21.2 

Mandatory Indemnification of Directors and Former Directors

Subject to the Business Corporations Act, the Company must indemnify a director, former director or alternate director of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director and alternate director is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 21.2.

21.3 

Indemnification of Other Persons

Subject to any restrictions in the Business Corporations Act, the Company may indemnify any person.

21.4 

Non-Compliance with Business Corporations Act

The failure of a director, alternate director or officer of the Company to comply with the Business Corporations Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Article 21.

21.5 

Company May Purchase Insurance

The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

(1) 

is or was a director, alternate director, officer, employee or agent of the Company;

(2) 

is or was a director, alternate director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;

(3) 

at the request of the Company, is or was a director, alternate director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;

(4) 

at the request of the Company, holds or held a position equivalent to that of a director, alternate director or officer of a partnership, trust, joint venture or other unincorporated entity;

against any liability incurred by him or her as such director, alternate director, officer, employee or agent or person who holds or held such equivalent position.

Page 35

22. 

DIVIDENDS

22.1 

Payment of Dividends Subject to Special Rights

The provisions of this Article 22 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.

22.2 

Declaration of Dividends

Subject to the Business Corporations Act, the directors may from time to time declare and authorize payment of such dividends as they may deem advisable.

22.3 

No Notice Required

The directors need not give notice to any shareholder of any declaration under Article 22.2.

22.4 

Record Date

The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.

22.5 

Manner of Paying Dividend

A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company or any other company, or in any one or more of such ways as may be authorized by the directors.

22.6 

Settlement of Difficulties

If any difficulty arises in regard to a distribution under Article 22.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:

(1) 

set the value for distribution of specific assets;

(2) 

determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and

(3) 

vest any such specific assets in trustees for the persons entitled to the dividend.

22.7 

When Dividend Payable

Any dividend may be made payable on such date as is fixed by the directors.

22.8 

Dividends to be Paid in Accordance with Number of Shares

All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

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22.9 

Receipt by Joint Shareholders

If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.

22.10 

Dividend Bears No Interest

No dividend bears interest against the Company.

22.11 

Fractional Dividends

If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.

22.12 

Payment of Dividends

Any dividend or other distribution payable in cash in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the address of the shareholder, or in the case of joint shareholders, to the address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.

22.13 

Capitalization of Surplus

Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.

22.14 

Fractional Share Dividends

Notwithstanding any other provisions of these Articles, should any dividend result in any shareholders being entitled to a fractional part of a share of the Company, the directors shall have the right to pay such shareholders in place of that fractional share, the cash equivalent thereof calculated on the par value thereof or, in the case of shares without par value, calculated on the price or consideration for which such shares were or were deemed to be issued, and shall have the further right and complete discretion to carry out such distribution and to adjust the rights of the shareholders with respect thereon on as practical and equitable a basis as possible including the right to arrange through a fiscal agent or otherwise for the sale, consolidation or other disposition of those fractional shares on behalf of those shareholders of the Company.

23. 

DOCUMENTS, RECORDS AND REPORTS

23.1 

Recording of Financial Affairs

The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Business Corporations Act.

23.2 

Inspection of Accounting Records

Unless the directors determine otherwise, or unless otherwise determined by ordinary resolution, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.

Page 37

24. 

NOTICES

24.1 

Method of Giving Notice

Unless the Business Corporations Act or these Articles provide otherwise, a notice, statement, report or other record (collectively a “record”) required or permitted by the Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

(1) 

mail addressed to the person at the applicable address for that person as follows:

(a) 

for a record mailed to a shareholder, the shareholder's registered address;

(b) 

for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class;

(c) 

in any other case, the mailing address of the intended recipient;

(2) 

delivery at the applicable address for that person as follows, addressed to the person:

(a) 

for a record delivered to a shareholder, the shareholder's registered address;

(b) 

for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class;

(c) 

in any other case, the delivery address of the intended recipient;

(3) 

sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;

(4) 

sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class;

(5) 

sending the record by any other method permitted by applicable securities legislation; or

(6) 

physical delivery to the intended recipient.

24.2 

Deemed Receipt of Mailing

A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 24.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing.

24.3 

Certificate of Sending

A certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 24.1, prepaid and mailed or otherwise sent as permitted by Article 24.1 is conclusive evidence of that fact.

Page 38

24.4 

Notice to Joint Shareholders

A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the item to the joint shareholder first named in the central securities register in respect of the share.

24.5 

Notice to Trustees

A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:

(1) 

mailing the record, addressed to them:

(a) 

by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and

(b) 

at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or

(2) 

if an address referred to in paragraph (1)(b) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.

25. 

SEAL

25.1 

Who May Attest Seal

Except as provided in Articles 25.2 and 25.3, the Company's seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:

(1) 

any two directors;

(2) 

any officer, together with any director;

(3) 

if the Company only has one director, that director; or

(4) 

any one or more directors or officers or persons as may be determined by the directors.

25.2 

Sealing Copies

For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 25.1, the impression of the seal may be attested by the signature of any director or officer.

25.3 

Mechanical Reproduction of Seal

The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Business Corporations Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and the chair of the board or any senior officer together with the secretary, treasurer, secretary-treasurer, an assistant secretary, an assistant treasurer or an assistant secretary-treasurer may in writing authorize such person

Page 39

to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.

26. 

PROHIBITIONS

26.1 

Definitions

In this Article 26:

(1) 

“designated security” means:

(a) 

a voting security of the Company;

(b) 

a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or

(c) 

a security of the Company convertible, directly or indirectly, into a security described in paragraph (a) or (b);

(2) 

“security” has the meaning assigned in the Securities Act (British Columbia); (3) “voting security” means a security of the Company that: 

(a) 

is not a debt security, and

(b) 

carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

26.2 

Application

Article 26.3 does not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply, or a company which is a reporting issuer as defined in the Securities Act (British Columbia).

26.3 

Consent Required for Transfer of Shares or Designated Securities

Notwithstanding any other provision of these Articles, while the Company is, or becomes, a company which is not a reporting issuer as defined in the Securities Act (British Columbia), no share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition.

27. 

SPECIALRIGHTS AND RESTRICTIONS

27.1 

Special Rights and Restrictions Attaching to Common Shares

The Common shares, as a class, shall confer on the holders thereof and shall be subject to the following special rights and restrictions:

(1)

Voting. The holders of the Common shares shall be entitled to receive notice of and to attend all meetings of the shareholders of the Company and shall have one vote for each Common share held at all meetings of the shareholders of the Company, except meetings at which only holders of another specified class or series of shares of the Company are entitled to vote separately as a class or series.

Page 40

(2)

Dividends. Subject to the prior rights of the holders of the Preferred shares and any other shares ranking senior to the Common shares with respect to priority in the payment of dividends, the holders of Common shares shall be entitled to receive dividends and the Company shall pay dividends thereon, as and when declared by the directors of the Company out of moneys properly applicable to the payment of dividends, in such amount and in such form as the directors of the Company may from time to time determine and all dividends which the directors of the Company may declare on the Common shares shall be declared and paid in equal amounts per share on all Common shares at the time outstanding.

(3)

Participation on Liquidation. In the event of the liquidation, dissolution or winding-up of the Company or any other distribution of assets of the Company among its shareholders for the purpose of winding-up its affairs or upon a reduction of capital, the holders of the Common shares shall, subject to the prior rights of the holders of the Preferred shares and any other shares ranking senior to the Common shares in respect of priority in the distribution of assets upon liquidation, dissolution, winding-up or any other distribution of assets for the purpose of winding-up or a reduction of capital, be entitled to share equally, share for share, in the remaining assets and property of the Company.

27.2 

Special Rights and Restrictions Attaching to Preferred Shares

The Preferred shares, as a class, shall confer on the holders thereof and shall be subject to the following special rights and restrictions:

(1)

One or More Series. The directors may issue Preferred shares in one or more series.

(2)

Creation or Deletion of Series. The directors may alter by resolution the Notice of Articles and/or the Articles of the Company to fix or change the number of shares in, and to determine the designation and special rights and restrictions attaching to the shares of each series of Preferred shares, including, but without in any way limiting or restricting the generality of the foregoing:

(a) 

Voting. The directors may confer on the holders of any series of Preferred shares the right to notice of or to be present or to vote, either in person or by proxy, at any general meeting of the shareholders of the Company other than a separate meeting of the holders of the Preferred shares, or of the holders of shares of a series of the Preferred shares, as the case may be;

(b)

Dividends. The directors may create, define or attach to any series of Preferred shares the rate or amount of dividends (whether cumulative, non-cumulative or partially cumulative), the dates, places and currencies of payment thereof and may allow the directors to declare dividends with respect to the Common shares only or with respect to any series of Preferred shares only or with respect to any combination of two or more such classes or series of classes;

(3)

If Series Entitled to Cumulative Dividend. Where the Preferred shares or one or more series of Preferred shares are entitled to cumulative dividends, and where cumulative dividends in respect of the Preferred shares or a series of Preferred shares are not paid in full, the shares of all series of Preferred shares entitled to cumulative dividends shall participate rateably in respect of accumulated dividends in accordance with the amounts that would be payable on those shares if all the accumulated dividends were paid in full.

(4)

All Series of Preferred Shares Participate Rateably on Winding-Up. Where amounts payable on a winding-up are not paid in full or on the occurrence of any other event where the holders of the shares of all series of Preferred shares are entitled to a return of capital but are not paid in full, the shares of all series of Preferred shares shall participate rateably in a return of capital in respect of Preferred shares in accordance with the amounts that would be payable on the return of capital if all amounts so payable were paid in full.

Page 41

(5)

No Priority. No special rights or restrictions attached to a series of Preferred shares shall confer on the
series priority over another series of Preferred shares then outstanding respecting:

(a) 

dividends, or

(b) 

a return of capital:

(i)

in winding-up, or

(ii) 

on the occurrence of another event that would result in the holders of all series of
Preferred shares being entitled to a return of capital.

(6)

Special Rights and Restrictions of Issued Series. A directors’ resolution pursuant to paragraph 28.2 (2)
above must be passed before the issue of shares of the series to which the resolution relates, and after
the issue of shares of that series the number of shares in, the designation of, and the special rights and
restrictions attached to that series may be added to, altered, varied or abrogated only in accordance
with the British Columbia Business Corporations Act.

(7) 

Priority on Liquidation. Except as provided herein, in the event of the liquidation, dissolution or
winding-up of the Company or any distribution of its assets for the purpose of winding-up its affairs,
after the payment of dividends declared but unpaid, the holders of the Preferred shares shall be entitled
pari passu to be paid such amount as the special rights and restrictions attaching to such shares shall
provide, or in the absence of any express provision with respect thereto, the amount of capital paid up
in respect thereof per share for each Preferred share held by them, out of the assets of the Company in
preference to and with priority over any payment or distribution of any capital asset or monies among
the holders of any Common shares or any other shares ranking junior to the preferred shares in respect
of priority or the distribution of assets upon liquidation, dissolution or winding-up or any other
distribution of assets for the purpose of winding-up or a reduction of capital, of the Company.

(8) 

The foregoing provisions of these Articles shall apply to all Preferred shares except as expressly
provided in the special rights and restrictions which the directors may create, define or attach to any
series of Preferred shares.

EX-4.18

MAG SILVER CORP.

STOCK OPTION PLAN (2007)

Effective Date: March 30, 2007

Approved by the Board of
Directors on March 30, 2007.

Approved by the
Shareholders on May 8, 2007.

TABLE OF CONTENTS

Page

SECTION 1 DEFINITIONS AND INTERPRETATION

2

1.1

Definitions

2

1.2

Choice of Law

2

1.3

Headings

2

SECTION 2 GRANT OF OPTIONS

2

2.1

Grant of Options

2

2.2

Record of Option Grants

2

2.3

Effect of Plan

2

SECTION 3 PURPOSE AND PARTICIPATION

2

3.1

Purpose of Plan

2

3.2

Participation in Plan

2

3.3

TSX-VN Limits on Option Grants

2

3.4

Additional Limits on Option Grants

2

3.5

Notification of Grant

2

3.6

Copy of Plan

2

3.7

Limitation on Service

2

3.8

No Obligation to Exercise

2

3.9

Agreement

2

3.10

Notice

2

3.11

Representation to TSX-VN

2

SECTION 4 NUMBER OF SHARES UNDER PLAN

2

4.1

Board to Approve Issuance of Shares

2

4.2

Number of Shares

2

4.3

Fractional Shares

2

SECTION 5 TERMS AND CONDITIONS OF OPTIONS

2

5.1

Exercise Period of Option

2

5.2

Number of Shares Under Option

2

5.3

Exercise Price of Option

2

5.4

Termination of Option

2

5.5

Vesting of Option and Acceleration

2

5.6

Additional Terms

2

SECTION 6 TRANSFERABILITY OF OPTIONS

2

6.1

Non-transferable

2

6.2

Death of Option Holder

2

6.3

Disability of Option Holder

2

6.4

Disability and Death of Option Holder

2

6.5

Vesting

2

6.6

Deemed Non-Interruption of Engagement

2

SECTION 7 EXERCISE OF OPTION

2

7.1

Exercise of Option

2

7.2

Issue of Share Certificates

2

7.3

No Rights as Shareholder

2

SECTION 8 ADMINISTRATION

2

8.1

Board or Committee

2

8.2

Appointment of Committee

2

- ii -

8.3

Quorum and Voting

2

8.4

Powers of Committee

2

8.5

Administration by Committee

2

8.6

Interpretation

2

SECTION 9 APPROVALS AND AMENDMENT

2

9.1

Shareholder Approval of Plan

2

9.2

Amendment of Option or Plan

2

SECTION 10 CONDITIONS PRECEDENT TO ISSUANCE OF OPTIONS AND SHARES

2

10.1

Compliance with Laws

2

10.2

Obligation to Obtain Regulatory Approvals

2

10.3

Inability to Obtain Regulatory Approvals

2

SECTION 11 ADJUSTMENTS AND TERMINATION

2

11.1

Termination of Plan

2

11.2

No Grant During Suspension of Plan

2

11.3

Alteration in Capital Structure

2

11.4

Triggering Events

2

11.5

Notice of Termination by Triggering Event

2

11.6

Determinations to be Made By Committee

2

STOCK OPTION PLAN

SECTION 1
DEFINITIONS AND INTERPRETATION

1.1

Definitions

As used herein, unless there is something in the subject matter or context inconsistent therewith, the following terms shall have the meanings set forth below:

(a)

“Administrator” means such Executive or Employee of the Company as may be designated as Administrator by the Committee from time to time, if any.

(b)

“Associate” means, where used to indicate a relationship with any person:

(i)

any relative, including the spouse of that person or a relative of that person’s spouse, where the relative has the same home as the person;

(ii)

any partner, other than a limited partner, of that person;

(iii)

any trust or estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar capacity; and

(iv)

any corporation of which such person beneficially owns or controls, directly or indirectly, voting securities carrying more than 10% of the voting rights attached to all outstanding voting securities of the corporation.

(c)

“Black-Out” means a restriction imposed by the Company on all or any of its directors, officers, employees, insiders or persons in a special relationship whereby they are to refrain from trading in the Company’s securities until the restriction has been lifted by the Company.

(d)

“Board” means the board of directors of the Company.

(e)

“Change of Control” means an occurrence when either:

(i)

a Person or Entity, other than the current “control person” of the Company (as that term is defined in the Securities Act), becomes a “control person” of the Company; or

(ii)

a majority of the directors elected at any annual or extraordinary general meeting of shareholders of the Company are not individuals nominated by the Company’s then-incumbent Board.

(f)

“Committee” means a committee of the Board appointed in accordance with this Plan or if no such committee is appointed, the Board itself.

(g)

“Company” means MAG Silver Corp.

(h)

“Consultant” means an individual who:

(i)

is engaged to provide, on an ongoing bona fide basis, consulting, technical, management or other services to the Company or any Subsidiary other than:

- 2 -

A.

services provided in relation to a “distribution” (as that term is described in the Securities Act); and

B.

unless the Shares are listed on the Toronto Stock Exchange, American Stock Exchange, the New York Stock Exchange or the London Stock  Exchange, or quoted on the Nasdaq National Market or the Nasdaq Small Cap Market, other than:

(1)

the services of a “registrant” (as that term is defined in the Securities Act); or

(2)

services that include investor relations activities;

(ii)

provides the services under a written contract between the Company or any Subsidiary and the individual or a Consultant Entity (as defined in clause (h)(v) below);

(iii)

in the reasonable opinion of the Company, spends or will spend a significant amount of time and attention on the affairs and business of the Company or any Subsidiary; and

(iv)

has a relationship with the Company or any Subsidiary that enables the individual to be knowledgeable about the business and affairs of the Company,

and includes:

(v)

a corporation of which the individual is an employee or shareholder or a partnership of which the individual is an employee or partner (a “Consultant Entity”); or

(vi)

an RRSP or RRIF established by or for the individual under which he or she is the beneficiary.

(i)

“Disability” means a medically determinable physical or mental impairment expected to result in death or to last for a continuous period of not less than 12 months, and which causes an individual to be unable to engage in any substantial gainful activity, or any other condition of impairment that the Committee, acting reasonably, determines constitutes a disability.

(j)

“Employee” means:

(i)

an individual who works full-time or part-time for the Company or any Subsidiary and such other individuals as may, from time to time, be permitted by applicable Regulatory Rules to be granted Options as employees or as an equivalent thereto; or

(ii)

an individual who works for the Company or any Subsidiary either full-time or on a continuing and regular basis for a minimum amount of time per week providing services normally provided by an employee and who is subject to the same control and direction by the Company or any Subsidiary over the details and methods of work as an employee of the Company or any Subsidiary, but for whom income tax deductions are not made at source,

and includes:

(iii)

a corporation wholly-owned by such individual; and

(iv)

any RRSP or RRIF established by or for such individual under which he or she is the beneficiary.

(k)

“Executive” means an individual who is a director or officer of the Company or a Subsidiary, and includes:

(i)

a corporation wholly-owned by such individual; and

- 3 -

(ii)

any RRSP or RRIF established by or for such individual under which he or she is the beneficiary.

(l)

“Exercise Notice” means the written notice of the exercise of an Option, in the form set out as Schedule “B” hereto, duly executed by the Option Holder.

(m)

“Exercise Period” means the period during which a particular Option may be exercised and is the period from and including the Grant Date through to and including the Expiry Time on the Expiry Date provided, however, that no Option can be exercised unless and until all necessary Regulatory Approvals have been obtained.

(n)

“Exercise Price” means the price at which an Option is exercisable as determined in accordance with section 5.3.

(o)

“Expiry Date” means the date the Option expires as set out in the Option Certificate or as otherwise determined in accordance with sections 5.4, 6.2, 6.3, 6.4 or 11.4.

(p)

“Expiry Time” means the time the Option expires on the Expiry Date, which is 5:00 p.m. local time in Vancouver, British Columbia on the Expiry Date.

(q)

“Grant Date” means the date on which the Committee grants a particular Option, which is the date the Option comes into effect provided however that no Option can be exercised unless and until all necessary Regulatory Approvals have been obtained.

(r)

“Incentive Stock Option” or “ISO” means an Option granted to a U.S. Option Holder in accordance with the terms of Section 422 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

(s)

“Insider” means:

(i)

an insider as that term is defined in the Securities Act; and

(ii)

an Associate of any person who is an insider by virtue of clause 1.1(s)(i) above.

(t)

“Nonqualified Stock Option” or “NSO” means an Option that does not meet the requirements of Code Section 422 and is not an Incentive Stock Option or ISO.

(u)

“Market Value” means the market value of the Shares as determined in accordance with section 5.3.

(v)

“Option” means an incentive share purchase option granted pursuant to this Plan entitling the Option Holder to purchase Shares of the Company.

(w)

“Option Certificate” means the certificate, in substantially the form set out as Schedule “A” hereto, evidencing the Option.

(x)

“Option Holder” means a Person or Entity who holds an unexercised and unexpired Option or, where applicable, the Personal Representative of such person.

(y)

“Outstanding Issue” means the number of Shares that are outstanding (on a non-diluted basis) immediately prior to the Share issuance or grant of Option in question.

(z)

“Person or Entity” means an individual, natural person, corporation, government or political subdivision or agency of a government, and where two or more persons act as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of securities of an issuer, such partnership, limited partnership, syndicate or group shall be deemed to be a Person or Entity.

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(aa)

“Personal Representative” means:

(i)

in the case of a deceased Option Holder, the executor or administrator of the deceased duly appointed by a court or public authority having jurisdiction to do so; and

(ii)

in the case of an Option Holder who for any reason is unable to manage his or her affairs, the person entitled by law to act on behalf of such Option Holder.

(bb)

“Plan” means this stock option plan as from time to time amended.

(cc)

“Regulatory Approvals” means any necessary approvals of the Regulatory Authorities as may be required from time to time for the implementation, operation or amendment of this Plan or for the Options granted from time to time hereunder.

(dd)

“Regulatory Authorities” means all organized trading facilities on which the Shares are listed, and all securities commissions or similar securities regulatory bodies having jurisdiction over the Company, this Plan or the Options granted from time to time hereunder.

(ee)

“Regulatory Rules” means all corporate and securities laws, regulations, rules, policies, notices, instruments and other orders of any kind whatsoever which may, from time to time, apply to the implementation, operation or amendment of this Plan or the Options granted from time to time hereunder including, without limitation, those of the applicable Regulatory Authorities.

(ff)

“Securities Act” means the Securities Act (British Columbia), RSBC 1996, c.418 as from time to time amended.

(gg)

“Share” or “Shares” means, as the case may be, one or more common shares without par value in the capital stock of the Company.

(hh)

“Share Compensation Arrangement” means any stock option, stock option plan, employee stock purchase plan or any other compensation or incentive mechanism involving the issuance or potential issuance of Shares, including a share purchase from treasury which is financially assisted by the Company by way of a loan, guarantee or otherwise.

(ii)

“Subsidiary” means a wholly-owned or controlled subsidiary corporation of the Company.

(jj)

“Triggering Event” means:

(i)

the proposed dissolution, liquidation or wind-up of the Company;

(ii)

a proposed merger, amalgamation, arrangement or reorganization of the Company with one or more corporations as a result of which, immediately following such event, the shareholders of the Company as a group, as they were immediately prior to such event, are expected to hold less than a majority of the outstanding capital stock of the surviving corporation;

(iii)

the proposed acquisition of all or substantially all of the issued and outstanding shares of the Company by one or more Persons or Entities;

(iv)

a proposed Change of Control of the Company;

(v)

the proposed sale or other disposition of all or substantially all of the assets of the Company; or

(vi)

a proposed material alteration of the capital structure of the Company which, in the opinion of the Committee, is of such a nature that it is not practical or feasible to make adjustments to this Plan or

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to the Options granted hereunder to permit the Plan and Options granted hereunder to stay in effect.

(kk)

“TSX-VN” means the TSX Venture Exchange.

1.2

Choice of Law

The Plan is established under, and the provisions of the Plan shall be subject to and interpreted and construed in accordance with, the laws of the Province of British Columbia.  The Company and each Option Holder hereby attorn to the jurisdiction of the Courts of British Columbia.

1.3

Headings

The headings used herein are for convenience only and are not to affect the interpretation of the Plan.

SECTION 2
GRANT OF OPTIONS

2.1

Grant of Options

The Committee shall, from time to time in its sole discretion, grant Options to such Persons or Entities and on such terms and conditions as are permitted under this Plan.

2.2

Record of Option Grants

The Committee shall be responsible to maintain a record of all Options granted under this Plan and such record shall contain, in respect of each Option:

(a)

the name and address of the Option Holder;

(b)

the category (Executive, Employee or Consultant) under which the Option was granted to him, her or it;

(c)

the Grant Date and Expiry Date of the Option;

(d)

the number of Shares which may be acquired on the exercise of the Option and the Exercise Price of the Option;

(e)

the vesting and other additional terms, if any, attached to the Option; and

(f)

the particulars of each and every time the Option is exercised.

2.3

Effect of Plan

All Options granted pursuant to this Plan shall be subject to the terms and conditions of this Plan notwithstanding the fact that the Option Certificates issued in respect thereof do not expressly contain such terms and conditions but instead incorporate them by reference to this Plan.

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SECTION 3
PURPOSE AND PARTICIPATION

3.1

Purpose of Plan

The purpose of the Plan is to provide the Company with a share-related mechanism to attract, retain and motivate qualified Executives, Employees and Consultants, to incent such individuals to contribute toward the long term goals of the Company, and to encourage such individuals to acquire Shares of the Company as long term investments.

3.2

Participation in Plan

The Committee shall, from time to time and in its sole discretion, determine those Executives, Employees and Consultants, if any, to whom Options are to be granted.

3.3

TSX-VN Limits on Option Grants

If the Company is listed on TSX-VN as a Tier 1 issuer, the following limitations shall apply to the Plan and all Options thereunder so long as such limitations are required by the TSX-VN:

(a)

the maximum number of Shares which may be reserved for issuance to Insiders pursuant to Options under the Plan shall be 10% of the Outstanding Issue;

(b)

the maximum number of Options which may be granted to Insiders under the Plan within any 12 month period shall be 10% of the Outstanding Issue;

(c)

the maximum number of Options which may be granted to any one Option Holder under the Plan within any 12 month period shall be 5% of the Outstanding Issue;

(d)

with respect to section 5.1, the Expiry Date of an Option shall be no later than the tenth anniversary of the Grant Date of such Option;

(e)

the maximum number of Options which may be granted to any one Consultant within any 12 month period must not exceed 2% of the Outstanding Issue; and

(f)

the maximum number of Options which may be granted within any 12 month period to Employees or Consultants engaged in investor relations activities must not exceed 2% of the Outstanding Issue and such options must vest in stages over 12 months with no more than 25% of the Options vesting in any three month period; and

(g)

the maximum number of Options which may be granted as ISOs shall not exceed 700,000,

and such limitation will not be an amendment to this Plan requiring the Option Holders consent under section 9.2 of this Plan.

If the Company is listed on TSX-VN as a Tier 2 issuer, the following limitations shall apply to the Plan and all Options thereunder so long as such limitations are required by the TSX-VN:

(a)

the maximum number of Shares which may be reserved for issuance to Insiders pursuant to Options under the Plan shall be 10% of the Outstanding Issue;

(b)

the maximum number of Options which may be granted to Insiders under the Plan within any 12 month period shall be 10% of the Outstanding Issue;

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(c)

the maximum number of Options which may be granted to any one Option Holder under the Plan within any 12 month period shall be 5% of the Outstanding Issue;

(d)

with respect to section 5.1, the Expiry Date of an Option shall be no later than the fifth anniversary of the Grant Date of such Option;

(e)

the maximum number of Options which may be granted to any one Consultant within any 12 month period must not exceed 2% of the Outstanding Issue;

(f)

the maximum number of Options which may be granted within any 12 month period to Employees or Consultants engaged in investor relations activities must not exceed 2% of the Outstanding Issue and such options must vest in stages over 12 months with no more than 25% of the Options vesting in any three month period; and

(g)

the maximum number of Options which may be granted as ISOs shall not exceed 700,000,

and such limitation will not be an amendment to this Plan requiring the Option Holders consent under section 9.2 of this Plan.

3.4

Additional Limits on Option Grants

Incentive Stock Options shall be granted only to an individual who is an Employee of the Company or a Subsidiary or related company and shall be subject to the following special limitations required by Section 422 of the Code, and any contrary provisions of this Plan shall be disregarded:

(a)

Limitation on Amount of Grants.  As to all Incentive Stock Options granted under the terms of this Plan, to the extent that the aggregate fair market value of the Shares (determined at the time the Incentive Stock Option is granted) with respect to which Incentive Stock Options are exercisable for the first time by the Option Holder during any calendar year (under this Plan and all other incentive stock option plans of the Company, a related corporation or a predecessor corporation) exceeds $100,000 (U.S.), such options shall be treated as Nonqualified Stock Options.  The previous sentence shall not apply if the Internal Revenue Service issues a public rule, issues a private ruling to the Company, any Option Holder or any legatee, personal representative or distributee of an Option Holder or issues regulations changing or eliminating such annual limit.  No such limitation shall apply to Nonqualified Stock Options.

(b)

Grants to Ten Percent Shareholders.  Incentive Stock Options may be granted to a person owning more than 10% of the total combined voting power of all classes of shares of the Company and any Parent or Subsidiary only if (i) the exercise price is at least 110% of the fair market value of the stock at the time of grant, and (ii) the option is not exercisable after the expiration of five years from the date of grant.

(c)

Notice of Disposition.  The Board of Directors may require an Option Holder  to give the Company prompt notice of any disposition of Shares acquired by exercise of an Incentive Stock Option prior to the expiration of two years after the date of the grant of the option and one year from the date of exercise.

(d)

Shareholder Approval.  No Options granted under this Plan will be considered Incentive Stock Options unless this Plan has been approved by the shareholders of the Company within 12 months before or after the date such Plan has been adopted by the Company’s Board of Directors.

3.5

Notification of Grant

Following the granting of an Option, the Administrator shall, within a reasonable period of time, notify the Option Holder in writing of the grant and shall enclose with such notice the Option Certificate representing the Option so granted.  In no case will the Company be required to deliver an Option Certificate to an Option Holder until such time as the Company has obtained all necessary Regulatory Approvals for the grant of the Option.

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3.6

Copy of Plan

Each Option Holder, concurrently with the notice of the grant of the Option, shall be provided with a copy of the Plan.  A copy of any amendment to the Plan shall be promptly provided by the Administrator to each Option Holder.

3.7

Limitation on Service

The Plan does not give any Option Holder that is an Executive the right to serve or continue to serve as an Executive of the Company or any Subsidiary, nor does it give any Option Holder that is an Employee or Consultant the right to be or to continue to be employed or engaged by the Company or any Subsidiary.

3.8

No Obligation to Exercise

Option Holders shall be under no obligation to exercise Options granted under this Plan.

3.9

Agreement

The Company and every Option Holder granted an Option hereunder shall be bound by and subject to the terms and conditions of this Plan.  By accepting an Option granted hereunder, the Option Holder has expressly agreed with the Company to be bound by the terms and conditions of this Plan.  In the event that the Option Holder receives his, her or its Options pursuant to an oral or written agreement with the Company or a Subsidiary, whether such agreement is an employment agreement, consulting agreement or any other kind of agreement of any kind whatsoever, the Option Holder acknowledges that in the event of any inconsistency between the terms relating to the grant of such Options in that agreement and the terms attaching to the Options as provided for in this Plan, the terms provided for in this Plan shall prevail and the other agreement shall be deemed to have been amended accordingly.

3.10

Notice

Any notice, delivery or other correspondence of any kind whatsoever to be provided by the Company to an Option Holder will be deemed to have been provided if provided to the last home address, fax number or email address of the Option Holder in the records of the Company and the Company shall be under no obligation to confirm receipt or delivery.

3.11

Representation to TSX-VN

As a condition precedent to the issuance of an Option, the Company must be able to represent to TSX-VN as of the Grant Date that the Option Holder is a bona fide Executive, Employee or Consultant of the Company or any Subsidiary.

SECTION 4
NUMBER OF SHARES UNDER PLAN

4.1

Board to Approve Issuance of Shares

The Board shall approve by resolution the issuance of all Shares to be issued to Option Holders upon the exercise of Options, such authorization to be deemed effective as of the Grant Date of such Options regardless of when it is actually done.  The Board shall be entitled to approve the issuance of Shares in advance of the Grant Date, retroactively after the Grant Date, or by a general approval of this Plan.

4.2

Number of Shares

Subject to adjustment as provided for herein, the number of Shares which will be available for purchase pursuant to Options granted pursuant to this Plan will not exceed 10% of the number of common shares of the Company which are issued and outstanding on the particular Grant Date, including the existing 3,486,000 Shares currently subject to

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outstanding Options as of the date of this Plan which were granted prior to implementation of this Plan and, which, by the implementation of this Plan are grandfathered under this Plan; provided, however, that the maximum number of Options that may be granted as ISOs shall not exceed 700,000.  If any Option expires or otherwise terminates for any reason without having been exercised in full, the number of Shares in respect of such expired or terminated Option shall again be available for the purposes of granting Options pursuant to this Plan.

4.3

Fractional Shares

No fractional shares shall be issued upon the exercise of any Option and, if as a result of any adjustment, an Option Holder would become entitled to a fractional share, such Option Holder shall have the right to purchase only the next lowest whole number of Shares and no payment or other adjustment will be made for the fractional interest.

SECTION 5
TERMS AND CONDITIONS OF OPTIONS

5.1

Exercise Period of Option

Subject to sections 5.4, 6.2, 6.3, 6.4 and 11.4, the Grant Date and the Expiry Date of an Option shall be the dates fixed by the Committee at the time the Option is granted and shall be set out in the Option Certificate issued in respect of such Option.

5.2

Number of Shares Under Option

The number of Shares which may be purchased pursuant to an Option shall be determined by the Committee and shall be set out in the Option Certificate issued in respect of the Option.

5.3

Exercise Price of Option

The Exercise Price at which an Option Holder may purchase a Share upon the exercise of an Option shall be determined by the Committee and shall be set out in the Option Certificate issued in respect of the Option.  The Exercise Price shall not be less than the Market Value of the Shares as of the Grant Date. The Market Value of the Shares for a particular Grant Date shall be determined as follows:

(a)

for each organized trading facility on which the Shares are listed, Market Value will be the closing trading price of the Shares on the day immediately preceding the Grant Date less any discounts permitted by the applicable regulatory authorities;

(b)

if the Company’s Shares are listed on more than one organized trading facility, the Market Value shall be the Market Value as determined in accordance with subparagraph (a) above for the primary organized trading facility on which the Shares are listed, as determined by the Committee, subject to any adjustments as may be required to secure all necessary Regulatory Approvals;

(c)

if the Company’s Shares are listed on one or more organized trading facilities but have not traded during the ten trading days immediately preceding the Grant Date, then the Market Value will be, subject to any adjustments as may be required to secure all necessary Regulatory Approvals, such value as is determined by the Committee; and

(d)

if the Company’s Shares are not listed for trading on a stock exchange or over the counter market, the value which is determined by the Committee to be the fair value of the Shares, taking into consideration all factors that the Committee deems appropriate, including, without limitation, recent sale and offer prices of the Shares in private transactions negotiated at arms’ length.

Notwithstanding anything else contained herein, in no case will the Market Value be less than the minimum prescribed by each of the organized trading facilities that would apply to the Company on the Grant Date in question.

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5.4

Termination of Option

Subject to such other terms or conditions that may be attached to Options granted hereunder, an Option Holder may exercise an Option in whole or in part at any time and from time to time during the Exercise Period.  Any Option or part thereof not exercised within the Exercise Period shall terminate and become null, void and of no effect as of the Expiry Time on the Expiry Date. The Expiry Date of an Option shall be the earlier of the date so fixed by the Committee at the time the Option is granted as set out in the Option Certificate and the date established, if applicable, in paragraphs (a) or (b) below or sections 6.2, 6.3, 6.4, or 11.4 of this Plan:

(a)

Ceasing to Hold Office - In the event that the Option Holder holds his or her Option as an Executive and such Option Holder ceases to hold such position other than by reason of death or Disability, the Expiry Date of the Option shall be, unless otherwise expressly provided for in the Option Certificate, the 90th day following the date the Option Holder ceases to hold such position unless the Option Holder ceases to hold such position as a result of:

(i)

ceasing to meet the qualifications set forth in the corporate legislation applicable to the Company;

(ii)

a special resolution having been passed by the shareholders of the Company removing the Option Holder as a director of the Company or any Subsidiary; or

(iii)

an order made by any Regulatory Authority having jurisdiction to so order;

in which case the Expiry Date shall be the date the Option Holder ceases to hold such position; OR

(b)

Ceasing to be Employed or Engaged - In the event that the Option Holder holds his or her Option as an Employee or Consultant or the Options were granted to an Option Holder who is engaged in investor relations activities, and such Option Holder ceases to hold such position other than by reason of death or Disability, the Expiry Date of the Option shall be, unless otherwise expressly provided for in the Option Certificate, the 30th day following the date the Option Holder ceases to hold such position, unless the Option Holder ceases to hold such position as a result of:

(i)

termination for cause;

(ii)

resigning or terminating his or her position; or

(iii)

an order made by any Regulatory Authority having jurisdiction to so order;

in which case the Expiry Date shall be the date the Option Holder ceases to hold such position.

In the event that the Option Holder ceases to hold the position of Executive, Employee or Consultant for which the Option was originally granted, but comes to hold a different position as an Executive, Employee or Consultant prior to the expiry of the Option, the Committee may, in its sole discretion, choose to permit the Option to stay in place for that Option Holder with such Option then to be treated as being held by that Option Holder in his or her new position and such will not be considered to be an amendment to the Option in question requiring the consent of the Option Holder under section 9.2 of this Plan.  Notwithstanding anything else contained herein, in no case will an Option be exercisable later than the Expiry Date of the Option.

5.5

Vesting of Option and Acceleration

The vesting schedule for an Option, if any, shall be determined by the Committee and shall be set out in the Option Certificate issued in respect of the Option.  Subject to the approval of the TSX-VN, the Committee may elect, at any time, to accelerate the vesting schedule of one or more Options including, without limitation, on a Triggering Event, and such acceleration will not be considered an amendment to the Option in question requiring the consent of the Option Holder under section 9.2 of this Plan.

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5.6

Additional Terms

Subject to all applicable Regulatory Rules and all necessary Regulatory Approvals, the Committee may attach additional terms and conditions to the grant of a particular Option, such terms and conditions to be set out in a schedule attached to the Option Certificate.

SECTION 6TRANSFERABILITY OF OPTIONS

6.1

Non-transferable

Except as provided otherwise in this Section 6, Options are non-assignable and non-transferable.

6.2

Death of Option Holder

In the event of the Option Holder’s death, any Options held by such Option Holder shall pass to the Personal Representative of the Option Holder and shall be exercisable by the Personal Representative on or before the date which is the earlier of six months following the date of death and the applicable Expiry Date.

6.3

Disability of Option Holder

If the employment or engagement of an Option Holder as an Employee or Consultant or the position of an Option Holder as a director or officer of the Company or a Subsidiary is terminated by the Company by reason of such Option Holder’s Disability, any Options held by such Option Holder shall be exercisable by such Option Holder or by the Personal Representative on or before the date which is the earlier of six months following the termination of employment, engagement or appointment as a director or officer and the applicable Expiry Date.

6.4

Disability and Death of Option Holder

If an Option Holder has ceased to be employed, engaged or appointed as a director or officer of the Company or a Subsidiary by reason of such Option Holder’s Disability and such Option Holder dies within six months after the termination of such engagement, any Options held by such Option Holder that could have been exercised immediately prior to his or her death shall pass to the Personal Representative of such Option Holder and shall be exercisable by the Personal Representative on or before the date which is the earlier of six months following the death of such Option Holder and the applicable Expiry Date.

6.5

Vesting

Unless the Committee determines otherwise, Options held by or exercisable by a Personal Representative shall, during the period prior to their termination, continue to vest in accordance with any vesting schedule to which such Options are subject.

6.6

Deemed Non-Interruption of Engagement

Employment or engagement by the Company shall be deemed to continue intact during any military or sick leave or other bona fide leave of absence if the period of such leave does not exceed 90 days or, if longer, for so long as the Option Holder’s right to re-employment or re-engagement by the Company is guaranteed either by statute or by contract.  If the period of such leave exceeds 90 days and the Option Holder’s re-employment or re-engagement is not so guaranteed, then his or her employment or engagement shall be deemed to have terminated on the ninety-first day of such leave.

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SECTION 7
EXERCISE OF OPTION

7.1

Exercise of Option

An Option may be exercised only by the Option Holder or the Personal Representative of any Option Holder.  An Option Holder or the Personal Representative of any Option Holder may exercise an Option in whole or in part at any time and from time to time during the Exercise Period up to the Expiry Time on the Expiry Date by delivering to the Administrator the required Exercise Notice, the applicable Option Certificate and a certified cheque or bank draft payable to the Company in an amount equal to the aggregate Exercise Price of the Shares then being purchased pursuant to the exercise of the Option.  Notwithstanding anything else contained herein, Options may not be exercised during Black-Out unless the Committee determines otherwise.

7.2

Issue of Share Certificates

As soon as reasonably practicable following the receipt of the Exercise Notice, the Administrator shall cause to be delivered to the Option Holder a certificate for the Shares so purchased.  If the number of Shares so purchased is less than the number of Shares subject to the Option Certificate surrendered, the Administrator shall also provide a new Option Certificate for the balance of Shares available under the Option to the Option Holder concurrent with delivery of the Share Certificate against the return of the original Option Certificate.

7.3

No Rights as Shareholder

Until the date of the issuance of the certificate for the Shares purchased pursuant to the exercise of an Option, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to such Shares, notwithstanding the exercise of the Option, unless the Committee determines otherwise.  In the event of any dispute over the date of the issuance of the certificates, the decision of the Committee shall be final, conclusive and binding.

SECTION 8
ADMINISTRATION

8.1

Board or Committee

The Plan shall be administered by the Board, by a Committee of the Board appointed in accordance with section 8.2 below, or by an Administrator appointed in accordance with subsection 8.4(b).

8.2

Appointment of Committee

The Board may at any time appoint a Committee, consisting of not less than two of its members, to administer the Plan on behalf of the Board in accordance with such terms and conditions as the Board may prescribe, consistent with this Plan. Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and appoint new members in their place, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan.

8.3

Quorum and Voting

A majority of the members of the Committee shall constitute a quorum and, subject to the limitations in this Section 8, all actions of the Committee shall require the affirmative vote of members who constitute a majority of such quorum.  Members of the Committee may vote on any matters affecting the administration of the Plan or the grant of Options pursuant to the Plan.  The Committee may approve matters by written resolution signed by a majority of the quorum.

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8.4

Powers of Committee

The Committee (or the Board if no Committee is in place) shall have the authority to do the following:

(a)

administer the Plan in accordance with its terms;

(b)

appoint or replace the Administrator from time to time;

(c)

determine all questions arising in connection with the administration, interpretation and application of the Plan, including all questions relating to the Market Value of the Shares;

(d)

correct any defect, supply any information or reconcile any inconsistency in the Plan in such manner and to such extent as shall be deemed necessary or advisable to carry out the purposes of the Plan;

(e)

prescribe, amend, and rescind rules and regulations relating to the administration of the Plan;

(f)

determine the duration and purposes of leaves of absence from employment or engagement by the Company which may be granted to Option Holders without constituting a termination of employment or engagement for purposes of the Plan;

(g)

do the following with respect to the granting of Options:

(i)

determine the Executives, Employees or Consultants to whom Options shall be granted, based on the eligibility criteria set out in this Plan;

(ii)

determine the terms of the Option to be granted to an Option Holder including, without limitation, the Grant Date, Expiry Date, Exercise Price and vesting schedule (which need not be identical with the terms of any other Option);

(iii)

subject to any necessary Regulatory Approvals and section 9.2, amend the terms of any Options;

(iv)

determine when Options shall be granted; and

(v)

determine the number of Shares subject to each Option;

(h)

accelerate the vesting schedule of any Option previously granted; and

(i)

make all other determinations necessary or advisable, in its sole discretion, for the administration of the Plan.

8.5

Administration by Committee

All determinations made by the Committee in good faith shall be final, conclusive and binding upon all persons.  The Committee shall have all powers necessary or appropriate to accomplish its duties under this Plan.

8.6

Interpretation

The interpretation by the Committee of any of the provisions of the Plan and any determination by it pursuant thereto shall be final, conclusive and binding and shall not be subject to dispute by any Option Holder.  No member of the Committee or any person acting pursuant to authority delegated by it hereunder shall be personally liable for any action or determination in connection with the Plan made or taken in good faith and each member of the Committee and each such person shall be entitled to indemnification with respect to any such action or determination in the manner provided for by the Company.

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SECTION 9
APPROVALS AND AMENDMENT

9.1

Shareholder Approval of Plan

If required by a Regulatory Authority or by the Committee, this Plan may be made subject to the approval of a majority of the votes cast at a meeting of the shareholders of the Company or by a majority of votes cast by disinterested shareholders at a meeting of shareholders of the Company.  Any Options granted under this Plan prior to such time will not be exercisable or binding on the Company unless and until such shareholder approval is obtained.

9.2

Amendment of Option or Plan

Subject to any required Regulatory Approvals, the Committee may from time to time amend any existing Option or the Plan or the terms and conditions of any Option thereafter to be granted provided that where such amendment relates to an existing Option and it would:

(a)

materially decrease the rights or benefits accruing to an Option Holder; or

(b)

materially increase the obligations of an Option Holder;

then, unless otherwise excepted out by a provision of this Plan, the Committee must also obtain the written consent of the Option Holder in question to such amendment.  If at the time the Exercise Price of an Option is reduced the Option Holder is an Insider of the Company, the Insider must not exercise the option at the reduced Exercise Price until the reduction in Exercise Price has been approved by the disinterested shareholders of the Company.

SECTION 10
CONDITIONS PRECEDENT TO ISSUANCE OF OPTIONS AND SHARES

10.1

Compliance with Laws

An Option shall not be granted or exercised, and Shares shall not be issued pursuant to the exercise of any Option, unless the grant and exercise of such Option and the issuance and delivery of such Shares comply with all applicable Regulatory Rules, and such Options and Shares will be subject to all applicable trading restrictions in effect pursuant to such Regulatory Rules and the Company shall be entitled to legend the Option Certificates and the certificates representing such Shares accordingly.

10.2

Obligation to Obtain Regulatory Approvals

In administering this Plan, the Committee will seek any Regulatory Approvals which may be required. The Committee will make all filings required with the Regulatory Authorities in respect of the Plan and each grant of Options hereunder.  No Option granted will be exercisable or binding on the Company unless and until all necessary Regulatory Approvals have been obtained.  The Committee shall be entitled to amend this Plan and the Options granted hereunder in order to secure any necessary Regulatory Approvals and such amendments will not require the consent of the Option Holders under section 9.2 of this Plan.

10.3

Inability to Obtain Regulatory Approvals

The Company’s inability to obtain Regulatory Approval from any applicable Regulatory Authority, which Regulatory Approval is deemed by the Committee to be necessary to complete the grant of Options hereunder, the exercise of those Options or the lawful issuance and sale of any Shares pursuant to such Options, shall relieve the Company of any liability with respect to the failure to complete such transaction.

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SECTION 11
ADJUSTMENTS AND TERMINATION

11.1

Termination of Plan

Subject to any necessary Regulatory Approvals, the Committee may terminate or suspend the Plan.  Unless earlier terminated as provided in this Section 11, the Plan shall terminate on, and no more Options shall be granted under the Plan after, the tenth anniversary of the Effective Date of the Plan.

11.2

No Grant During Suspension of Plan

No Option may be granted during any suspension, or after termination, of the Plan.  Suspension or termination of the Plan shall not, without the consent of the Option Holder, alter or impair any rights or obligations under any Option previously granted.

11.3

Alteration in Capital Structure

If there is a material alteration in the capital structure of the Company and the Shares are consolidated, subdivided, converted, exchanged, reclassified or in any way substituted for, the Committee shall make such adjustments to this Plan and to the Options then outstanding under this Plan as the Committee determines to be appropriate and equitable under the circumstances, so that the proportionate interest of each Option Holder shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustments may include, without limitation:

(a)

a change in the number or kind of shares of the Company covered by such Options; and

(b)

a change in the Exercise Price payable per Share provided, however, that the aggregate Exercise Price applicable to the unexercised portion of existing Options shall not be altered, it being intended that any adjustments made with respect to such Options shall apply only to the Exercise Price per Share and the number of Shares subject thereto.

For purposes of this section 11.3, and without limitation, neither:

(a)

the issuance of additional securities of the Company in exchange for adequate consideration (including services); nor

(b)

the conversion of outstanding securities of the Company into Shares;

 shall be deemed to be material alterations of the capital structure of the Company.

Any adjustment made to any Options pursuant to this section 11.3 shall not be considered an amendment requiring the Option Holder’s consent for the purposes of Section 9.2 of this Plan.

11.4

Triggering Events

Subject to the Company complying with section 11.5 and any necessary Regulatory Approvals and notwithstanding any other provisions of this Plan or any Option Certificate, the Committee may cause all or a portion of all or any of the Options granted under the Plan to terminate upon the occurrence of a Triggering Event without the consent of the Option Holder or Holders in question.  Such termination shall not be considered an amendment requiring the Option Holder’s consent for the purpose of section 9.2 of this Plan.

11.5

Notice of Termination by Triggering Event

In the event that the Committee wishes to cause all or a portion of any of the Options granted under this Plan to terminate on the occurrence of a Triggering Event, it must give written notice to the Option Holders in question not

- 16 -

less than 10 days prior to the consummation of a Triggering Event.  Upon the giving of such notice and subject to any necessary Regulatory Approvals, all Options or portions thereof granted under the Plan which the Company proposes to terminate shall become immediately exercisable notwithstanding any contingent vesting provision to which such Options may have otherwise been subject.

11.6

Determinations to be Made By Committee

Adjustments and determinations under this Section 11 shall be made by the Committee, whose decisions as to what adjustments or determination shall be made, and the extent thereof, shall be final, binding, and conclusive.

SCHEDULE “A”

Without prior written approval of the TSX Venture Exchange and compliance with all applicable securities legislation, the securities represented by this certificate may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until 12:01 a.m. on [date four months and one day after Grant Date].

MAG SILVER CORP.

STOCK OPTION PLAN - OPTION CERTIFICATE

This Option Certificate is issued pursuant to the provisions of the Stock Option Plan (2007) (the “Plan”) of MAG Silver Corp. (the “Company”) and evidences that [Name of Option Holder] is the holder (the “Option Holder”) of an option (the “Option”) to purchase up to  common shares (the “Shares”) in the capital stock of the Company at a purchase price of Cdn.$ per Share (the “Exercise Price”).  This Option may be exercised at any time and from time to time from and including the following Grant Date through to and including up to 5:00 p.m. local time in Vancouver, British Columbia (the “Expiry Time”) on the following Expiry Date:

(a)

the Grant Date of this Option is , 200; and

(b)

subject to sections 5.4, 6.2, 6.3, 6.4 and 11.4 of the Plan, the Expiry Date of this Option is ,200.

To exercise this Option, the Option Holder must deliver to the Administrator of the Plan, prior to the Expiry Time on the Expiry Date, an Exercise Notice, in the form provided in the Plan, which are incorporated by reference herein, together with the original of this Option Certificate and a certified cheque or bank draft payable to the Company in an amount equal to the aggregate of the Exercise Price of the Shares in respect of which this Option is being exercised.

This Option Certificate and the Option evidenced hereby is not assignable, transferable or negotiable and is subject to the detailed terms and conditions contained in the Plan.  This Option Certificate is issued for convenience only and in the case of any dispute with regard to any matter in respect hereof, the provisions of the Plan and the records of the Company shall prevail.  This Option is also subject to the terms and conditions contained in the schedules, if any, attached hereto.

Any share certificates issued pursuant to an exercise of the Option before 12:01 a.m. on [date four months and one day after Grant Date] will contain the following legend:

“Without prior written approval of the TSX Venture Exchange and compliance with all applicable securities legislation, the securities represented by this certificate may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a Canadian resident until 12:01 a.m. on [date four months and one day after Grant Date].”

If the Option Holder is a resident or citizen of the United States of America at the time of the exercise of the Option, the certificate(s) representing the Shares will be endorsed with the following or a similar legend:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE 1933 ACT, (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND

- 2 -

IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY.  DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

This Option was granted to the Option Holder in his or her capacity as a [pick one: Director, Officer, Advisor, Employee, Consultant] of the Company [, and shall continue in effect should his or her status change and he or she continue in a new capacity as a Director, Officer, Advisor, Employee or Consultant of the Company].

MAG Silver Corp.

Per:  

[Full Name of Person], Administrator,

Stock Option Plan

The Option Holder acknowledges receipt of a copy of the Plan and represents to the Company that the Option Holder is familiar with the terms and conditions of the Plan, and hereby accepts this Option subject to all of the terms and conditions of the Plan.  The Option Holder agrees to execute, deliver, file and otherwise assist the Company in filing any report, undertaking or document with respect to the awarding of the Option and exercise of the Option, as may be required by the Regulatory Authorities.  The Option Holder further acknowledges that if the Plan has not been approved by the shareholders of the Company on the Grant Date, this Option is not exercisable until such approval has been obtained.

Signature of Optionee:

Date signed:

Signature

Print Name

Address

OPTION CERTIFICATE - SCHEDULE

The additional terms and conditions attached to the Option represented by this Option Certificate are as follows:

1.

vest as to:

(a)

 Shares on  [date];

(b)

 Shares on  [date];

(c)

 Shares on  [date]; and

(d)

 Shares on  [date].

2.

3.

4.

5.

SCHEDULE “B”

MAG SILVER CORP.
STOCK OPTION PLAN

NOTICE OF EXERCISE OF OPTION

TO:

The Administrator, Stock Option Plan

MAG Silver Corp.

[ Address]

(or such other address as the Company may advise)

The undersigned hereby irrevocably gives notice, pursuant to the Stock Option Plan  (2007) (the “Plan”) of MAG Silver Corp. (the “Company”), of the exercise of the Option to acquire and hereby subscribes for (cross out inapplicable item):

(a)

all of the Shares; or

(b)

 of the Shares;

which are the subject of the Option Certificate attached hereto (attach your original Option Certificate).

The undersigned tenders herewith a certified cheque or bank draft (circle one) payable to “[Full Name of Company]” in an amount equal to the aggregate Exercise Price of the aforesaid Shares and directs the Company to issue the certificate evidencing said Shares in the name of the undersigned to be mailed to the undersigned at the following address (provide full complete address):

___________________________________

___________________________________

___________________________________

___________________________________

The undersigned acknowledges the Option is not validly exercised unless this Notice is completed in strict compliance with this form and delivered to the required address with the required payment prior to 5:00 p.m. local time in Vancouver, B.C. on the Expiry Date of the Option.

DATED the

 day of

, 20

.

Signature of Option Holder

EX-4.20

EMPLOYMENT AGREEMENT

THIS AGREEMENT made as of the 25^th day of January, 2005

BETWEEN:

MAG SILVER CORPORATION., a corporation subsisting under the laws of British Columbia, with an office at Suite 328 – 550 Granville Street, Vancouver, British Columbia, V6C 2B5

(“MAG” or the “Corporation”)

OF THE FIRST PART

- and -

Dan MacInnis,  businessman, of 4325 Interlaken Court Reno, Nevada, USA  89509

(“MacInnis”)

OF THE SECOND PART

WHEREAS MAG wishes to employ MacInnis and MacInnis wishes to be employed by MAG in connection with the continuing operation of the business carried on by MAG (the “Business”) from Vancouver, British Columbia.

AND WHEREAS MAG and MacInnis wish to set out the terms of MacInnis’s employment.

NOW THEREFORE IN CONSIDERATION OF the payment of the sum of $1.00, the covenants and agreements continued in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

AGREEMENT TO EMPLOY

1.

MAG agrees to continue to employ MacInnis in connection with the Business on the terms and conditions set out herein (the “Employment”), and MacInnis agrees to accept employment on such terms.

TERM

2.

The term of this Agreement and the Employment shall be for an indefinite period, provided that:

(a)

MAG may terminate this Agreement and the Employment at any time as set out in paragraphs 9 and 10 hereof;

- 2 -

(b)

MacInnis may terminate this Agreement and the Employment at any time as set out in paragraph 11 hereof;

(c)

This Agreement and the Employment are automatically terminated when MacInnis dies or, at MAG’s option, at any time after he reaches the age of 65;

(d)

MacInnis may terminate this Agreement and the Employment if there is a change in control as set out in paragraph 12 hereof; and

(e)

MAG may, at its option, give notice that this Agreement and the Employment are terminated effective immediately by reason of MacInnis being unable to perform substantially all his duties for a continuous period in excess of 6 months or for periods collectively exceeding 6 months in any 12-month period.  Such termination may be without advance notice or compensation to MacInnis.

DUTIES AND RESPONSIBILITIES

3.

MacInnis shall be the Chief Executive Officer of MAG and shall, in such capacity, be in charge and control of and be responsible for the day-to-day operations of MAG and shall have the authority, and perform the duties, assigned to him from time to time by the Board of Directors of MAG.  MacInnis agrees that he shall relocate to the Greater Vancouver Regional District or within daily commuting distance to downtown and that the office of MAG shall be located in Vancouver until decided to be changed by the Board of MAG.

CONFLICT OF INTEREST/DUTY OF LOYALTY

4.

MacInnis agrees to devote at least 95% of his working time during the Employment to the Business and shall not engage or have an interest in any other enterprise, occupation or profession, directly or indirectly, or become a principal, agent, director, officer or employee of another company, firm or person, as applicable, which will interfere with MacInnis’s duties and responsibilities hereunder without the written approval, not to be unreasonably withheld, of the Board of Directors of MAG.  MacInnis agrees not to be directly or indirectly engaged in any business, whether as a principal, agent, director, officer, employee or otherwise, which competes with MAG or which employment, business or activity would constitute a conflict of interest on MacInnis’s part with MAG’s interests.  The Board of Directors is aware of and agrees that MacInnis may act as a consultant for Sydney Resources Corporat ion or Platinum Group Metals Ltd., mining and exploration companies provided this does not exceed the 5% working of his working time on behalf of the companies in the foregoing sentence.

CONFIDENTIALITY

5.

MacInnis agrees to keep the affairs of the Business, financial and otherwise, strictly confidential and shall not disclose the same to any person, company or firm, directly or indirectly, during or after his employment by MAG except as reasonably necessary to carry out his Employment duties or as otherwise authorized in writing by the Board of Directors of MAG.  MacInnis agrees not to use such information, directly or indirectly,

- 3 -

for his own interests, or any interests other than those of the Business, whether or not those interests conflict with the interests with the interests of the Business, during or after his employment by MAG provided however that he shall not be restricted by the foregoing unreasonably such that he is not able to continue to work in the mineral industry.

REMUNERATION

6.

(a)

MacInnis shall be remunerated as follows during the term of this Agreement:

(i)

minimum base salary of CDN $10,900 per month, payable monthly and to be reviewed annually by the Board of Directors of MAG;

(ii)

all benefits that may be made available to officers of MAG from time to time on terms determined by the Board of Directors of MAG; and

(iii)

 (3) three weeks’ vacation annually.

(b)

All payments required to be made under this agreement are subject to statutory deductions, as applicable, including for income tax, Canada Pension Plan and Employment Insurance coverage.

7.

MacInnis shall also be given the following additional incentives:

(a)

incentive stock options to acquire Common Shares of MAG in such amounts as approved by the Board of Directors of MAG from time to time. The recommended amount is suggested at 250,000 shares subject to the terms of the option plan of the Company and with a 4 month vesting provision whereby no options would be exercisable during the first 4 months from their grant.

REIMBURSEMENT OF EXPENSES

8.

All MacInnis’s reasonable expenses related to the Business will be reimbursed upon the submittal by MacInnis of an expense report with appropriate supporting documentation to MAG’s Chief Financial Officer. Approval of reasonable expenses shall occur within reasonable length of time not to exceed 15 days of receipt of a complete report with receipts.  Actual tax preparation and filing costs for MacInnis of up to C$ 750.00 shall be paid by the Company as part of the relocation allowance. The Company shall provide for up to $C 10,000 in actual reasonable relocation expenses including transportation, and accommodations during the initial start-up period of Employment provided that the provision of expenses will cease immediately if this agreement is terminated.

TERMINATION

9.

This Agreement and the Employment may be terminated by MAG summarily and without notice, or payment in lieu of notice, severance payments, benefits, damages or

- 4 -

any sums whatsoever, in the event that there is just cause for termination of MacInnis’s employment at common law.  Notwithstanding the generality of the foregoing, just cause shall be deemed to exist in the event MacInnis:

(a)

is convicted of an indictable offence;

(b)

has committed an act of fraud or material dishonesty in connection with his Employment or the Business;

(c)

is the subject of any proceeding by a securities regulatory agency; or

(d)

materially breaches his duties under this Agreement.

Subject to paragraph 2:

(e)

This Agreement and the Employment may be terminated on notice by MAG to MacInnis without cause upon payment to MacInnis at termination of 3 months’ base salary and provision of the benefits described under subparagraph 6(a)(iii) (except for insured or other benefits which cannot be extended to a person not actively employed by MAG) for the earlier of 3 months or until MacInnis obtains comparable benefits from another source.

(f)

The parties agree that any payment to MacInnis pursuant to paragraph 10(a) is not intended and will not be of the nature of a penalty and shall be considered by the parties as liquidated damages.

(g)

The parties further agree that, notwithstanding anything to the contrary contained in this Agreement, MacInnis shall not be required or called upon to mitigate in any manner whatsoever such liquidated damages.

(h)

This Agreement and the Employment may be terminated on notice by MacInnis to MAG by giving 60 days’ written notice.

CHANGE OF CONTROL

10.

(a)

If at any time during the term of this Agreement there is a change in control of MAG, as defined below, then MacInnis shall have 60 days from the date of such change of control to elect in writing whether or not he wishes to terminate this Agreement and the Employment, after which time he shall be deemed to have elected not to do so.  If MacInnis elects to terminate this Agreement and the Employment under this paragraph, then he shall give written notice of his election to the Corporation and this Agreement and the Employment shall terminate 60 days from the day of such notice.  MacInnis shall then be entitled to receive from MAG the compensation set out in paragraph 10(a) above.

(b)

For the purposes of this Agreement:

- 5 -

(i)

a “change of control of MAG” shall mean the occurrence of any of the following events:

(1)

less than 50% of the Board of Directors of MAG being composed of Continuing Directors; or

(2)

a person (within the meaning of the provisions of the Securities Act (British Columbia) (the “Securities Act”) (other than persons who are shareholders, directly or indirectly, or directors of MAG as of the date of this Agreement)), alone or with its affiliates, associates or persons (other than persons who are shareholders, directly or indirectly, or directors of MAG as of the date of this Agreement) with whom such person is acting jointly or in concert (all within the meaning of the Securities Act), becoming, following the date of this Agreement, the beneficial owner(s) (also within the meaning of the Securities Act) of securities representing, or convertible into securities representing, more than 30% of the total voting rights attaching to all then outstanding MAG securities having under all circumstances the right to vote on any resolution concerning the election of directors; and

(ii)

“Continuing Director” shall mean either:

(1)

an individual who is a member of the Board of Directors of MAG on the date of this Agreement; or

(2)

an individual who becomes a member of the Board of Directors of MAG subsequent to the date of this Agreement with the agreement of at least a majority of the Continuing Directors who are members of the Board of Directors of MAG at the date that the individual became a member of the Board of Directors of MAG.

SEVERABILITY

11.

The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision, and any invalid provision will be severable from this Agreement.

GOVERNING LAW

12.

This Agreement is governed by and is to be considered, interpreted and enforced in accordance with the laws of British Columbia.

HEIRS/SUCCESSORS BOUND

13.

This Agreement enures to the benefit of and is binding upon the parties and their respective heirs, administrators, executors, successors and assigns as appropriate.

- 6 -

ASSIGNMENT

14.

This Agreement is not assignable by either party without the consent in writing of the other party, which consent may be unreasonably withheld.

ENTIRE AGREEMENT

15.

As of its date execution, this Agreement supersedes all prior agreements, whether written or oral, express or implied, between the parties, and constitutes the entire agreement between the parties.  The parties agree that there are no other collateral agreements or understandings between them except as set out in this Agreement.

AMENDMENT

16.

This Agreement may be amended only in writing signed by the parties and witnessed.

HEADINGS

17.

All headings in this Agreement are for convenience only and shall not be used for the interpretation of this Agreement.

RECOURSE ON BREACH

18.

MacInnis acknowledge that damages would be an insufficient remedy for a breach of this Agreement and agrees that MAG may apply for and obtain any relief available to it in a court of law or equity, including injunctive relief, to restrain breach or threat of breach of this Agreement or to enforce the covenants contained therein and, in particular, the covenant contained in paragraph 24 in addition to rights MAG may have to damages arising from said breach or threat of breach.  

CONFIDENTIALITY OF AGREEMENT

19.

The parties agree that this Agreement is confidential and shall remain so.  The parties agree that this Agreement or the contents hereof shall not be divulged by any party without the consent in writing of the other party, with the exception of disclosure to personal advisors, disclosure that may be required by the laws of any jurisdiction in which the Business is conducted or may be conducted in future and disclosure pursuant to applicable securities laws and the rules and policies of any stock exchange on which MAG securities are traded.  Each party agrees to request of its personal advisors that they enter into similar agreements of confidentiality if requested to do so by the other party to this Agreement.

INDEPENDENT LEGAL ADVICE

20.

MacInnis agrees that he has had independent legal advice or the opportunity to receive same in connection with the execution of this Agreement and has read this Agreement in its entirety, understands its contents and is signing this Agreement freely and voluntarily, without duress or undue influence from any party.

- 7 -

NOTICE

21.

Any notice required or permitted to be made or given under this Agreement to either party shall be in writing and shall be sufficiently given if delivered personally, or if sent by prepaid registered mail to the intended recipient of such notice at:

(a)

in the case of MAG, to:

Suite 328 - 550 Granville Street
Vancouver, British Columbia
V6C 2B5

(b)

in the case of MacInnis, to:

4325 Interlaken Court

Reno Nevada, USA  89509

_______________

or at such other address as the party to whom such writing is to be given shall provide in writing to the party giving the said notice.  Any notice delivered to the party to whom it is addressed shall be deemed to have been given and received on the day it is so delivered or, if such day is not a business day, then on the next business day following any such day.  Any notice mailed shall be deemed to have been given and received on the fifth business day following the date of mailing.

CONFIDENTIALITY

22.

The parties hereby agree that all trade secrets, trade names, client information, client files and processing and marketing techniques, mineral properties, mineral exploration data or information or mining or exploration proposals, relating to the Business or disclosed to MacInnis in the course of his Employment (collectively, the “Confidential Information”) shall become, on execution of this Agreement, and shall be thereafter, as the case may be, the sole property of MAG whether arising before or after the execution of this Agreement.  MacInnis agrees not to:

(a)

divulge any of the Confidential Information to any person, partnership or corporation;

(b)

to use, directly or indirectly, alone or with others and Confidential Information other than for the Business; or

(c)

to assist in the disclosure or divulging of any such Confidential Information, directly or indirectly, except as authorized in writing by the Board of Directors of MAG.

- 8 -

The restrictions in this clause 22 shall not restrict MacInnis unreasonably such that he is not able to continue work in the mineral industry.

SURVIVAL

23.

Paragraphs 5, 20, 21 and 24 shall survive the termination of this Agreement and the Employment and shall continue in full force and effect according to their terms.

IN WITNESS WHEREOF the parties hereto have executed these presents under their respective seals and hands of their proper offices authorized in that behalf, as applicable.

The Corporate Seal of MAG SILVER CORPORATION was hereunto affixed in the presence of: /s/ “Frank Hallam” Authorized Signatory /s/ “R. Michael Jones” Authorized Signatory	) ) ) ) ) ) ) ) ) )	c/s
SIGNED, SEALED AND DELIVERED in the presence of: /s/ “Carrie Cojocari” Witness	) ) ) ) )	/s/ “Dan MacInnis” DAN MACINNIS

EX-4.21

328 - 550 Burrard Street

Vancouver BC, V6C 2B5

PHONE: (604) 630-1399

FAX: (604) 484-4710

www.magsilver.com

August 1, 2005

Mr. Gord Neal

3505 West 40^th Ave

Vancouver, BC

V6N 3B7

Re: Revised Offer of Position

Dear Gordon,

It is my pleasure to now offer you a full time consulting position as the Vice President Corporate Development with MAG Silver Corporation (“MAG”) for 90% of your working time. We understand that you have other corporate finance opportunities that will occupy 10% of your time on an ongoing basis.

Your revised consulting engagement will commence August 1, 2005.  A description of your role and duties is included in this letter and forms a part of this offer.  As we discussed, we expect that within proper corporate governance there will be opportunities to add value to Platinum Group Metals Ltd. and Sydney Resource Corporation, with a grant of options, in consideration of your general assistance to those firms.

The following are terms and conditions of your engagement with the Company:

1.

The Company will pay you a monthly fee of $ 9,000 payable in a single monthly payment at the beginning of each month.  Fees for partial months served will be paid pro-rata based on days worked over regular working days in that month.  The Company will not withhold taxes or related deductions or remit such amounts to Canada Revenue Agency on a monthly basis.  As a consultant you will be responsible personally for all required income tax, employment insurance, Canada pension plan payments or any other payroll remittance that may become due and payable to Canada Revenue Agency.  You will ensure that all such payments are made and you will indemnify MAG for any claim that may later arise from Canada Revenue Agency against MAG for either employee or employer related withholdings.  Your fees will be subject to review from time to time by the Board of Directors of the Company, but may no t be reduced without your written consent.

2.

The Company will grant you annual vacation time of three weeks (15 working days) per year with pay, to be taken by you at a mutually agreeable time each year.  For purposes of this calculation, a year commences on January 1^st each year.  

3.

You have already been granted 100,000 incentive stock options in accordance with your original engagement with the Company.  Subject to the approval of the Board of Directors of the Company, you will be granted an additional incentive stock option allowing you to purchase a further 90,000 shares of the Company at a price of $0.75 per share based on your acceptance of this offer.  These options will be subject to the rules and conditions of the British Columbia Securities Commission and the TSX Venture Exchange.

4.

Your engagement with the Company may be terminated immediately, at any time, for cause.  For purposes of this section, cause will include, but not be limited to, any criminal act or breach of any British Columbia Securities Commission or TSX Venture Exchange regulation that has governance over your activities.  Compliance with all laws and regulations in a condition of your completion of your duties.

5.

Your engagement with the Company may be terminated by yourself or the Company at any time without cause by way of a written 30-day notice.

6.

Subject to the approval of the Chief Financial Officer, you will be reimbursed for all appropriate corporate expenses in a regular and timely manner upon your submission of receipts, other supporting documents and summary reports.  You may incur expenses related to your duties on behalf of the Company at your discretion, but within monthly and annual budgetary guidelines established by the Board of Directors and the President of the Company.  Any single expenditure of $1,000 or more will require advance approval from the president or Chief Financial Officer.  Fees and charges for items such as telephones, cell phones, data base rental, communications and etc. may be charged to the Company only as approved by the President or Chief Financial Officer.

7.

This Revised Offer of Position will replace and supersede all prior agreements between you and the Company, excepting your existing incentive stock option agreement as described above.

8.

In addition to the above remuneration, the Company will also honour the following bonus program, at all times in compliance with regulatory guidelines, as follows:

a.

A bonus of $10,000 will be paid for every new recognized industry analyst who covers or writes about the Company; and

b.

a bonus of $10,000 will be paid for each 3 new and “non-financing related” institution brought to be aware of the Company by Gord Neal who then subsequently, as a result of Gord Neal’s introduction, then purchases $250,000 or more worth of the Company’s securities on the open market; and

c.

a bonus of $50,000 will be paid for coordinating and closing any MAG financing for an amount in excess of $5.0 million, and this bonus will be split with Dan MacInnis as to 40% or $20,000 and Neal & Co. as to 60% or $30,000.

The Board of Directors has set forth a strategic plan for the Company, which the you and the CEO will be expected to implement as a part of your formal duties on behalf of the Company:

·

To grow MAG Silver to a company with sizable silver resources and potentially reserves as quickly as possible; and

·

look at producing and near producing assets for acquisition; and

·

take advantage of the shareholder base that MAG has with interest in silver; and

·

to grow the shareholder base to MAG especially in the institutional sphere

·

take advantage of the properties that MAG has secured and maximize their value either by direct exploration investment or in strategic alliances with other companies; and

·

build on the relationship that is emerging with Penolés into projects with resources or production.

Your specific duties as Vice President Corporate Development will include:

·

to expand the shareholder base and coverage of MAG in the analysts and financial community; and

·

to review the Company position and direction and develop MAG on it is strengths; and

·

to report to the Board on shareholder sentiment and the outside view of the Company; and

·

to assist in the development and presentation materials for all of the Company’s business; and

·

to look for key contacts, alliances, comparables, peer groups and other industry information to assist the Company in growth; and

·

to work with the Vancouver office support systems to assist the Company in its operations; and

·

to review the contracts and budgets of the Company for continuity with its message and corporate finance planning; and

·

to interrelate with the investment banking community on the Company’s behalf.

·

the requirement to purchase and wear an approved Company tie, or face disciplinary action.

Please deliver to me personally your signed original copy in confidence.  I look forward to working together.

Yours truly,

/s/ “Frank Hallam”

____________________

Frank R. Hallam, CFO

MAG Silver Corporation

Agreed and Accepted

/s/ “Gordon Neal”

_______________________

Gord Neal

Dated : October 11, 2005

EX-4.22

SERVICE AGREEMENT

THIS AGREEMENT is dated for reference the 14^th September, 2005

BETWEEN:

MAG SILVER CORPORATION , having an office at Bentall Tower 5, Suite 328, 550 Burrard Street, Vancouver, BC, V6C 2B5

(the “Company”)

AND:

CONTACT FINANCIAL CORPORATION, having an office at Suite 410–744 West Hastings St., Vancouver, BC, V6M  1A5

(the “Service Provider”)

WHEREAS the Company and the Service Provider wish to enter into this Agreement regarding the provision of the Service Provider’s services to the Company,

THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:

1.

SERVICES

1.1

The Company hereby retains the Service Provider upon the terms and conditions of this Agreement, and the Service Provider hereby accepts such retainer on such terms and conditions.

1.2

The Service Provider shall provide the Company with expertise and assistance in the areas generally described in Schedule “A” to this Agreement.  If requested by the Company, the Service Provider shall be a member of the Company’s Strategic Advisory Board at the pleasure of the Company.  

1.3

The Service Provider shall take direction from and report to the Company’s chairman or to such other person as the Company’s president may direct.  The Service Provider shall devote sufficient time and attention to the Company’s business as may be required to properly perform its duties hereunder.

1.4

The Service Provider covenants that it shall not do, or fail to do, anything which could be reasonably expected to damage the reputation of the Company, its affiliates or any of its directors, officers, employees, contractors or consultants.

1.5

The Service Provider will ensure that the substantive content of any and all public communications by the Service Provider in respect of the Company will not be released to the public until it has been reviewed and consented to by a senior officer of the Company, which consent must be expressed in writing.

— 2 —

2.

TERM

2.1

The term of this Agreement shall be as stated in Schedule “A”.

3.

REMUNERATION AND EXPENSES

3.1

The Service Provider’s remuneration will be as specified in Schedule “A”.

3.2

Subject to the limitations expressed below with respect to prior authorization, the Company shall reimburse the Service Provider for all reasonable expenses incurred by it in furtherance of the Company's business.  The Service Provider shall, to the greatest extent possible, submit statements and receipts for all expenses claimed.  The Service Provider acknowledges and agrees that the Company’s obligation to reimburse those expenses is subject to the following limitations:

(a)

the Company will only reimburse the Service Provider for those expenses that the Company considers reasonable or to which the Company has granted prior written authorization;

(b)

the Company will not be responsible for, and the Service Provider will be responsible for and pay expenses associated with the provision of office space and general office support services (e.g. staff, utilities, office equipment) that may be required by the Service Provider in connection with rendering the services to the Company; and

(c)

the Company will not be responsible for, and the Service Provider  will be responsible for  and will pay all costs of conducting the Service Provider’s business, including but not limited to, the expense and responsibility for any applicable insurance or municipal, provincial or federal licenses, permits, taxes or assessments of any kind, and payment of all business and employment taxes including, but not limited to, income taxes, Canada Pension Plan and Employment Insurance Act contributions, and worker’s compensation premiums.

4.

CONFIDENTIAL INFORMATION

4.1

The Service Provider shall keep all Confidential Information in confidence and not use or allow others to use or disclose any Confidential Information except for Company’s benefit and, if the Service Provider is a corporation or other entity, the Service Provider shall use its best efforts to ensure that all of its employees,   agents , directors and officers who become privy to the Confidential Information are bound by the terms of this section.  In this Agreement, “Confidential Information” means all data, processes, formulations, analysis, methodologies and other information which is designated by Company as confidential or which would be reasonably understood  to be confidential information based on the substance of the information and the circumstances under which it is conveyed, whether orally or in writing, except for any part of the Confidential Information which:

(a)

is or becomes publicly available other than as a result of a disclosure by Company ;

(b)

is or becomes available to the Service Provider from a source (other than Company or its representatives) which, to the best of the Service Provider’s knowledge after due inquiry, is not prohibited from disclosing such information to the Service Provider by a legal, contractual or fiduciary obligation; or

— 3 —

(c)

the Service Provider demonstrates was properly in the Service Provider’s possession or control at the time of disclosure of that Confidential Information to it by the Company or its representatives.

4.2

The Service Provider agrees that it shall not, before or after termination or expiry of this Agreement, remove any reports , information, property, or any other material belonging to the Company, or any reproductions thereof, without the prior written permission of the Company’s chairman ..

4.3

The Service Provider acknowledges and agrees that, without prejudice to any and all rights of either party to this Agreement, an injunction may be the only effective remedy to protect a breach of the provisions of this section 4.  This section 4 will survive the termination of this Agreement.

5.

TERMINATION OF AGREEMENT

5.1

This Agreement may be terminated by the Company, at the end of the initial 3 month Guaranteed Period, with 30 day’s advance written notice to the Service Provider with full payment of the final 30 days being issued immediately to the Service Provider upon notice of termination.

5.2

The Service Provider may terminate this Agreement upon 30 days’ notice to the Company. Upon such an event, the Company will issue full payment of the final 30 days within one week of notice of termination.

5.3

The Service Provider acknowledges and agrees that the Company may, at its option, terminate this Agreement immediately upon written notice to the Service Provider where:

(a)

the Service Provider has committed a material breach of the provisions of this Agreement, if such breach has not been cured to the Company’s satisfaction within 5 days of the Service Provider being notified of such breach by the Company (For greater certainty and without limiting the foregoing, a breach by the Service Provider of any of Section 1.4, 1.5 or 7.1 will be deemed to be a material breach of this Agreement);

(b)

the Service Provider or any of its directors or officers has been convicted of an indictable criminal offence; or

(c)

the bankruptcy , insolvency of the Service Provider or if the Service Provider has a receiving order made against it, makes an assignment for the benefit of creditors or takes the benefit of any statute for the time being in force relating to bankrupt or insolvent debtors for the orderly payment of debts.

6.

RELATIONSHIP

6.1

The Service Provider is an independent contractor of the Company, and no party to this Agreement will make any representations or statements indicating or suggesting that any joint venture, partnership, or other such relationship exists between the Company and the Service Provider.  The Company and the Service Provider will have no authority to assume or create obligations binding upon the other and will not take any action which may have the effect of creating the appearance of having such authority.  

7.

COMPLIANCE WITH LAWS AND REGULATORY POLICIES

7.1

The Service Provider shall comply with all applicable statutes, rules and regulations and the lawful requirements and directions of any governmental authority having jurisdiction with respect to the provision of

— 4 —

his services.

8.

MISCELLANEOUS

8.1

The provisions of the schedules attached to this Agreement form an integral part of this Agreement.

8.2

Any notice or other communication given under this Agreement shall be in writing and shall be deemed to have been given if personally delivered to a party hereto at its address appearing on the first page of this Agreement (or to such other address as one party provides to the other in a notice given according to this subsection).  All notices and other communications shall be deemed to have been given and received on the first business day following its delivery as aforesaid.

8.3

The provisions of sections 4 of this Agreement shall survive the expiry or earlier termination of this Agreement.

8.4

Each provision of this Agreement is severable.  If any provision of this Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction, the illegality, invalidity or unenforceability of that provision will not affect:

(a)

the legality, validity or enforceability of the remaining provisions of this Agreement, or

(b)

the legality, validity or enforceability of that provision in any other jurisdiction

except that if:

(c)

on the reasonable construction of this Agreement as a whole, the applicability of the other provision presumes the validity and enforceability of the particular provision, the other provision will be deemed also to be invalid or unenforceable; and

(d)

as a result of the determination by a court of competent jurisdiction that any part of this Agreement is unenforceable or invalid and, as a result of this Section 8.4, the basic intentions of the parties in this Agreement are entirely frustrated, the parties hereto will use all reasonable efforts to amend, supplement or otherwise vary this Agreement to confirm their mutual intention in entering into this Agreement.

8.5

This Agreement may not be assigned by either party hereto without the prior written consent of the other.  This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.

8.6

The laws of British Columbia and the laws of Canada applicable therein shall exclusively govern this Agreement.

8.7

This Agreement represents the entire agreement between the parties hereto and their respective principals and supersedes all prior agreements and understandings, whether written or oral, between the parties concerning the Service Provider's provision of services to the Company.  This Agreement may not be amended or otherwise modified except by an instrument in writing signed by both parties.

8.8

This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which shall constitute one agreement.  This Agreement may be delivered by fax.

— 5 —

IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written notwithstanding its actual date of execution.

MAG SILVER CORP.

/s/ “Gordon Neal”

Per:

______________________________________

Gord Neal, Vice President

CONTACT FINANCIAL CORPORATION

/s/ “Kirk Gamley”

Per:

______________________________________

Kirk Gamley, President

Schedule A

Details of Retainer

The Service Provider shall provide the Company with its expertise and assistance, on a part time basis, in the following areas:

Investor Relations (including company information dissemination to interested parties, inquiry responses, assistance with company events, assistance with AGMs, advertising, etc.)  In this regard, the Service Provider acknowledges and agrees that it is of principal importance to the Company that the Service Provider initiate contact with and introduce the Company to relevant industry analysts, institutional and retail investors throughout North America and Europe.

General Shareholder Relations (including responding to shareholder inquiries, proper disclosure, news release & update dissemination, assistance with other disclosure issues, etc.)

Investor Database Development (creation and maintenance of an investor & shareholder database to be used for full, proper and timely disclosure)

Corporate Consultation (including assistance with internal company matters, news release & reporting issues, possible finance issues, etc.)

The term of this Agreement will commence on September 1st, 2005 (the “Start Date”) and terminate on December 1st, 2005. This period shall be known as the “Guaranteed Period”. The Company will pay a monthly fee in advance of services provided of CAD 6,000 to the Service Provider (plus 7 % GST) commencing September 1st, 2005. At the end of the Guaranteed Period, the Service Provider and the Company mutually consent to extend the Agreement on a month to month basis, subject to the terms and conditions of the Agreement.

EX-4.23

FIELD SERVICES AGREEMENT

THIS FIELD SERVICES AGREEMENT ("Agreement") is made this 1st day of March, 2007, between Compañia Minera Cascabel S.A. de C.V. and its U.S. affiliate, IMDEX INC. (hereinafter collectively referred to as "CASCABEL") and; MAG Silver Corp., a British Columbia corporation and its Mexican affiliate, Minera Lagartos S. A. de C.V. (hereinafter collectively referred to as "MAG").

WITNESSETH

WHEREAS, MAG has submitted to CASCABEL a proposal for work ("Proposal"), attached as Schedule A, and from time to time may submit additional proposals for work which it wishes CASCABEL to perform; and

WHEREAS, CASCABEL represents to MAG that it has the facilities, equipment personnel, experience, and capability of performing the work described in the Proposal in the manner prescribed by this Agreement.

THEREFORE, in consideration of the mutual promises set forth in this Agreement, CASCABEL, and MAG agree as follows:

1)

Work to be performed by CASCABEL:  CASCABEL agrees to perform the tasks and provide the professional services (collectively, the "Work") set forth in Schedule A, which may be expanded or extended from time to time and to work with MAG to create future proposals of work for additional programs.  CASCABEL will give consultation and advice to MAG during the performance of the Work and agrees to furnish all labor, supervision, materials, tools, equipment, and services needed to complete the Work.  CASCABEL may sub-contract certain equipment and additional personnel deemed necessary, only with advance written approval from the MAG.

2)

Right of First Refusal granted to MAG by CASCABEL for Silver Properties: As part of this agreement, CASCABEL, Dr. Peter Megaw, Dr. Tony Kuehn and Ing. Porfirio Padilla Lara agree to grant MAG the right of first refusal to examine all silver properties currently in CASCABEL’s control, or brought to CASCABEL or as may be known or offered to CASCABEL or its subsidiaries by others.  Where deemed appropriate by MAG and solely at MAG’S discretion, MAG may lease, option, purchase, joint venture or otherwise acquire an interest in such silver properties as may be known or offered by CASCABEL, or its subsidiaries, to MAG.  CASCABEL will inform MAG in writing of the availability of each project and MAG will have up to 60 days to make a decision to invest in, or lease the named property.  In the event that MAG decides not to invest in or lease the named property, or fails to inform CASCABEL of i ts decision regarding the property within 60 days of being informed by CASCABEL of its availability, CASCABEL shall be free to dispose of or make other arrangements on the property with others.

3)

Finders Fees:  In recognition of the work carried out by CASCABEL to introduce the properties envisaged in Para: 2 above, MAG agrees to pay to CASCABEL such Finders Fees on each new Property of Merit not already controlled by CASCABEL, introduced by CASCABEL, as may be reasonably negotiated between CASCABEL and MAG and as shall be approved by the TSX Venture Exchange, (The “Exchange”.)  Properties already owned or otherwise controlled by CASCABEL shall be negotiated in good faith between MAG and CASCABEL independent of any Finder’s Fee.

4)

CASCABEL’S Personnel:  CASCABEL shall at all times remain alert to MAG's interest and shall communicate to MAG's representative ideas, suggestions, literature, references and other information which in CASCABEL'S professional opinion may contribute to the success of MAG's mineral exploration and development efforts for services performed under this Agreement.

Page 1 of 8

5)

MAG'S Representative:  MAG hereby designates Daniel MacInnis or another person as may be appointed by the Board of MAG, in writing, as its representative(s) to consent, approve, and otherwise act on behalf of MAG in respect of material matters under this Agreement.

6)

Term of Agreement: The term of this Agreement shall be for 12 months from the effective date specified above unless sooner terminated by MAG.  MAG may terminate this Agreement at any time following one month after the effective date upon notice, and if MAG terminates before the completion of all Work, it shall make payment only for CASCABEL'S services rendered and costs incurred through the date of notice of termination.  This shall include costs due from CASCABEL to subcontractors contracted for the Work and approved by MAG.

7)

Time for Performance:  CASCABEL shall promptly commence to Work and conduct its Work with all due speed.  CASCABEL shall complete the Work under this Agreement by the termination date specified in Schedule A, unless time for completion is extended.  If CASCABEL is delayed in the execution of its Work by any cause for which MAG is responsible, or any cause which is beyond reasonable control of CASCABEL;  CASCABEL shall, upon written application to MAG at the time of such delay, be granted such reasonable extension of time as MAG shall deem equitable and just.  

8)

Compensation, Invoicing and Payment:  For services rendered, MAG shall pay CASCABEL as per the appended Estimate of Rates and Charges (Schedule B).  Such payments shall be for both office work and fieldwork and shall be based on rates in U.S. dollars.  Payments to IMDEX shall be made in US dollars directly to IMDEX.  Payments to Minera CASCABEL in Mexico may be made in Mexican Pesos based on exchange rate on day CASCABEL submits invoice.  This exchange rate shall be placed on all invoices.  

a)

MAG shall pay reasonable expenses incurred by CASCABEL while CASCABEL personnel are away from home base, performing services for MAG.  Such expenses shall include those incurred for food, travel and lodging.  MAG shall pay CASCABEL  $25.00 per day plus $.45/kilometer traveled in CASCABEL'S two-wheel drive vehicle, and $.50/kilometer traveled in CASCABEL'S four-wheel drive vehicle and monthly charges shall not exceed $1,500 per month per vehicle without prior approval.  Said mileage, or minimum day rates, shall constitute full payment to CASCABEL and CASCABEL shall pay all costs incurred to provide said vehicle including fuel, oil, and maintenance.  Some project areas may only be accessible by extremely rough roads, in which case CASCABEL may petition MAG for an excess tire wear charge of an amount to be determined between the parties. MAG shall also pay for costs incurred by CASCABEL in purc hasing office supplies and publications required in the performance of CASCABEL'S service, but such items shall be owned by MAG.

b)

MAG shall pay CASCABEL'S costs incurred in the employment of persons, equipment rentals, and service contractors required in the performance of Work for MAG.  However, CASCABEL shall not employ such persons, rent such equipment, or contract such services without prior consent of MAG.

c)

MAG has provided CASCABEL with a minimum advance payment of US$15,000 (The "Advance") before Work commenced, to be used for salaries and expenses incurred by CASCABEL in performance of Work for MAG.  CASCABEL shall submit invoices and statements to MAG setting forth the number of days worked for MAG and the expenses incurred on MAG’s behalf, documented by Project, with appropriate receipts, incurred in connection with performing services for MAG during a given billing period.

d)

The billing period under this Agreement shall be either: monthly, or when accumulated invoicable expenses equal 75% of the advance.   CASCABEL shall add an overhead fee as appropriate, to the amount of each invoice billed, in accordance with the schedule in Schedule B. MAG shall have right to demand reasonable verification of all items shown on CASCABEL'S invoices, including copies of original invoices and supporting

Page 2 of 8

documentation, couriered to MAG’s offices at the address below on a monthly basis.  Subject to verifications, MAG shall pay invoices within 15 days of receiving them at Bentall Tower 5, Suite 328 - 550 Burrard Street, Vancouver, BC – V6C 2B5. Canada.  At termination of Agreement, final invoicing shall clear the Advance with any balance due being returned to MAG.  If a balance is owed to CASCABEL at the end of the Agreement, this shall be payable within 15 days of submission of final reports to MAG.   

e)

MAG is encouraged to arrange direct billing with all major service contractors including, but not limited to, drilling contractors, road and/or building contractors, analytical laboratories, and metallurgical laboratories.  Should they not, MAG shall, where requested in writing by CASCABEL, provide CASCABEL with advance payments of 100% of the amounts required for any approved service contractors required for performance of Work, and exceeding 15% of the Advance. These amounts shall be kept in a separate bank account and shall be used only for the intended purposes.  

f)

CASCABEL shall submit separate invoices for professional services and expenses incurred relative to specific property blocks as requested and defined by MAG.  MAG will inform CASCABEL of any changes in the property divisions in sufficient time as to prevent delay in payment of invoices by MAG.

9)

Co-operation and Coordination:  CASCABEL shall cooperate with MAG's personnel in performing the Work required by this Agreement and shall keep MAG advised of the current status of all Work and of estimated completion times.  CASCABEL shall cooperate and coordinate it’s Work with MAG's other contractors and incorporate these contractor's contributions into its Work as necessary.  Any disputes between contractors shall be decided by MAG.

10)

Indemnification:  To the fullest extent permitted by Mexican Law, CASCABEL shall save harmless and indemnify MAG, its officers, employees, agents, and affiliated companies from any liability for injury or death, and any proceedings and costs in connection therewith, including reasonable attorney fees, arising out of, or resulting from the performance of the Work, including any acts and/or omissions, including passive or active negligence of CASCABEL or any subcontractors or anyone directly or indirectly employed by either of them.

11)

Independent Contractor:  CASCABEL shall employ and direct all persons performing any Work under this Agreement.  Those persons, including all employees, servants, agents, and subcontractors engaged by CASCABEL, shall be at all times subject to the control and discretion of CASCABEL and shall not be the employees of, or subject to the discretion or control of MAG in any way.  The parties intend that CASCABEL shall be at all times an independent contractor and nothing contained in this Agreement shall be construed as making CASCABEL or any of its employees or subcontractors, agents of MAG.  CASCABEL shall determine the manner and method in which Work shall be performed and shall conduct the Work in the name of CASCABEL.

12)

Insurance:  CASCABEL shall be wholly responsible for deciding on the level of coverage and type and method of insuring its own activities and personnel engaged on MAG’s behalf.  For the avoidance of doubt, MAG shall in no way be responsible for any of the activities of CASCABEL and its personnel, sub contractors and others working under the direction of CASCABEL on MAG’s projects.  Where CASCABEL carries insurance or receives indemnities from others for work on MAG’s behalf, CASCABEL shall ensure that MAG is clearly identified and indemnified in such insurance policies and indemnities where offered.

13)

Confidentiality:   CASCABEL shall hold confidential and not disclose to others, except as authorized by MAG, any data or information discovered or developed on MAG's assignment, the contents of CASCABEL'S reports and recommendations to MAG, and any information relating to the policies, organization, operation, or other activities of a technical or general nature of MAG which is disclosed by MAG, unless data or information become available to the

Page 3 of 8

general public from a source other than CASCABEL.  This confidentially covenant does not apply to any information now in public domain, CASCABEL’S possession, or any new information, which may hereafter come into CASCABEL'S possession except as herein above provided.  This confidentiality covenant is to remain in effect for a period of 1 year after the termination of this Agreement.

14)

At the termination of this Agreement: CASCABEL shall return to MAG any of its proprietary data or information which is in writing or other tangible form that are in CASCABEL'S possession.

15)

Non-Competition:  CASCABEL shall not claim, option, purchase, or otherwise acquire any mineral concessions within, or within a distance of 2 km of the external boundary of, any of MAG’s holdings in the project area(s), unless MAG gives express written permission for CASCABEL to do so.  (See also the Right of First Refusal in Para: 2 above.)

16)

No-Hire Clause:  MAG may not directly hire any CASCABEL employee involved in any manner in Work for a period of 1 year after expiration date of this Agreement, unless MAG pays CASCABEL 20% of said employee's annual salary.  MAG shall make a signed copy of employment contract between MAG and said CASCABEL employee available before said employee’s start-up date with MAG, and MAG shall pay CASCABEL 20% of said employee’s full annual salary at that same time.  Said annual salary shall be determined as: annual salary; 12 times the employee's monthly salary; 50 times the employee's weekly salary; or 300 times the employee's daily salary.  Excepted from this requirement shall be any individual hired through CASCABEL at MAG’s request.

17)

Notices:  All notices and other communications to be given under this Agreement, including invoices, reports, and payments, shall be made in writing and shall be deemed to have been made if mailed or hand delivered to:

CASCABEL

CIA. MINERA CASCABEL S.A. DE C.V.

Avenida 13 #100

Colonia Bugambilias

Hermosillo, Sonora CP 83140

Attention:  Ing. Porfirio Padilla Lara

IMDEX

International Mineral Development and Exploration Inc;

5800 N. Cmo Escalante

Tucson, AZ.  USA  85718  

Attention: Dr. Peter Megaw

MAG

MAG SILVER CORP.

Bentall Tower 5

Suite 328 - 550 Burrard Street

Vancouver B.C.

Canada  V6C 2B5

Attention:  Daniel MacInnis

18)

Compliance with Applicable Laws and Regulations and Agreements:  CASCABEL represents that it and all of its employees and subcontractors who will perform work required by Mexican Law to be performed by licensed personnel shall be so licensed.  In carrying out its obligations under this Agreement, CASCABEL shall comply with all applicable Mexican Federal, State, and Local, laws, rules and regulations, and with the provisions of all agreements between MAG and the owner of the surface estate of all MAG's mining or exploration properties.

Page 4 of 8

19)

Taxes: A 15% Ad Valorem Tax (IVA) is mandated by Mexican law and shall be added to the total of each billing.  MAG may recover some of this at year’s end by filing the proper documentation with the Mexican Treasury (Hacienda).  CASCABEL shall pay all other occupational, business, excise or other taxes of any kind levied or imposed on CASCABEL.  CASCABEL shall have full and exclusive responsibility for the payment of any and all taxes and contributions levied or assessed against CASCABEL for unemployment insurance, employee liquidation (severance), old age retirement benefits, pensions, and annuities now imposed or imposed hereafter by any Mexican Federal or State government which are measured by wages, salaries or other remuneration paid to persons employed by CASCABEL in connection with the Work.

20)

Late Payment Fee:  A fee of 1.5% per month shall be added for invoices unpaid over 30 days.  This fee shall be assessed on a monthly basis.

21)

Assignments and Subcontracts:  This Agreement shall inure to and be binding on MAG and CASCABEL and their successors and assigns, and partners.  No assignment or delegation by CASCABEL shall relieve it of its obligations under this Agreement and CASCABEL may not assign or subcontract this Agreement without written consent from MAG.  MAG may assign its rights under this Agreement at any time to any affiliate.

22)

Governing Law:  This Agreement shall be governed by and construed under the Laws of the United States of Mexico in courts located in the State of Sonora.  If necessary to implement this clause and clause 8 of this Agreement, both parties will agree to do such things and carry out such acts as may be necessary to register a Spanish version of this agreement in Mexico.

23)

Business Relationship:  It is not the purpose or intent of this Agreement to create, and this Agreement shall never be construed as creating a joint venture, mining partnership, commercial partnership, or other mutual business relation.  CASCABEL understands and agrees that the consulting fees and Finders Fees paid shall be the total and complete compensation paid for all Work hereunder and that CASCABEL shall not be entitled to any other considerations such as commissions, royalties, or the like.

24)

Civil Unrest and Acts of God:  MAG understands that if, in the judgment of IMDEX/CASCABEL principals, riot, revolution or other political or social unrest renders entry into MAG’s work area hazardous, IMDEX/CASCABEL may choose to delay work until such time as entry may again be safely made. Furthermore, flood, earthquake, hurricane, tornado, or other Act of God may cause civil authorities to restrict access to a work area and IMDEX/CASCABEL may be forced to delay completion of work for such reasons.  In any such case, MAG shall be notified immediately so that alternatives can be discussed and/or the postponements provided by Mexican Law may be invoked in a timely manner.

25)

Kidnapping, Assault, or Robbery Insurance: In addition to the other charges and costs to be paid by MAG under this Agreement and its Schedules, MAG shall also pay a portion of CASCABEL’s insurance premium for kidnap, assault or robbery insurance, up to US$5,000 per year, which portion shall be equivalent to the portion of time spent on the Work under this agreement, when compared with the total time spent by CASCABEL on all of its clients in totality.  MAG shall have the right to inspect the appropriate time sheets to verify this calculation and also to examine and ensure that it is duly indemnified by any such Insurance put in place by CASCABEL for this purpose.

26)

Complete Agreement:  This Agreement and the Schedules annexed hereto constitute the entire understanding and agreement between the parties and supersedes all prior agreements, negotiations, and representations, whether written or oral, made prior to the execution of this Agreement.  This Agreement may be amended only by written instrument identified as an Amendment and signed by each party.

Page 5 of 8

IN WITNESS WHEREOF, the parties have executed this Agreement effective the date first written above.

CIA. MINERA CASCABEL S.A. DE C.V.

By: /s/ “Ing. Porfirio Padilla Lara”

     Ing. Porfirio Padilla Lara, Director General

INTERNATIONAL MINERAL DEVELOPMENT & EXPLORATION INC.

By: /s/  “Peter K.M. Megaw”

     Dr. Peter K.M. Megaw, President

MAG SILVER CORP.

By: /s/ “Daniel MacInnis”

   Mr. Daniel MacInnis, President

Page 6 of 8

Schedule A

“SCHEDULE A”

TO FIELD SERVICE AGREEMENT FOR MANAGEMENT OF EXPLORATIONS PROGRAMS IN MEXICO BY MINERA CASCABEL, S.A. de C.V.

Task and Professional Services to be provided by CASCABEL to MAG

1.

Supervise and support all Exploration Activities on MAG’S current and future projects in Mexico, as requested by MAG.  
Work to include, but not exclusively:

o

Provision of technical supervision for the drill program and ongoing exploration program.

o

Provision of a support crew and geologists on site, including related transportation and lodging, as directed by MAG, during all phases of any drill program aimed at targets identified by CASCABEL/IMDEX.

o

Provision of supervision and all coordination for the drill contractor and any other contractors and suppliers deemed by CASCABEL to be necessary to complete the project and duly approved by MAG in accordance with this agreement.

o

Direct and close control of all core samples, assays, geological information, etc to ensure that geological work can be correctly reported to the market in accordance with the policies of the TSX Venture Exchange.

o

Provide a QP to certify that the work has been carried out in accordance with the above policies and to confirm the veracity of any Press Releases regarding the same, subject to prior review and Approval by CASCABEL  or IMDEX’s representatives.

o

Coordinate surface access, legal agreements and other issues with the surface landowners and mineral rights holders as necessary.

o

Any other work that may be necessary to ensure the reasonable completion of the exploration program.

o

Any other duties that may be mutually agreed between CASCABEL and MAG in writing.

2.

Identify, prospect and assist MAG in negotiation and Lease, Purchase or Joint Venture of other mineral properties in Mexico, concentrating on Gold and associated base metals.  Such work to include:

o

Examination of potential projects for validity and due diligence of owners claims for Project.

o

Examination and confirmation of land and mineral holdings

o

Generation of potential exploration targets, including the preparation of exploration budgets, time tables etc.

o

Assistance in the negotiation of suitable Lease, Purchase or Joint Venture agreements to allow MAG to explore the properties and develop them assuming exploration success.  (The final decision to acquire the properties is totally at the discretion of MAG, as contemplated in this agreement.)

o

Any other work that may be necessary to ensure the reasonable completion of the exploration program.

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Schedule B

“SCHEDULE B”

MINERA CASCABEL, S.A. DE C.V.

2007 SCHEDULE OF CHARGES

PROFESSIONAL SERVICES     DAILY  FEES

Principal: (Peter, Tony or Porfirio) $650.00*

Senior US Geologist-Project Coordinator (Keating…PhD) $600.00*

Senior US Geologist-Project Coordinator (Lyons, McGlasson) $550.00*

Senior Project Manager (Gallardo, Arredondo, Ramirez, Gamiño) 

$375.00

Project Manager (Castillo) 

$325.00

Senior Geologist 

$300.00

Senior Geologist  

$275.00

Project Geologist (bilingual) 

$250.00

Project Geologist  

$230.00

Geologist (bilingual) 

$225.00

Geologist  

$200.00

Jr. Geologist/Tech. Assistant (bilingual) 

$175.00

Jr. Geologist/Tech. Assistant  

$150.00

Administrative Support 

$250.00

Environmental Permitting & Support Coordinator  

$200.00

Accountant 

$230.00

Surveyor/Landman 

$250.00

CAD/GIS Draftsman/Computer Geologist, I.T. 

$240.00

Draftsman 

$130.00   

Project Logistics Coordinator  

$175.00

Sampling crew supervisor 

$100.00

Helper/Driver   

$80.00

Secretary (bilingual) 

$200.00

Secretary  

$125.00

Office Helper 

$ 60.00

EXPENSES

Direct Field related Costs (i.e. lodging, meals etc.)  

AT COST plus 10% Admin Fee

Expendable supplies, direct Office costs etc( i.e. Phone calls)

AT COST plus 10% Admin Fee

Vehicle  (4WD)

$25/day plus

$0.50/Kilometer

Vehicle  (2WD)

$25/day plus

$0.45/kilometer

* US based personnel and their expenses billed through IMDEX in US

Note: Daily Fees for Principals are NOT subject to any OVERHEAD CHARGE.

All subcontract work billed through Minera Cascabel will be subject to a 10% overhead fee.

ALL MEXICO CHARGES SUBJECT TO 15% I.V.A.

All office support, data processing and drafting billed on 8-hour day basis.

ALL ABOVE COSTS INCLUDE ALL BOOKKEEPING, ACCOUNTING, AND TAX REQUIREMENTS.  ALL QUOTES IN US DOLLARS.  PESO EXPENSES CONVERTED TO DOLLARS AT RATE PREVAILING WHEN EXPENSES INCURRED.

(All bank transfer fees and exchange costs will be billed as expense costs)

1.5% /month Finance Charge will be added to all invoices unpaid over 30 days

Page 8 of 8

EX-8

Exhibit 8

List of Subsidiaries

Minera Los Lagartos, S.A. de C.V. Avenida Trece No. 100 Col. Coralillo Hermosillo, Sonora C.P. 83140 Incorporated under the laws of the Mexican Republic Beneficial ownership = 100%

EX-11.1

MAG Silver Corp.

(the “Corporation”)

CODE OF BUSINESS CONDUCT AND ETHICS

The Corporation is committed to the highest standards of legal and ethical business conduct.  This Code of Business Conduct and Ethics (the “Code”) summarizes the legal, ethical and regulatory standards that the Corporation must follow to promote integrity and deter wrongdoing and is a reminder to our directors, officers and employees, of the seriousness of that commitment.  Compliance with this Code and high standards of business conduct is mandatory for every director, officer and employee of the Corporation or any of its subsidiaries.

INTRODUCTION

Our business is becoming increasingly complex, both in terms of the geographies in which we function and the laws with which we must comply.  To help our directors, officers and employees understand what is expected of them and to carry out their responsibilities, we have created this Code.  Additionally, we have appointed the Corporation’s TBA to serve as the Corporation Ethics Officer to ensure adherence to the Code and report to the Board of Directors of the Corporation or any committee thereof who shall be responsible for monitoring compliance with the Code.

This Code is not intended to be a comprehensive guide to all of our policies or to all your responsibilities under law or regulation.  It provides general parameters to help you resolve the ethical and legal issues you encounter in conducting our business. Think of this Code as a guideline, or a minimum requirement, that must always be followed.  If you have any questions about anything in the Code or appropriate actions in light of the Code, you may contact the Corporation Ethics Officer or the Chair of the Governance and Nomination Committee (the “Governance Committee”) of the Board of Directors of the Corporation.

We expect each of our directors, officers and employees to read and become familiar with the ethical standards described in this Code and to affirm your agreement to adhere to these standards by signing the Compliance Certificate that appears at the end of this Code.  Violations of the law, our corporate policies, or this Code may lead to disciplinary action, including dismissal.

I.

We Insist on Honest and Ethical Conduct By All of Our Directors, Officers, Employees and Other Representatives

We place the highest value on the integrity of our directors, our officers and our employees and demand this level of integrity in all our dealings.  We insist on not only ethical dealings with others, but on the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.

Fair Dealing

Directors, officers and employees are required to deal honestly fairly in a manner which fosters a climate of mutual respect with our business partners, competitors and other third parties including the communities in which we operate.  In our dealings with these parties, we:

·

prohibit bribes, kickbacks and any other form of improper payment, direct or indirect, to any representative of a government, labor union, business partner or other third party in order to obtain a contract, some other commercial benefit or government action;

·

prohibit our directors, officers and employees from accepting any bribe, kickback or improper payment from anyone;

·

prohibit gifts or favors of more than nominal value to or from our business partners;

·

limit marketing and entertainment expenditures to those that are necessary, prudent, job-related and consistent with our policies;

·

require clear and precise communication in our contracts, our advertising, our literature, and our other public statements and seek to eliminate misstatement of fact or misleading impressions;

·

protect all proprietary data provided to us by third parties as reflected in our agreements with them; and

·

prohibit our representatives from otherwise taking unfair advantage of our business partners or other third parties, through inaccurate billing, manipulation, concealment, abuse of privileged information or any other unfair-dealing practice; and

·

conduct all material transactions in a transparent manner.

Conflicts of Interest; Corporate Opportunities

Our directors, officers and employees should not be involved in any activity that creates or gives the appearance of a conflict of interest between their personal interests and the interests of the Corporation  In particular, unless specific permission has been provided by (i) the Corporation Ethics Officer, or (ii) the Governance Committee, no employee, director or officer shall:

·

be a consultant to, or a director, officer or employee of, or otherwise operate an outside business that:

Ø

competes with the Corporation;

Ø

supplies products or services to the Corporation; or

Ø

purchases products or services from the Corporation;

·

have any material interest (financial or otherwise), including significant stock ownership, in any entity with which we do business that might create or give the appearance of a conflict of interest;

·

seek or accept any personal loan or services from any entity with which we do business, except from financial institutions or service providers offering similar loans or services to third parties under similar terms in the ordinary course of their respective businesses;

·

be a consultant to, or a director, officer or employee of, or otherwise operate an outside business if the demands of the outside business would interfere with the director’s, officer’s or employee’s responsibilities to us (if in doubt, consult your supervisor, the Corporation Ethics Officer or the Governance Committee);

·

accept any personal loan or guarantee of obligations from the Corporation, except to the extent such arrangements are legally permissible; or

·

conduct business on behalf of the Corporation with immediate family members, which include spouses, children, parents, siblings and persons sharing the same home whether or not legal relatives;

provided, however, that only the Governance Committee (or the Board of Directors as a whole, if the potential conflict involves a member of the Governance Committee) shall have the authority to grant such permission to a director or officer.

Directors, officers, and employees must notify the Corporation Ethics Officer or the Governance Committee of the existence of any actual or potential conflict of interest.

Confidentiality and Corporate Assets

Our directors, officers and employees are entrusted with our confidential information and with the confidential information of our business partners.  This information may include (1) technical or scientific information about current and future projects, (2) business or marketing plans or projections, (3) earnings and other internal financial data, (4) personnel information, (5) supply and customer lists and (6) other non-public information that, if disclosed, might be of use to our competitors, or harmful to our business partners.  This information is our property, or the property of our business partners and in many cases was developed at great expense.  Our directors, officers and employees shall:

·

Not discuss confidential information with or in the presence of any unauthorized persons, including family members and friends;

·

Use confidential information only for our legitimate business purposes and not for personal gain;

·

Not disclose confidential information to third parties; and

·

Not use Corporation’s property or resources for any personal benefit or the personal benefit of anyone else.  Corporation’s property includes the Corporation internet, email, and voicemail services, which should be used only for business related activities, and which may be monitored by the Corporation at any time without notice.

II.

We Provide Full, Fair, Accurate, Timely and Understandable Disclosure

We are committed to providing our shareholders, investors and other stakeholders with full, fair, accurate, timely and understandable disclosure in the reports that we file with the United States Securities and Exchange Commission and with the Canadian provincial securities regulators.  To this end, our directors, officers and employees shall:

·

not make false or misleading entries in our books and records for any reason;

·

not condone any undisclosed or unrecorded bank accounts or assets established for any purpose;

·

comply with generally accepted accounting principles at all times;

·

notify our Chief Financial Officer if there is an unreported transaction;

·

maintain a system of internal accounting controls that will provide reasonable assurances to management that all transactions are properly recorded;

·

maintain books and records that accurately and fairly reflect our transactions;

·

prohibit the establishment of any undisclosed or unrecorded funds or assets;

·

maintain a system of internal controls that will provide reasonable assurances to our management that material information about the Corporation is made known to management, particularly during the periods in which our periodic reports are being prepared;

·

present information in a clear and orderly manner and avoid the use of unnecessary legal and financial language in our periodic reports; and

·

not communicate to the public any nonpublic information unless expressly authorized to do so.

We have also adopted a Timely Disclosure, Confidentiality and Insider Trading Policy, which governs our disclosure policies.  A copy of the Timely Disclosure, Confidentiality and Insider Trading Policy can be obtained from the Governance and Nomination Committee.

III.

We Comply With all Laws, Rules and Regulations

We will comply with all laws and governmental regulations that are applicable to our activities, and expect all our directors, officers and employees to obey the law.  Specifically, unless otherwise required by law, regulation or state policy, including but not limited to South Africa’s policy on Black Economic Empowerment, we are committed to:

·

maintaining a safe and healthy work environment;

·

promoting a workplace that is free from discrimination or harassment based on race, color, religion, sex, age, national origin, disability or other factors that are unrelated to the Corporation’s business interests;

·

supporting fair competition and laws prohibiting restraints of trade and other unfair trade practices;

·

conducting our activities in full compliance with all applicable environmental laws;

·

keeping the political activities of our directors, officers and employees separate from our business;

·

prohibiting any illegal payments, gifts, or gratuities to any government officials or political party;

·

prohibiting the unauthorized use, reproduction, or distribution of any third party’s trade secrets, copyrighted information or confidential information;

·

prohibiting the sale or export, either directly or through our representatives, of our products to countries where technology related goods such as ours may not be sold; and

·

complying with all applicable securities laws.

Our directors, officers and employees are prohibited from trading our securities while in possession of material, nonpublic (“inside”) information about the Corporation.  We have adopted an Insider Trading Policy in this regard, with which all directors, officers and employees must comply.  A copy of the Timely Disclosure, Confidentiality and Insider Trading Policy can be obtained from the Governance and Nomination Committee.

REPORTING, WAIVER AND EFFECT OF VIOLATIONS

Compliance with this code of conduct is, first and foremost, the individual responsibility of every director, officer and employee. We attempt to foster a work environment in which ethical issues and concerns may be raised and discussed with supervisors or with others without the fear of retribution.  It is our responsibility to provide a system of reporting and access when you wish to report a suspected violation, or to seek counseling, and the normal chain of command cannot, for whatever reason, be used.  

Administration

Our Board of Directors and Governance Committee have established the standards of business conduct contained in this Code and oversee compliance with this Code.  Additionally, we have appointed the Corporation’s TBA to serve as the Corporation Ethics Officer to ensure adherence to the Code.  While serving in this capacity, the Corporation Ethics Officer reports directly to the Board of Directors.  

Training on this Code will be included in the orientation of new employees and provided to existing directors, officers, and employees on an on-going basis. To ensure familiarity with the Code, directors, officers, and employees will be asked to read the Code and sign a Compliance Certificate annually.

Reporting Violations and Questions

Directors, officers, and employees must report, in person or in writing, any known or suspected violations of laws, governmental regulations or this Code to either TBA, the Corporation Ethics Officer or Jonathan Rubenstein, the Chair of the Governance Committee.  Additionally, directors, officers, and employees may contact the Corporation Ethics Officer or the Governance Committee with a question or concern about this Code or a business practice.  Any questions or violation reports will be addressed immediately and seriously, and can be made anonymously.  If you feel uncomfortable reporting suspected violations to these individuals, you may report matters to Fasken Martineau DuMoulin LLP or Harris, Mericle & Wakayama LLC, our outside counsel.  The address and telephone number of these persons are listed in the attachment to this Code.

We will not allow any retaliation against a director, officer or employee who acts in good faith in reporting any violation.

Our Corporation Ethics Officer will investigate any reported violations and will determine an appropriate response, including corrective action and preventative measures, involving the Governance Committee or Chief Executive Officer when required.  All reports will be treated confidentially to every extent possible.

Consequences of a Violation.

Directors, officers and employees that violate any laws, governmental regulations or this Code will face appropriate, case specific disciplinary action, which may include demotion or immediate discharge.  In addition, violation of any laws, governmental regulations or this Code could result in public disclosure of such violation including, without limitation, the names of parties involved.

Requests for Waivers.

Requests for waivers from this Code must be delivered to the Corporation Ethics Officer or the Governance Committee, together with a summary of all relevant facts and circumstances.  Waivers with respect to directors and officers may only be granted by the Corporation’s Board of Directors.  Waivers with respect to non-officer employees may be granted by the Corporation’s Ethics Officer.

Names and Addresses (as of 11 June 2007)
Reporting Contacts:
Corporation Ethics Officer:	The Chair of our Governance Committee:
Name: TBA Address: MAG Silver Corp. #328 – 550 Burrard Street Vancouver, BC  V6C 2B5 Phone: 604-630-1399 E-mail: TBA	Name:  Jonathan Rubenstein Address: MAG Silver Corp. #328 – 550 Burrard Street Vancouver, BC  V6C 2B5 Phone: 604-630-1399 E-mail: TBA

Additional Reporting Contacts:

Our Outside Counsel in Canada:

Our Outside Counsel in the United States:

Fasken Martineau DuMoulin LLP Attn:  Charlotte Bell Suite 2100, 1075 West Georgia St. Vancouver  British Columbia   V6E 3G2 Canada Phone: (604) 631-3141 Fax: (604) 632-3141 E-mail: CBell@van.fasken.com Harris, Mericle & Wakayama, LLC Attn:  Andrei N.J. Kreptul 999 Third Avenue, Suite 3210 Seattle, WA 98104  USA
Phone: (206) 621-1818 Fax: (206) 624-8560 Email: akreptul@hmwlaw.com

COMPLIANCE CERTIFICATE

I have read and understand the Code of Business Conduct and Ethics of MAG Silver Corp. (the “Code”).  I will adhere in all respects to the ethical standards described in the Code.  I further confirm my understanding that any violation of the Code will subject me to appropriate disciplinary action, which may include demotion or discharge.

I certify to MAG Silver Corp. that I am not in violation of the Code, unless I have noted such violation in a signed Statement of Exceptions attached to this Compliance Certificate.

Date:
___             ______________________ Name:
Title/Position:

Check one of the following:

o

A Statement of Exceptions is attached.

o

No Statement of Exceptions is attached.

EX-15.4

MAG Silver Corp.

(the “Corporation”)

AUDIT COMMITTEE CHARTER

1.

General

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

2.

Members

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

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

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

3.

Duties

The Committee will have the following duties:

·

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

·

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

- 2 -

·

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

·

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

·

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

·

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

·

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

·

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

·

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

·

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

·

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

·

generally accepted accounting principles have been consistently applied;

·

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

·

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

·

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

·

Recommend to the Board an external auditor to be nominated for appointment by the Corporation’s shareholders.  Subject to the appointment of the Corporation’s external

- 3 -

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

·

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

·

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

·

Consider the independence of the external auditors, including reviewing the range of services provided in the context of all consulting services obtained by the Corporation.

·

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

·

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

·

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

·

Establish a procedure for:

·

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

·

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

·

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

·

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

·

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

- 4 -

·

Review and oversee all related party transactions.

·

Perform other functions as requested by the Board.

·

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

·

Review and recommend updates to the charter; receive approval of changes from the Board.

·

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

·

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

·

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

·

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

·

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

4.

Chair

The Committee will in each year appoint the Chair of the Committee from among the members of the Committee.  In the Chair’s absence, or if the position is vacant, the Committee may select another member as Chair.

The Chair will have the right to exercise all powers of the Committee between meetings but will attempt to involve all other members as appropriate to the exercise of any powers and will, in any event, advise all other members of the Committee of any decisions made or powers exercised.

5.

Meetings

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

- 5 -

meeting of the Committee to consider any matter that the external auditor believes should be brought to the attention of the Board or shareholders of the Corporation.

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

6.

Quorum

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

7.

Removal and Vacancy

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

8.

Authority

The Committee may:

·

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

·

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

·

communicate directly with the internal and external auditors.

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

9.

Secretary and Minutes

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

10.

Funding

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

EX-15.5

MAG Silver Corp.

(the “Corporation”)

COMPENSATION COMMITTEE CHARTER

1.

General

The Board of Directors of the Corporation (the “Board”) has established a Compensation Committee (the “Committee”) for the purpose of approving or providing the Board with recommendations relating to compensation of executive officers, succession plans for executive officers, human resources policies for executive officers, and administration of the Corporation’s compensation and benefits plans.

2.

Members

The Board will in each year appoint a minimum of three (3) directors as members of the Committee.  All members of the Committee shall be non-management directors and shall be independent within the meaning of all applicable U.S. and Canadian securities laws and the rules of the Toronto Stock Exchange and the American Stock Exchange (the “Applicable Regulations”); provided, however, that one or more members of the Committee may be non-independent if permitted by all Applicable Regulations.

3.

Duties

The Committee will have the following duties:

A.

Executive Officers

·

Review, approve and report to the Board annually on management’s succession plans for all executive officers, other than the Chief Executive Officer (the “CEO”), including specific development plans and career planning for potential successors;

·

Review and recommend to the Board for approval the general compensation philosophy and guidelines for all executive officers, including the CEO.  This includes incentive plan design and other remuneration;

·

Review and recommend to the Board the compensation, including salary, incentives, benefits and other perquisites, of all executive officers, except for the CEO; and

·

Report on executive compensation as required in public disclosure documents.

B.

CEO

·

Review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those corporate goals and objectives, consider the Corporate Governance and Nomination Committee’s report respecting the CEO’s performance and recommend to the Board the CEO’s compensation level based on this evaluation, including salary, incentives, benefits and other perquisites.

·

Notwithstanding any provisions contained herein to the contrary, the CEO shall not be permitted to attend the Committee’s deliberations and voting relating to the CEO’s compensation.

C.

Corporate Human Resources

·

Establish compensation and recruitment policies and practices for the Corporation’s executive officers, including establishing levels of salary, incentives, benefits and other perquisites provided to executives of the Corporation and its subsidiaries; provided, however, that the compensation of individual executive officers shall be subject to the Board’s approval.

D.

Compensation Plans

·

Administration of the Corporation’s stock option plans and stock incentive plans (the “SOPs”), and making of awards under the plans, and, without limiting the foregoing, will have the following responsibilities with respect thereto:

·

Report to the Board on all matters relating to the SOPs;

·

Interpret and administer the SOPs as provided in the SOPs;

·

Approve for recommendation to the Board awards to eligible persons;

·

Recommend to the Board the exercise price, vesting terms, limitations, restrictions, and conditions upon awards;

·

Make recommendations to the Board with respect to the amendment of the SOPs;

·

Make recommendations to the Board to establish, amend and rescind any rules and regulations relating to the SOPs;

·

Make determinations deemed necessary or desirable for the administration of the SOPs and make such recommendations to the Board; and

·

Correct any deficiency, inconsistency or omission in the SOPs.

·

Administration of any other compensation and benefits plans, if and to the extent that such administration is delegated to the Committee by the Board.

E.

Outside Advisors

·

The Committee will receive and consider all requests for the retention of outside advisors and experts from an individual director, the Board, and all of its committees (except for the Audit Committee and Corporate Governance and Nomination Committee, which will notify the Committee of its actions in this regard).

F.

Public Disclosure

·

The Committee shall review all executive compensation disclosure before the Corporation publicly discloses this information.

4.

Chair

The Board will in each year appoint the Chair of the Committee from among the members of the Committee.  In the Chair’s absence, or if the position is vacant, the Committee may select another member as Chair.  

5.

Meetings

The Committee will meet not less than once per year at the request of its Chair and may also meet at any other time or times at the request of any member of the committee.  Notices calling meetings will be sent to all Committee members, to the CEO of the Corporation, to the Chair of the Board and to all other directors.

The CEO of the Corporation and, to the extent the Chair of the Board is not otherwise a member of the Committee, the Chair, and all other directors who are not members of the Committee may attend all meetings of the Committee in an ex-officio capacity and will not vote.  The CEO shall not attend in-camera sessions.

6.

Quorum

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

7.

Removal and Vacancy

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

8.

Authority

The Committee may engage and compensate, at the Corporation’s expense, and with the approval of the Chair, any outside advisor or expert as it deems necessary to permit it to carry out its duties.

9.

Secretary and Minutes

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

EX-15.6

MAG Silver Corp.

(the “Corporation”)

GOVERNANCE AND

NOMINATION COMMITTEE CHARTER

1.

General

The Board of Directors of the Corporation (the “Board”) has established a Governance and Nomination Committee (the “Committee”) for the purpose of providing the Board with recommendations relating to corporate governance in general, including, without limitation:  (a) all matters relating to the stewardship role of the Board in respect of the management of the Corporation, (b) Board size and composition, including the candidate selection process and the orientation of new members, (c) Board compensation, and (d) such procedures as may be necessary to allow the Board to function independently of management.  The Committee will also oversee compliance with policies associated with an efficient system of corporate governance.   

2.

Members

The Board will in each year appoint a minimum of three (3) directors as members of the Committee.  All members of the Committee shall be independent within the meaning of all applicable U.S. and Canadian securities laws and the rules of the Toronto Stock Exchange and the American Stock Exchange (the “Applicable Regulations”); provided, however, that one or more members of the Committee may be non-independent if permitted by all Applicable Regulations.

3.

Duties

The Committee will have the following duties:

A.

The Committee will review and make recommendations to the Board respecting:

·

corporate governance in general and regarding the Board’s stewardship role in the management of the Corporation, including the role and responsibilities of directors and appropriate policies and procedures for directors to carry out their duties with due diligence and in compliance with all legal and regulatory requirements;

·

(i) the size and composition of the Board (including with reference to applicable rules, regulations or guidelines promulgated by regulatory authorities related to corporate governance), (ii) whether any compensation committee interlocks exist, (iii) general responsibilities and functions of the Board and its members, and of the Chief Executive Officer (the “CEO”), including position descriptions for the CEO and the Chair of the Board, (iv) the organization and responsibilities of Board committees, and (v) the procedures for effective Board meetings to ensure that the Board functions independently of management and without conflicts of interest;

·

the long term plan for the composition of the Board that takes into consideration the current strengths, skills and experience on the Board and the strategic direction of the Corporation.  This plan will include: (i) the desired qualifications, demographics, skills and experience for potential directors, (ii) the appropriate rotation of directors on Board

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committees, (iii) an interview process for potential candidates for Board membership, and (iv) a list of future candidates for Board membership;

·

when required, a candidate for appointment to the office of Chair of the Board, after taking into account the competencies and skills that the Board as a whole should possess, the competencies and skills that the existing directors possess, the competencies and skills of the proposed nominee and the amount of time and resources the proposed nominee can devote as a member of the Board;

·

when required, a candidate for appointment to the office of CEO;

·

annually, in consultation with the Chair of the Board and the CEO, the Board nominees for election as members of the Board;

·

as required, candidates to fill any Board and Committee vacancies;

·

whether the Committee and the Board will consider candidates for the Board recommended by shareholders, and if so, any policies and procedures with respect thereto;

·

at appropriate intervals:  (i) compensation and benefit levels for the directors of the Corporation and its subsidiaries, and (ii) compensation and benefit levels for the Chair of the Board;

·

together with the Chairs of other Board Committees, the scope, duties and responsibilities of those Committees and where advisable, any amendments thereto, as well as the establishment or disbanding of Board Committees and changes to their composition, including the Chairs thereof;

·

periodically, directors and officers third party liability insurance coverage; and

·

the framework for delegating authority from the Board to management.  

B.

The Committee will review, approve and report to the Board on:

·

the orientation process for new directors and plans for the ongoing development of existing Board members including the provision of continuing education opportunities for all directors, so that individuals may maintain or enhance their skills and abilities as directors, as well as to ensure their knowledge and understanding of the Corporation’s business remains current;

·

the establishment of appropriate processes for the regular evaluation of the effectiveness of the Board, its committees and its members;

·

in conjunction with the Chair of the Board, the performance of individual directors, the Board as a whole, and committees of the Board;

·

the performance evaluation of the Chair of the Board and the Chair of each Board Committee;

·

regularly, the performance evaluation of the CEO, including performance against

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corporate objectives.  The Committee will also report to the Compensation Committee in this regard, to assist that committee in its recommendation to the Board respecting the CEO’s compensation;

·

CEO succession planning;

·

together with the Chair of the Board (where appropriate), concerns of individual directors about matters that are not readily or easily discussed at full Board meetings, to ensure the Board can operate independently of management; and

·

the corporate governance disclosure sections in the Corporation’s U.S. and Canadian securities law and stock exchange filings, and any other corporate governance matters as required by public disclosure requirements.

C.

The Committee will oversee compliance with [the Corporation’s Timely Disclosure, Confidentiality and Insider Trading Policies], authorize any waiver granted in connection with these policies, and confirm with management the appropriate disclosure of any such waiver.

D.

The Committee will oversee compliance with the Corporation’s Code of Business Conduct and Ethics (the “Code”), monitor compliance with the Code, authorize any waiver granted in connection with the Code (provided, however, that any waiver granted with respect to a director or officer must be granted by the Board, and the Committee may delegate the approval of waivers with respect to non-officer employees to the Chair of the Committee or a designated compliance officer), and oversee the appropriate disclosure of any such waivers.

E.

The Committee will oversee compliance with any rules, regulations or guidelines promulgated by regulatory authorities relating to corporate governance.

F.

The Committee will receive and consider all requests for the retention of outside advisors and experts from an individual director, the Board, and all of its committees (except for the Audit Committee and Compensation Committee, which will notify the Committee of its actions in this regard).

4.

Chair

The Board will in each year appoint the Chair of the Committee from among the members of the Committee.  In the Chair’s absence, or if the position is vacant, the Committee may select another member as Chair.  The Chair will have the right to exercise all powers of the Committee between meetings but will attempt to involve all other members as appropriate prior to the exercise of any powers and will, in any event, advise all other members of any decisions made or powers exercised.

5.

Meetings

The Committee will meet not less than once per year at the request of its Chair and may also meet at any other time or times at the request of any member of the committee.  Notices calling meetings will be sent to all Committee members, to the CEO of the Corporation, to the Chair of the Board and to all other directors.

The CEO of the Corporation and, to the extent the Chair of the Board is not otherwise a member of the Committee, the Chair, and all other directors who are not members of the Committee may

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attend all meetings of the Committee in an ex-officio capacity and will not vote.  The CEO shall not attend in-camera sessions.

6.

Quorum

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

7.

Removal and Vacancy

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

8.

Authority

The Committee may engage and compensate, at the Corporation’s expense, and with the approval of the Chair, any outside advisor or expert as it deems necessary to permit it to carry out its duties.

9.

Secretary and Minutes

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

EX-15.7

MAG Silver Corp.

(the “Corporation”)

TIMELY DISCLOSURE,

CONFIDENTIALITY AND INSIDER TRADING POLICY

1.

Purpose of this Policy

The purpose of this Policy is to ensure that the Corporation and all persons to whom this Policy applies meet their obligations under the provisions of securities laws and stock exchange rules by establishing a process for the timely disclosure of all Material Information (as defined herein), ensuring that all persons to whom this Policy applies understand their obligations to preserve the confidentiality of Undisclosed Material Information (as defined herein) and ensuring that all appropriate parties who have Undisclosed Material Information are prohibited from Insider Trading (as defined herein) and Tipping (as defined herein) under applicable law, stock exchange rules and this Policy.  This Policy covers disclosures in documents filed with the securities regulators and written statements made in the Corporation’s annual and quarterly reports, news releas es, letters to shareholders, presentations by senior management and information contained on the Corporation’s web site and other electronic communications. It extends to oral statements made in meetings and telephone conversations with analysts and investors, interviews with the media as well as speeches, press conferences and conference calls.

2.

To Whom this Policy Applies

The main groups to whom this Policy apply are set forth in Schedule “A” attached hereto.  Each section of the Policy that imposes restrictions and obligations will describe which groups of persons are subject to that section. References in this Policy to “any person to whom this Policy applies” or similar references are intended to include persons in all of the groups described in Schedule “A”.

3.

Responsibility for this Policy

The Corporation has created an operational committee (the “Disclosure Committee”) consisting of the Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”) and one independent director together with such other persons as they may delegate from time to time.  The composition of the Disclosure Committee may change from time to time and the Corporation will advise all persons to whom this Policy applies of any such changes.

4.

Individuals Who Are Authorized to Speak on Behalf of the Corporation

4.1

Only the individuals (“Spokespersons”) listed below are authorized to communicate with analysts, the media and investors on behalf of the Corporation and only with respect to the areas noted opposite their respective names. The list may be changed by the Disclosure Committee from time to time.

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Spokesperson	Area
TBA	All
TBA	All
TBA	All

4.2

A Spokesperson may, from time to time, delegate in writing (1) other Board Members, Officers, Employees or Contractors, or (2) with the approval of the Disclosure Committee, any other person, to speak on behalf of the Corporation as back-ups or to respond to specific inquiries.  The Spokesperson will advise the Chief Executive Officer that such a delegation has been made.

4.3

Any person to whom this Policy applies who is approached by the media, an analyst, investor or any other member of the public to comment on the affairs of the Corporation, must refer all inquiries to the Chief Executive Officer and must promptly notify the Chief Executive Officer that the approach was made.

4.4

Notwithstanding the requirements of this Policy, any Director of the Corporation is authorized to speak on behalf of the Corporation if approached by the media, an analyst, investor or any other member of the public so long as such discussion is restricted to only cover information, statements and policy positions already disclosed by the Corporation and therefore already in the public domain.

5.

Disclosure of Material Information

5.1

“Material information” consists of both “material facts” and “material changes”.  A “material fact” means a fact that significantly affects, or would reasonably be expected to have a significant effect on, the market price or value of the securities of the Corporation.  A “material change” means a change in the business, operations, assets or ownership of the Corporation that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the Corporation and includes a decision to implement such a change if such a decision is made by senior management of the Corporation who believe that confirmation of the decision by the board of directors of the Corporation (the “Board”) is probable.  Und er U.S. securities legislation, Material Information also includes any matters to which there is substantial likelihood that a reasonable investor would attach importance in making investment decisions.

5.2

In making materiality judgments, it is necessary to take into account a number of factors that cannot be captured in a simple bright-line standard or test.  These include, among other things, the nature of the information itself, the volatility of the Corporation’s securities and prevailing market conditions.  The materiality of a particular event or piece of information may vary between companies according to their size, the nature of their operations and many other factors.  Under volatile market conditions, apparently insignificant variances between earnings

- 3 -

projections and actual results can have a significant impact on share price once released.  The Corporation will monitor and assess the market’s reaction to different information that is publicly disclosed to help make materiality judgments in the future.  As a guiding principle, if there is any doubt about whether particular information is material or not, the Corporation should err on the side of materiality and release the information publicly.

5.3

Any person to whom this Policy applies who becomes aware of information that has the possibility of being Material Information must immediately disclose that information to a member of the Disclosure Committee.  Schedule “B” attached hereto lists examples of Material Information.  That list is not exhaustive and the Corporation still needs to exercise its own judgment in making materiality determination.

5.4

Material Information is required to be disclosed immediately except in restricted circumstances where immediate release of the information would be unduly detrimental to the interests of the Corporation.  (See Section 8.2 of this Policy.) The Disclosure Committee, in consultation with the Board and others as appropriate, shall determine what is deemed to be Material Information and the appropriate public disclosure. Disclosure must be corrected immediately if the Corporation subsequently learns that earlier disclosure by the Corporation contained a material error at the time it was given and must be updated if earlier disclosure has become misleading as a result of intervening events.

5.5

News releases disclosing Material Information will be transmitted to the American Stock Exchange and to the Toronto Stock Exchange (the “Exchanges”), relevant regulatory bodies and major news wire services (that provide simultaneous distribution in Canada and the U.S.) that disseminate financial news to the financial press and to daily newspapers that provide regular coverage of financial news in the areas where the Corporation has operations.  When the Exchanges are open for trading, advance notice of a press release announcing Material Information must be provided to the Market Surveillance Branch (or similar departments) of the Exchanges to determine if a halt in trading is necessary to provide time for the market to digest the news.  When a press release announcing Material Information is issued outside of trading hours, the Market Surveillance Branch of the Exchanges should be notified before the market opens.  Copies of all press releases should be supplied to the Market Surveillance Branch of the Exchanges and to the relevant securities regulators immediately.

5.6

The Corporation’s news releases should contain enough detail to enable the media and investors to understand the substance and importance of the change that is being disclosed.  The guiding principle should be to communicate clearly and accurately the nature of the information, without including unnecessary details, exaggerated reports or editorial commentary designed to colour the investment community’s perception of the announcement one way or another.

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5.7

All news releases must include the name of an officer or director of the Corporation who is responsible for the announcement, together with the Corporation’s telephone number.  It may also include the name and telephone number of additional contact persons.

5.8

News releases announcing Material Information will be disseminated through an approved news wire service that provides simultaneous national (in Canada and the U.S.) distribution to stock exchange members, relevant regulatory bodies and appropriate financial media.

5.9

All news releases will be posted on the Corporation’s website promptly after confirmation of dissemination over the news wire.  The website will include a notice that advises the reader that the information posted was accurate at the time of posting, but may be superseded by subsequent news disclosures.

5.10

All news releases will, as soon as practicable after dissemination, be filed on SEDAR and be furnished to the U.S. Securities and Exchange Commission (“SEC”) under cover of Form 6-K on the SEC’s EDGAR database.

6.

Internet Chat Rooms and Bulletin Boards

6.1

Board Members, Officers, Employees and Contractors must not discuss or post any information relating to the Corporation or any of its subsidiaries or trading in securities of the Corporation in Internet chat rooms, newsgroups or bulletin boards.

6.2

Board Members, Officers, Employees and Contractors should advise the Disclosure Committee if they are aware of any discussion of information of the Corporation in a chat room, newsgroup or bulletin board.

7.

Rumours

The Corporation shall not comment, affirmatively or negatively, on rumours. This also applies to rumours on the Internet. Spokespersons will respond consistently to those rumours, saying “It is our policy not to comment on market rumours or speculation.”  If an Exchange or a securities regulatory authority requests that the Corporation make a statement in response to a market rumour, the Disclosure Committee will consider the matter and make a recommendation to the Chief Executive Officer as to the nature and context of any response.

8.

Confidentiality of Undisclosed Material Information

8.1

“Undisclosed Material Information” of the Corporation is the Material Information about the Corporation that has not been “Generally Disclosed”: that is, disseminated to the public by way of a news release together with the passage of a reasonable amount of time (24 hours, unless otherwise advised that the period is longer or shorter, depending on the circumstances) for the public to analyze the information.

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8.2

Where the immediate disclosure of Material Information concerning the business and affairs of the Corporation would be unduly detrimental to the interests of the Corporation, its disclosure may be delayed and kept confidential temporarily in accordance with applicable securities laws of Canada and the U.S. and applicable rules of the Exchanges (e.g., in some cases, immediate disclosure may be required by an Exchange in the event of unusual market activity or rumours).  Keeping information confidential can only be justified where the potential harm to the Corporation or to investors caused by immediate disclosure may reasonably be considered to outweigh the undesirable consequences of delaying disclosure.

Examples of circumstances in which disclosure might be unduly detrimental to the interests of the Corporation include:

·

Where the release of information would prejudice the ability of the Corporation to pursue specific and limited objectives or to complete a transaction or series of transactions that are underway.

·

Where the disclosure of the information would provide competitors with confidential corporate information that would be of significant benefit to them.

·

Where the disclosure of information concerning the status of ongoing negotiations would prejudice the successful completion of those negotiations.

·

Where the disclosure of information includes the names of, or reference to, partners who have not yet exercised their contractual right to comment on such disclosure and their comment may benefit the disclosure by improving its clarity or accuracy.

All decisions to keep Material Information confidential must be made by the Disclosure Committee or the Board.

8.3

Any person to whom this Policy applies and who has knowledge of Undisclosed Material Information must treat the Material Information as confidential until the Material Information has been Generally Disclosed.

8.4

Undisclosed Material Information shall not be disclosed to anyone except in the necessary course of business. If Undisclosed Material Information has been disclosed in the necessary course of business, anyone so informed must clearly understand that it is to be kept confidential, and, in appropriate circumstances, execute a confidentiality agreement.  Schedule “C” attached hereto lists circumstances where securities regulators believe disclosure may be in the necessary course of business. When in doubt, all persons to whom this Policy applies must consult with a member of the Disclosure Committee to determine whether disclosure in a particular circumstance is in the necessary course of business. For greater certainty, disclosure to analysts, institutional investors,

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other market professionals and members of the press and other media will not be considered to be in the necessary course of business.  “Tipping”, which refers to the disclosure of Undisclosed Material Information to third parties outside the necessary course of business, is prohibited.

8.5

In order to prevent the misuse of inadvertent disclosure of Undisclosed Material Information, the procedures set forth below should be observed at all times:

·

Documents and files containing confidential information should be kept in a safe place to which access is restricted to individuals who “need to know” that information in the necessary course of business and code names should be used if necessary;

·

Confidential matters should not be discussed in places where the discussion may be overheard or on cell phones or other wireless devices;

·

Transmission of documents containing Undisclosed Material Information by electronic means will be made only where it is reasonable to believe that the transmission can be made and received under secure conditions such as a dedicated server; and

·

Unnecessary copying of documents containing Undisclosed Material Information must be avoided and extra copies of documents must be promptly removed from meeting rooms and work areas at the conclusion of the meeting and must be destroyed if no longer required.

·

In certain circumstances the Disclosure Committee may assign a “code name” to confidential information.  Employees should utilize the “code name” at all times when discussing the confidential information.  Printed documents containing confidential information shall be stored in a secured cabinet and access to these documents on the Corporation’s computer network must be restricted.

8.6

In the event that confidential information, or rumours respecting the same, is divulged in any manner (other than in the necessary course of business), the Corporation is required to make an immediate announcement on the matter.  The Exchanges must be notified of the announcement in advance in the usual manner.  This includes contacting the applicable Exchange and may require requesting that trading be halted pending the issuance of a news release.

9.

Quiet Period

9.1

Each period (1) beginning on the last day of each fiscal quarter and each fiscal year, and (2) ending when the earnings for that quarter or year have been Generally Disclosed by way of a news release, will be a “Quiet Period”.  During a Quiet Period, Spokespersons must not provide any future-oriented information relating to the business and affairs of the Corporation or any of its subsidiaries. Spokespersons are also prohibited from providing any future oriented information

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about the Corporation or any of its subsidiaries’ prospective business, operations or capital, including future-oriented financial information (as that term is defined under applicable securities law) (“Forward-Looking Information”) about expected revenues, net income or profit, earnings per share, expenditure levels, and other information commonly referred to as earnings guidance (“Earnings Guidance”) or comments with respect to the financial results for the current fiscal quarter or current fiscal year.  Notwithstanding these restrictions, the Corporation may Generally Disclose Forward-Looking Information during the Quiet Period when the Forward-Looking Information constitutes Undisclosed Material Information, including, but not limited to, all such material information contained in scoping studi es, pre-feasibility Studies or bankable feasibility studies. During a quiet period, Spokespersons may respond to unsolicited inquiries about information either that is not Material Information or that has been Generally Disclosed.

10.

Avoiding Selective Disclosure

10.1

Material Information is required to be publicly disclosed before being disclosed to any person or company (e.g. in an interview with an analyst or in a telephone conversation with an investor) except disclosing such information to such person or company prior to public dissemination is necessary in the course of business and such person or company is bound by an express confidentiality agreement or owes the Corporation a duty of trust or confidence with respect to such information.

10.2

When participating in shareholder meetings, news conferences, analysts’ conferences and private meetings with analysts, Spokespersons must only disclose information that either (1) is not Material Information or (2) is Material Information but has previously been Generally Disclosed. For greater certainty, acceptable topics of discussion include the Corporation’s business prospects (subject to the provisions of Section 11 of this Policy), the business environment, management’s philosophy and long-term strategy. Any selective disclosure of Undisclosed Material Information, including Earnings Guidance, is not permitted.

10.3

To protect against selective disclosure, the following procedures should be followed:

·

Spokespersons who are participating in shareholder meetings, news conferences, analysts’ conferences and private meetings with analysts should normally script their comments and prepare answers to anticipated questions in advance of the meeting or conference; and

·

Those scripts should normally be reviewed by the Disclosure Committee before the meeting or conference and any Undisclosed Material Information that is contained in the script must be Generally Disclosed before the meeting or conference or deleted from the script if it is premature for the information to be Generally Disclosed.

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10.4

After each shareholder meeting, news conference, analysts’ conference or private meeting with analysts, the Corporation’s participants should normally meet and review the disclosures made during the course of the meeting or conference to determine if any Undisclosed Material Information was unintentionally disclosed.

10.5

If Undisclosed Material Information was disclosed, the participants must advise a member of the Disclosure Committee, who shall take immediate steps to ensure that the information is Generally Disclosed.

10.6

Pending the Material Information being Generally Disclosed, the Corporation must contact the parties to whom the Material Information was disclosed and inform them (1) that the information is Undisclosed Material Information and (2) of their legal obligations with respect to the Material Information.

11.

Limitations on Review, Distribution of Analysts’ Reports

11.1

When reviewing analysts’ reports in accordance with the procedure set out below, comments of Board Members, Officers, Employees and Contractors must be limited to identifying factual information that has been Generally Disclosed that may affect an analyst’s model and pointing out inaccuracies or omissions with respect to information that has been Generally Disclosed.

Any comments must contain a disclaimer that the report was reviewed for factual accuracy only. No comfort or guidance shall be expressed on the analysts’ earnings models or earnings estimates and no attempt shall be made to influence an analyst’s opinion or conclusion.

11.2

Analysts’ reports must not be circulated by Board Members, Officers, Employees and Contractors, except when in the necessary course of business, nor shall they be posted on, nor linked from the Corporation’s website.

12.

Forward-Looking Information

12.1

The Corporation may from time to time give Earnings Guidance or any other Forward-Looking Information through voluntary disclosure by way of a news release, provided that the cautionary language described in Section 12.2 accompanies the information.

12.2

If Forward-Looking Information is Generally Disclosed:

·

the information must be clearly stated to be forward-looking;

·

the factors and assumptions that were used to arrive at the Forward-Looking Information must be clearly described;

·

the factors that could cause actual results to differ materially must be clearly stated, and should be presented with a reasonably possible range

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of outcomes, a sensitivity analysis or other qualitative analysis that will assist in assessing the related risks; and

·

The information will be accompanied by a statement that the information is stated as of the current date and subject to change after that date, and the Corporation disclaims any intention to update or revise this statement of forward-looking information, whether as a result of new information, future events or otherwise.

13.

Trading of Securities of the Corporation

13.1

“Insider Trading” which refers to persons in a Special Relationship with the Corporation purchasing or selling or otherwise monetizing securities of the Corporation while in possession of Undisclosed Material Information, is prohibited.

13.2

In addition to Section 13.1, Board Members, Officers and Head Office Employees shall not purchase or sell or otherwise monetize securities of the Corporation except during a “Trading Window”, provided there is no “Blackout Period” in effect, other than pursuant to a pre-approved trading plan that complies with SEC Rule 10b5-1, provided such trading plan (1) is in writing; (2) was submitted to the Corporation for review prior to its adoption; and (3) was not adopted during a Blackout Period or at a time when the person was in possession of material non-public information.

“Trading Window” means: (1) the period of time beginning on the second day on which the Toronto Stock Exchange is open for trading and on which the trading in the Corporation’s securities is not halted or suspended (a “Trading Day”) after the financial results for the first, second, third fiscal quarter or the fiscal year (as applicable) have been disclosed by way of a news release and ending the last Trading Day immediately prior to the two weeks before  the end of the next fiscal quarter; and (2) any other period designated by the Disclosure Committee and communicated to those persons to whom this Policy applies. If the Trading Window ends on a weekend or statutory holiday, it shall be deemed to have ended on the last business day before the weekend or statutory holiday.

“Blackout Period” means: (1) any time that is not during a Trading Window; and (2) any other period designated by the Disclosure Committee and communicated to those persons to whom this Policy applies.

In the circumstances where the Disclosure Committee determines a Blackout Period is required a confidential memo will be sent to all persons subject to this Policy informing them that a Blackout Period is in effect and that no trading in the Corporation’s securities is to occur until further notice.  No reason for the Blackout Period will be provided.

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In addition, no person subject to a Blackout Period shall inform anyone not subject to the blackout that a Blackout Period is in effect as a result of particular events or developments.

13.3

Notwithstanding Section 13.2, a Board Member, Officer, Employee and Contractor may purchase or sell securities during a Blackout Period with the prior written consent of the CEO.  The CEO will grant permission to purchase or sell during a Blackout Period only in the case of a legal obligation to trade the Corporation’s securities which pre-dates the Blackout Period or as otherwise permitted by applicable securities rules.

13.4

The trading prohibitions in Sections 13.1 and 13.2 do not apply to the acquisition of securities through the exercise of share options or warrants provided that other conditions are met, including:

·

the options or warrants would otherwise expire during the Blackout period;

·

the options or warrants are in-the-money at the time of exercise;

·

the Blacked-out party is not in possession of any Material Undisclosed Information, be it Material Undisclosed Information that is the cause of the Blackout period or any other Material Undisclosed Information; and

·

the Blacked-out party has delivered written notice to the corporation of his or her intent to exercise options prior to such exercise and at the same time delivers a written acknowledgement confirming that the above conditions have been met and that he or she will not trade the shares received on exercise of the options until such time that:

i.

the Blackout Period has expired; and

ii.

the Blacked-out party is not otherwise subject to another Blackout Period or prohibited by law from trading in such shares.

13.5

These trading prohibitions do apply, however, to any sale of shares as part of a broker-assisted cashless exercise of an option or warrant, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option or warrant.

13.6

Notwithstanding any provision in this Policy to the contrary, Insiders and their Immediate Family Members should refrain from trading in the Corporation’s securities without obtaining approval from the Disclosure Committee prior to commencing any trade in the Corporation’s securities.

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14.

Trading in Securities of Other Companies

In addition, it is the policy of the Corporation that no Board Member, Officer, Employee or Contractor who, in the course of working for the Corporation, learns of material non-public information about a company with which the Corporation does business, including a customer or supplier of the Corporation, may trade in that company’s securities until the information becomes public or is no longer material.

15.

Post-Termination Transactions

This Policy continues to apply to transactions in Corporation securities by Board Members, Officers, Employees or Contractors even after termination of employment or service of such persons.  If any of these persons is in possession of Undisclosed Material Information at the time of termination of that person’s employment or service with the Corporation, that person may not trade in Corporation securities until that information has become public or is no longer material.

16.

Insider Trade Reports; U.S. Beneficial Ownership Reporting Requirements

16.1

An Insider of the Corporation is required to file an initial insider report within ten (10) days of becoming an Insider and subsequent insider reports within ten (10) days following any change in its interest in any securities of the Corporation. If an Insider of the Corporation does not own or have control over or direction over securities of the Corporation, or if ownership or direction or control over securities of the Corporation remains unchanged from the last report filed, a report is not required.  In addition, such Insider is required to disclose in writing to the Disclosure Committee, any change in its interest in any securities of the Corporation within five (5) days of such change.

16.2

In addition, U.S. law imposes reporting requirements on persons who acquire beneficial ownership (as such term is defined in Rule 13d-3 under the U.S. Securities Exchange Act of 1934) of more than five per cent of the Corporation’s common shares.  In general, such persons must file, within 10 days after such acquisition, a report of beneficial ownership with the SEC containing the information prescribed by the regulations under Section 13 of the U.S. Securities Exchange Act of 1934.

17.

Penalties

When Board Members, Officers, Employees or Contractors are caught trading on Undisclosed Material Information it causes great embarrassment to the Corporation.  While regulatory authorities concentrate their efforts on the individuals who trade, or who tip inside information to others who trade, U.S. federal securities laws also impose potential liability on companies and other “controlling persons” if they fail to take reasonable steps to prevent insider trading by company personnel (see “Control Person Liability” below).  As a result, the Corporation may take its own disciplinary actions, which could result in termination of employment or implementation of a probationary

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period.  The Corporation will also report the matter to the appropriate regulatory authorities.

The prohibition against trading on Undisclosed Material Information as set forth in Canadian and U.S. securities legislation can be enforced through a wide range of penalties, including:

(a)

fines and penal sanctions;

(b)

civil actions for damages;

(c)

criminal penalties and incarceration;

(d)

an accounting to the Corporation for any benefit or advantage received; and

(e)

administrative sanctions by securities commissions, such as cease trade orders and removal of exemptions.

18.

U.S. “Control Person” Liability

In the U.S., the Corporation and its supervisory personnel, if they fail to take appropriate steps to prevent illegal insider trading, could be subject to civil and criminal penalties.

19.

Acknowledgment

Employees will be requested to sign the acknowledgement attached as Schedule “D” to this Policy.

Non-compliance with these policies is a serious breach of the terms and conditions of engagement and will be dealt with accordingly.

[DATE]

SCHEDULE “A”

Individuals and Entities to Whom This Policy Applies

“Board Members, Officers, Employees and Contractors” means a Board Member, an officer, an Employee or an independent contractor (who is engaged in an employee-like capacity) of the Corporation or its subsidiaries.  As described below, all Board Members, Officers, Employees and Contractors are also persons in a Special Relationship with the Corporation.

“Employee” means a full-time, part-time, contract or secondment employee of the Corporation or any of its subsidiaries.

“Head Office Employee” means an Employee who regularly works out of the Corporation’s head office location in Vancouver, British Columbia.

“Immediate Family Member” means any spouse, live-in partner or relative of a person who resides in the same household as that person, who does not live in that person’s household but whose transactions in Corporation securities are directed by, or are subject to the influence or control of, that person (such as parents or children who consult with such person before they trade in Corporation securities; they accordingly should be made aware of the need to confer with such person before they trade in the Corporation’s securities).

“Insider” means:

(1)

a Board Member or a Senior Officer of the Corporation;

(2)

a person who beneficially owns, directly or indirectly, more than 10% of the voting securities of the Corporation or who exercises control or direction over more than 10% of the votes attached to the voting securities of the Corporation (a “10% Shareholder”);

(3)

a Board Member or a Senior Officer of a subsidiary of the Corporation; or

(4)

a Board Member or a Senior Officer of a 10% Shareholder of the Corporation.

As described herein, all Insiders are also (1) Board Members, Officers, Employees and Contractors and (2) persons in a Special Relationship with the Corporation.

“Persons in a Special Relationship with the Corporation” means:

(1)

each Board Member, Officer, Employee and Contractor;

(2)

each 10% Shareholder;

(3)

each Board Member, officer, employee or contractor of a 10% Shareholder;

(4)

each member of an operating or advisory committee of the Corporation or its subsidiaries;

(5)

each Board Member, officer, partner and employee of a company that is engaging in any business or professional activity with the Corporation or its subsidiaries and who routinely comes into contact with Material Information;

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(6)

each person or company that learned of Material Information with respect to the Corporation from a person or company described in (1) though (5) of this definition and knew or ought reasonably to have known that the other person or company was in such a special relationship; and

(7)

any Immediate Family Member of any individual referred to in (1) through (6).

(8)

A company is considered to be a “Subsidiary” of another company if it is controlled by (1) that other, (2) that other and one or more companies, each of which is controlled by that other, or (3) two or more companies, each of which is controlled by that other; or it is a subsidiary of a company that is that other’s subsidiary. In general, a company will control another company when the first company owns more than 50% of the outstanding voting securities of that other company.

“Senior Officer” means:

(1)

the chair or a vice-chair of the Board  or any of its subsidiaries, the President, Chief Executive Officer, Chief Financial Officer, a Vice-President, the Corporate Secretary, the Treasurer or the Managing Director of the Corporation or any of its subsidiaries or any of their operating divisions; or

(2)

any other individual who performs functions for the Corporation or any of its subsidiaries similar to those normally performed by an individual occupying any of the offices listed in (1) above.

As described herein, all Senior Officers are also (1) Insiders, (2) Board Members, Officers, Employees and Contractors and (3) persons in a Special Relationship with the Corporation.

SCHEDULE “B”

Examples of Information That May Be Material
(Based on National Policy 51-201 and
Section 410 of the Toronto Stock Exchange Manual;
also consistent with American Stock Exchange Company Guide)

Changes in corporate structure

·

changes in share ownership that may affect control of the company

·

changes in corporate structure such as major reorganizations, amalgamations, or mergers

·

take-over bids, issuer bids, or insider bids

Changes in capital structure

·

the public or private sale of additional securities

·

planned repurchases or redemptions of securities

·

planned splits of common shares or offerings of warrants or rights to buy shares

·

any share consolidation, share exchange, or stock dividend

·

changes in a company’s dividend payments or policies

·

the possible initiation of a proxy fight

·

material modifications to the rights of security holders

Changes in financial results

·

a significant increase or decrease in near-term earnings prospects

·

unexpected changes in the financial results for any period

·

shifts in financial circumstances, such as cash flow reductions, major asset write-offs or write-downs

·

changes in the value or composition of the company’s assets

·

any material change in the company’s accounting policies

Changes in business and operations

·

any development that affects the company’s resources, reserves, technology, products or markets

·

a significant change in capital investment plans or corporate objectives

·

major labour disputes or disputes with major contractors or suppliers

·

significant new contracts, products, patents, or services or significant losses of contracts or business

·

significant discoveries by resource companies

·

changes to the Board of Directors or executive management, including the departure of the company’s CEO, CFO, COO or president (or persons in equivalent positions)

·

the commencement of, or developments in, material legal proceedings or regulatory matters

·

waivers of corporate ethics and conduct rules for officers, directors, and other key employees

·

any notice that reliance on a prior audit is no longer permissible

·

de-listing of the company’s securities or their movement from one quotation system or exchange to another

Acquisitions and dispositions

·

significant acquisitions or dispositions of assets, property or joint venture interests

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·

acquisitions of other companies, including a take-over bid for, or merger with, another company

Changes in credit arrangements

·

the borrowing or lending of a significant amount of money

·

any mortgaging or encumbering of the company’s assets

·

defaults under debt obligations, agreements to restructure debt, or planned enforcement procedures by a bank or any other creditors

·

changes in rating agency decisions

·

significant new credit arrangements

SCHEDULE “C”

Examples of Disclosures That May Be Necessary in the Course Of Business
(Reproduced from National Policy 51-201)

(1)

Disclosure to:

·

vendors, suppliers, or strategic partners on issues such as research and development, sales and marketing, and supply contracts

·

employees, officers and board members

·

lenders, legal counsel, auditors, underwriters, and financial and other professional advisors to the Corporation

·

parties to negotiations

·

labour unions and industry associations

·

government agencies and non-governmental regulators

·

credit rating agencies (provided that the information is disclosed for the purpose of assisting the agency to formulate a credit rating and the agency’s ratings generally are or will be publicly available)

(2)

Disclosures in connection with a private placement

(3)

Communications with controlling shareholders, in certain circumstances

SCHEDULE “D”

RECEIPT AND ACKNOWLEDGEMENT

I,

, hereby acknowledge that I have received and 

(Print Name)

read a copy of the “Timely Disclosure, Confidentiality and Insider Trading Policy” and agree to comply with its terms. I understand that violation of insider trading or tipping laws or regulations may subject me to severe civil and/or criminal penalties, and that violation of the terms of the above-noted policy may subject me to discipline by the Corporation up to and including termination.

Signature

Date

EX-31.1

EXHIBIT 12.1

SECTION 302 CERTIFICATION

I, Daniel T. MacInnis, certify that:

1. I have reviewed this annual report on Form 20-F of MAG Silver Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 15, 2007

/s/ “Daniel T. MacInnis”

Daniel T. MacInnis

Chief Executive Officer

EX-31.2

EXHIBIT 12.2

SECTION 302 CERTIFICATION

I, Frank R. Hallam, certify that:

1. I have reviewed this annual report on Form 20-F of MAG Silver Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 15, 2007

/s/ “Frank R. Hallam”

Frank R. Hallam

Chief Financial Officer

EX-32.1

EXHIBIT 13.1

SECTION 906 CERTIFICATION

In connection with the annual report of MAG Silver Corp. (the “Company”) on Form 20-F for the fiscal year ending December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel T. MacInnis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Daniel T. MacInnis

Name: Daniel T. MacInnis

Title: Chief Executive Officer

June 15, 2007

A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Form 20-F to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 20-F), irrespective of any general incorporation language contained in such filing.

EX-32.2

EXHIBIT 13.2

SECTION 906 CERTIFICATION

In connection with the annual report of MAG Silver Corp. (the “Company”) on Form 20-F for the fiscal year ending December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frank R. Hallam, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Frank R. Hallam

Name: Frank R. Hallam

Title: Chief Financial Officer

June 15, 2007

A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Form 20-F to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 20-F), irrespective of any general incorporation language contained in such filing.