MAG SILVER CORP. (An exploration stage company) Consolidated Financial Statements For the nine month period ended September 30, 2008 (Unaudited)
	Dated: November 14, 2008

A copy of this report will be provided to any shareholder who requests it.

VANCOUVER OFFICE Suite 328 550 Burrard Street Vancouver, BC V6C 2B5 604 630 1399 phone 866 630 1399 toll free 604 484 4710 fax TSX:MAG AMEX:MVG www.magsilver.com info@magsilver.com

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MAG SILVER CORP.
(An exploration stage company)
Consolidated Balance Sheets
(expressed in Canadian dollars)	Unaudited			Audited
	Sept. 30, 2008			Dec. 31, 2007
ASSETS
CURRENT
Cash and cash equivalents	$	59,195,741		$	60,147,307
Accounts receivable (Note 3)		2,138,193			647,027
Interest receivable		139,250			173,308
Marketable securities (Note 4)		6,038			-
Prepaid expenses		116,331			49,668
TOTAL CURRENT ASSETS		61,595,553			61,017,310
EQUIPMENT AND LEASEHOLDS (Note 5)		66,734			22,116
INVESTMENT IN MINERA JUANICIPIO S.A. DE C.V. (Note 6)		7,356,331			5,948,361
MINERAL RIGHTS (Note 7)		5,930,230			5,084,509
DEFERRED EXPLORATION COSTS (Note 7)		21,715,841			12,989,636
TOTAL ASSETS	$	96,664,689		$	85,061,932
LIABILITIES
CURRENT
Accounts payable and accrued liabilities	$	841,529		$	637,180
SHAREHOLDERS' EQUITY
Share capital (Note 8)
Authorized - unlimited common shares,
without par value
Issued and outstanding at Sept. 30, 2008 - 49,155,566
common shares (Dec.31, 2007 - 46,954,196)		107,023,016			91,105,640
Common share purchase warrants		-			2,218,444
Contributed surplus		9,490,575			7,879,650
Accumulated other comprehensive income		(366,081	)		(716,778	)
Deficit		(20,324,350	)		(16,062,204	)
TOTAL SHAREHOLDERS' EQUITY		95,823,160			84,424,752
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	96,664,689		$	85,061,932
CONTINUING OPERATIONS (Note 1)
ON BEHALF OF THE BOARD
"Derek White"
Derek White, Director
"R. Michael Jones"
R. Michael Jones, Director

See accompanying notes to the consolidated financial statements.

MAG SILVER CORP.
(An exploration stage company)
Consolidated Statements of Loss and Comprehensive Loss
(expressed in Canadian dollars - Unaudited)
	For the			For the			For the			For the
	three month			three month			nine month			nine month
	period ended			period ended			period ended			period ended
	Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
	2008			2007			2008			2007
EXPENSES
Accounting and audit	$	73,746		$	96,597		$	212,354		$	131,542
Amortization		8,627			3,586			27,706			10,471
Bank charges and interest		890			513			2,570			1,832
Filing and transfer agent fees		10,616			58,504			144,694			136,893
Foreign exchange (gain) loss		(23,730	)		(655	)		(88,405	)		16,358
Legal		155,245			24,597			239,110			153,978
Management, salary and consulting fees		305,333			171,988			925,971			594,532
Mineral property costs written off (Note 7.(g))		-			-			1,221,019			750,277
Property investigation expense		4,107			44,591			4,107			44,591
Shareholder relations		94,293			54,624			229,617			293,531
Stock compensation expense		46,105			-			2,445,726			2,747,555
Telephone and office		85,862			86,112			375,428			279,596
Travel		66,112			22,026			173,082			151,750
		827,206			562,483			5,912,979			5,312,906
LOSS BEFORE THE FOLLOWING		(827,206	)		(562,483	)		(5,912,979	)		(5,312,906	)
INTEREST INCOME		446,078			211,108			1,650,833			527,665
NET LOSS FOR THE PERIOD	$	(381,128	)	$	(351,375	)	$	(4,262,146	)	$	(4,785,241	)
OTHER COMPREHENSIVE INCOME
CURRENCY TRANSLATION ADJUSTMENT		(176,183	)		-			355,229			-
UNREALIZED LOSS ON MARKETABLE
SECURITIES		(3,877	)		-			(4,532	)		-
COMPREHENSIVE LOSS FOR THE PERIOD	$	(561,188	)	$	(351,375	)	$	(3,911,449	)	$	(4,785,241	)
BASIC AND DILUTED
LOSS PER SHARE	$	(0.01	)	$	(0.01	)	$	(0.08	)	$	(0.12	)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING		49,154,630			43,613,863			48,669,056			41,573,736

See accompanying notes to the consolidated financial statements.

MAG SILVER CORP.
(An exploration stage company)
Consolidated Statements of Shareholders' Equity
(expressed in Canadian dollars - Unaudited)																	Deficit
														Accumulated			accumulated
	Common shares				Common share									other			during the			Total			Total
	without par value				purchase warrants						Contributed			comprehensive			exploration			Deficit			shareholders'
	Shares		Amount		Number			Amount			Surplus			income("AOCI")			stage			and "AOCI"			equity
Balance, December 31, 2006		37,928,610	$	23,433,942		-		$	-		$	3,059,194		$	-		$	(7,912,946	)	$	(7,912,946	)	$	18,580,190
Issued for cash (Note 8 (a))		5,760,000		59,955,443		1,380,000			2,692,571			-			-			-			-			62,648,014
Warrants exercised		2,883,486		6,468,783		(243,000	)		(474,127	)		-			-			-			-			5,994,656
Stock options exercised		382,100		1,247,472		-			-			(436,110	)		-			-			-			811,362
Stock options granted		-		-		-			-			5,256,566			-			-			-			5,256,566
Translation adjustment		-		-		-			-			-			(716,778	)		-			(716,778	)		(716,778	)
Net loss		-		-		-			-			-			-			(8,149,258	)		(8,149,258	)		(8,149,258	)
Balance, December 31, 2007		46,954,196		91,105,640		1,137,000			2,218,444			7,879,650			(716,778	)		(16,062,204	)		(16,778,982	)		84,424,752
Issued for cash		-		11,936		-			-			-			-			-			-			11,936
Warrants exercised		1,137,000		13,588,444		(1,137,000	)		(2,218,444	)		-			-			-			-			11,370,000
Stock options exercised		1,064,370		2,316,996		-			-			(834,801	)		-			-			-			1,482,195
Stock options granted		-		-		-			-			2,445,726			-			-			-			2,445,726
Translation adjustment		-		-		-			-			-			355,229			-			355,229			355,229
Unrealized loss on marketable
securities		-		-		-			-			-			(4,532	)		-			(4,532	)		(4,532	)
Net loss		-		-		-			-			-			-			(4,262,146	)		(4,262,146	)		(4,262,146	)
Balance, September 30, 2008		49,155,566	$	107,023,016		-		$	-		$	9,490,575		$	(366,081	)	$	(20,324,350	)	$	(20,690,431	)	$	95,823,160

See accompanying notes to the consolidated financial statements.

`

MAG SILVER CORP.
(An exploration stage company)
Consolidated Statements of Cash Flows
(expressed in Canadian dollars - Unaudited)
	For the			For the			For the			For the
	three month			three month			nine month			nine month
	Period ended			Period ended			Period ended			Period ended
	June 30,			Sept. 30,			Sept. 30,			Sept. 30,
	2008			2007			2008			2007
OPERATING ACTIVITIES
Net loss for the period	$	(381,128	)	$	(351,375	)	$	(4,262,146	)	$	(4,785,241	)
Items not involving cash:
Amortization		8,627			3,586			27,706			10,471
Mineral property costs written off (Note 7 (g))		-			-			1,221,019			750,277
Stock compensation expense		46,105			-			2,445,726			2,747,555
Changes in operating assets and liabilities
Accounts receivable		(381,110	)		(213,744	)		(1,491,166	)		(445,690	)
Interest receivable		15,654			(192,772	)		34,058			(370,533	)
Prepaid expenses		(35,725	)		28,557			(66,663	)		(14,927	)
Accounts payable and accrued liabilities		1,114			(383,925	)		(156,651	)		(129,176	)
		(726,463	)		(1,109,673	)		(2,248,117	)		(2,237,264	)
INVESTING ACTIVITIES
Purchase of equipment and leasehold improvements		(7,051	)		(642	)		(72,324	)		(2,291	)
Purchase of marketable securities		-						(10,570	)
Investment in Juanicipio JV		(95,781	)		(15,781	)		(1,052,741	)		(87,467	)
Mineral rights		(322,567	)		(280,765	)		(1,063,556	)		(772,224	)
Deferred exploration costs		(4,476,847	)		(1,068,483	)		(9,368,389	)		(3,388,257	)
		(4,902,246	)		(1,365,671	)		(11,567,580	)		(4,250,239	)
FINANCING ACTIVITIES
Issue of share capital		8,484			275,695			12,864,131			22,717,644
		8,484			275,695			12,864,131			22,717,644
INCREASE IN CASH		(5,620,225	)		(2,199,649	)		(951,566	)		16,230,141
CASH AND EQUIVALENTS, BEGINNING OF PERIOD		64,815,966			21,936,720			60,147,307			3,506,930
CASH AND EQUIVALENTS, END OF PERIOD
	$	59,195,741		$	19,737,071		$	59,195,741		$	19,737,071
CASH AND EQUIVALENTS WERE COMPRISED OF:
Cash	$	59,195,741		$	611,821		$	59,195,741		$	611,821
Short-term deposits		-			19,125,250			-			19,125,250
	$	59,195,741		$	19,737,071		$	59,195,741		$	19,737,071

MAG SILVER CORP.

(An exploration stage company)

Notes to the Consolidated Financial Statements (Unaudited)

1.           CONTINUING OPERATIONS

MAG Silver Corp (“the Company” or “MAG”)) was incorporated on April 21, 1999 under the Company Act of the Province of British Columbia and its shares were listed on the TSX Venture Exchange on April 21, 2000. On October 5, 2007 the Company moved to the TSX.

The Company is an exploration company working on mineral properties it has staked or acquired by way of option agreement principally in Mexico. The Company has not yet determined whether these mineral properties contain any economically recoverable ore reserves. 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 unaudited interim 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.

These unaudited interim consolidated financial statements do not include all the information and disclosures required by Canadian GAAP for annual consolidated financial statements. They have been prepared using the same accounting policies and methods of applications as the latest annual consolidated financial statements. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation have been made. The results for interim periods are not necessarily indicative of results for the entire year. The information contained in these unaudited interim financial statements should be read in conjunction with the Company’s latest audited consolidated financial statements for the year ended December 31, 2007.

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.           ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

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

On January 1, 2008, the Company adopted four new presentation and disclosure standards that were issued by the Canadian Institute of Chartered Accountants: Handbook Section 1535, Capital Disclosures ("Section 1535"), Handbook Section 3031, Inventories – (“Section 3031”), Handbook Section 3862, Financial Instruments - Disclosures ("Section 3862") and Handbook Section 3863, Financial Instruments - Presentation ("Section 3863"). These standards were adopted on a prospective basis without restatement of prior periods.

 (i)           Accounting Changes – Section 1506

Section 1506, Accounting Changes, prescribes the criteria for changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. This Section allows for voluntary changes in accounting policies only if they result in the financial statements providing reliable and more relevant information. In addition, this Section requires entities to disclose the fact that they did not apply a primary source of GAAP that have been issued but not yet effective. The adoption of this Section had no impact on the consolidated financial position or results of operations for the nine months ended September 30, 2008.

 (ii)           Capital disclosures – Section 1535

Section 1535, Capital Disclosures, establishes disclosure requirements regarding an entity’s capital, including (i) an entity’s objectives, policies, and processes of managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any externally imposed capital requirements; and (iv) if it has not complied, the consequences of such non-compliance. The new standard has had no impact on the consolidated financial position or results of operations for the nine months ended September 30, 2008.

(iii)           Financial instrument – Sections 3862 and 3863

Section 3862, Financial Instruments – Disclosures and Section 3863 Financial Instruments – Presentation replace Section 3861 Financial Instruments – Disclosure and Presentation. These new sections revise and enhance disclosure requirements while leaving presentation requirements unchanged. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the entity manages those risks. The new standards have had no impact on the consolidated financial position or results of operations for the nine months ended September 30, 2008. Refer to the additional sensitivity disclosure in Note 10.

(iv)           Inventories – Section 3031

Section 3031, Inventories, provides more guidance on the measurement and disclosure requirements for inventories. Specifically the new pronouncement requires inventories to be measure at the lower of cost or net realizable value, and provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realizable value. The new standard has had no impact on the consolidated financial position or results of operations for the nine months ended September 30, 2008.

 Recent Accounting Pronouncements

Goodwill and Intangible Assets

In February 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, replacing Section 3062, Goodwill and Other Intangible Assets and Section 3450, Research and Development Costs. The new pronouncement establishes standards for the recognition, measurement, presentation, and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. This Section is effective in the first quarter of 2009, and the Company is currently evaluating the impact of the adoption of this new Section on its consolidated financial statements.

Convergence with International Financial Reporting Standards

In February 2008, the Canadian Accounting Standards Board confirmed that publicly accountable enterprises will be required to adopt IFRS for fiscal years beginning on or after January 1, 2011, with earlier adoption permitted. Accordingly, the conversion to IFRS will be applicable to the Company’s reporting no later than in the first quarter of 2011, with restatement of comparative information presented. The conversion to IFRS will impact the Company’s accounting policies, information technology and data systems, internal control over financial reporting, and disclosure controls and procedures. The transition may also impact business activities, such as foreign currency activities, certain contractual arrangements, capital requirements and compensation arrangements. The Company is currently evaluating the future impact of IFRS on its financial statements and will continue to invest in training and additional resources to ensure a timely conversion.

3.           ACCOUNTS RECEIVABLE

	Sept. 30, 2008		Dec. 31, 2007
Goods and services tax recoverable	$	36,305	$	50,314
Mexican value added tax ("IVA") recoverable		2,094,590		596,713
Other		7,298		-
	$	2,138,193	$	647,027

4.   MARKETABLE SECURITIES

At September 30, 2008, the Company has the following marketable securities:

Available-for-sale securities	Number of Shares		Cost ($)		Accumulated Unrealized Losses ($)		Fair Value ($)
Fresnillo PLC		1,000		10,570		4,532		6,038

During the nine month period ended September 30, 2008 the Company recognized an unrealized loss of $4,532 (2007 - $nil) on marketable securities designated as available-for-sale instruments in other comprehensive income.

Fresnillo PLC

In 2008 the Company purchased 1,000 shares of Fresnillo PLC a company which holds a 56% interest in Minera Juanicipio, S.A. DE C.V. (Note 6)

5.   EQUIPMENT AND LEASEHOLDS

			September 30,				December 31,
	2008						2007
			Accumulated		Net book		Net book
	Cost		depreciation		value		value
Computer equipment
and software	$	48,664	$	26,813	$	21,851	$	12,603
Field equipment		67,201		35,021		32,180		9,513
Leasehold improvements		26,084		13,381		12,703		-
	$	141,949	$	75,215	$	66,734	$	22,116

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 two year term of the related lease.

6.           INVESTMENT IN MINERA JUANICIPIO S.A. DE C.V.

Pursuant to an original option agreement dated July 18, 2002 and subsequent corporate acquisitions the Company acquired a 100% interest in the Juanicipio Property in exchange for total consideration of $919,458. Of this amount, $656,125 was paid in cash and 366,667 common shares of the Company were issued at a value of $263,333.

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 granted to Peñoles or any of its subsidiaries an option to earn a 56% interest in the Juanicipio Property in Mexico in consideration for Peñoles conducting US $5,000,000 of exploration on the property over four years and Peñoles purchasing US $1,000,000 of Common Shares of the Company in two tranches for US$500,000 each.

In mid 2007 Peñoles met all of the earn-in requirements of the Agreement.  In December 2007 the Company and Peñoles created an operating company named Minera Juanicipio, S.A. de C.V. (“Minera Juanicipio”) for the purpose of holding and operating the Juanicipio Property. In 2008 Peñoles restructured and transferred its 56% interest of Minera Juanicipio into a new company called Compania Fresnillo S.A. de C.V.  (“Fresnillo”).  Minera Juanicipio is held as to 56% by Fresnillo and 44% by the Company.  In December 2007 all mineral rights and surface rights relating to the

Juanicipio project held by the Company and Peñoles, respectively, were ceded into Minera Juanicipio.  Minera Juanicipio is currently operated according to the terms and conditions of a shareholders agreement.  All costs relating to the project and Minera Juanicipio will be shared by the Company and Fresnillo pro-rata based on their ownership interests in Minera Juanicipio.

To capitalize Minera Juanicipio the Company invested 63.40 million pesos ($6.025 million) into Minera Juanicipio while Peñoles invested 80.69 million pesos ($7.668 million). MAG then received a payout from Minera Juanicipio of 26.41 million pesos ($2.510 million) against its contribution of the Juanicipio mineral rights while Peñoles received 70.28 million pesos ($6.679 million) against its contribution of surface rights and the Company’s 44% share of exploration costs incurred by Peñoles subsequent to the completion of their earn-in and up to December 31, 2007.

The Company has recorded its investment in the Minera Juanicipio using the equity basis of accounting. The cost of the investment includes the carrying value of the deferred exploration and mineral and surface rights costs incurred by the Company on the Juanicipio Property and contributed to Minera Juanicipio plus the required net cash investment to establish its 44% interest.

Effective December 31, 2007 the Company concluded that the functional currency of Minera Juanicipio was the Mexican peso as expenditures in Minera Juanicipio were principally being incurred in pesos and funded by advances from the venturers which were denominated in pesos. The Company translates its net investment in Minera Juanicipio using the current rate method with translation gains and losses recorded in other comprehensive loss which is a component of shareholders’ equity, until there is a realized reduction in the net investment.

The Company’s 44% interest in Minera Juanicipio is detailed as follows:

	Sept. 30, 2008		Dec. 31,2007
Camp costs	$	10,211	$	13,108
Geochemical		-		-
Geological		81,715		66,190
Geophysical		8,163		10,905
Gov't fees and licenses		10,238		8,764
Travel		3,207		3,906
Site administration		1,312		2,292
Cash contributions to the Minera Juanicipio		937,895		6,025,018
		1,052,741		6,130,183
Balance, beginning of year		5,948,361		3,044,509
	$	7,001,102	$	9,174,692
Recoveries		-		(2,509,553	)
Translation adjustment		355,229		(716,778	)
Balance, end of period	$	7,356,331	$	5,948,361

At September 30, 2008 the assets of Minera Juanicipio consisted of cash and short term investments in the amount of 4.74 million pesos ($457,308), IVA and other receivables in the amount of 9.90 million pesos ($0.96 million) and mineral, surface rights and exploration expenditures in the amount of 152.88 million pesos ($14.77 million).  Payables to Peñoles and other vendors for exploration work amounted to 1.42 million pesos ($137,000) while shareholders equity was 166.10 million pesos ($16.04 million).

7.           MINERAL RIGHTS AND DEFERRED EXPLORATION COSTS

	Nine month period ended September 30, 2008
	(Batopilas)								Sierra de		Cinco de
	Don Fippi		Guigui		Lagartos NW		Lagartos SE		Ramirez		Mayo		Sello			Other		Total
Acquisition costs of
mineral rights
Bal., beginning of year	$	1,422,672	$	1,571,172	$	50,032	$	-	$	800,736	$	610,448	$	105,852		$	523,597	$	5,084,509
Incurred during period		-		-		-		36,842		244,257		592,122		12,983			78,352		964,556
Less amounts written off		-		-		-		-		-		-		(118,835	)		-		(118,835	)
Balance, end of period	$	1,422,672	$	1,571,172	$	50,032	$	36,842	$	1,044,993	$	1,202,570	$	-		$	601,949	$	5,930,230
Deferred exploration costs
Camp costs	$	87,005	$	-	$	23,096	$	45,791	$	14,803	$	237,260	$	13,429		$	42,376	$	463,760
Drilling		921,580		-		796,534		4,940		-		4,557,172		485,327			2,616		6,768,169
Geochemical		50,857		-		4,672		24,687		-		267,815		13,584			2,124		363,739
Geological		240,875		-		91,636		109,870		43,878		519,905		48,665			146,874		1,201,703
Geophysical		61,464		-		8,163		1,697		2,063		110,573		-			-		183,960
Gov't fees and licenses		8,958		12,661		164,433		205,307		37,666		76,869		27,424			92,424		625,742
Site administration		13,251		-		6,501		7,035		4,036		31,741		2,535			8,892		73,991
Travel		33,222		-		6,219		10,500		10,659		44,398		6,696			27,889		139,583
Transport and shipping		2,651		-		813		635		-		3,441		50			152		7,742
		1,419,863		12,661		1,102,067		410,462		113,105		5,849,174		597,710			323,347		9,828,389
Bal., beginning of year		3,344,413		1,450,400		120,853		4,220,148		434,628		2,775,679		504,474			139,041		12,989,636
Less amounts written off		-		-		-		-		-		-		(1,102,184	)		-		(1,102,184	)
Balance, end of period	$	4,764,276	$	1,463,061	$	1,222,920	$	4,630,610	$	547,733	$	8,624,853	$	-		$	462,388	$	21,715,841

	Three month period ended September 30, 2008
	(Batopilas)								Sierra de		Cinco de
	Don Fippi		Guigui		Lagartos NW		Lagartos SE		Ramirez		Mayo		Sello		Other		Total
Acquisition costs of
mineral rights
Bal., beginning of period	$	1,422,672	$	1,571,172	$	50,032	$	29,443	$	1,005,573	$	945,804	$	-	$	582,967	$	5,607,663
Incurred during period		-		-		-		7,399		39,420		256,766		-		18,982		322,567
Less amounts written off		-		-		-		-		-		-		-		-		-
Balance, end of period	$	1,422,672	$	1,571,172	$	50,032	$	36,842	$	1,044,993	$	1,202,570	$	-	$	601,949	$	5,930,230
Deferred exploration costs
Camp costs	$	14,120	$	-	$	3,514	$	18,604	$	4,701	$	102,779	$	-	$	21,937	$	165,655
Drilling		67,531		-		75,656		102		-		2,262,094		-		2,616		2,407,999
Geochemical		12,385		-		3,243		3,094		-		164,653		-		44		183,419
Geological		51,252		-		28,441		41,610		11,342		285,833		-		93,816		512,294
Geophysical		2,623		-		2,546		1,697		849		33,994		-		-		41,709
Gov't fees and licenses		3,506		6,461		88,113		100,785		18,879		41,051		-		45,209		304,004
Site administration		2,870		-		1,670		2,196		3,324		14,968		-		3,710		28,738
Travel		4,604		-		2,717		3,568		1,740		15,625		-		4,288		32,542
Transport and shipping		385		-		16		13		-		70		-		3		487
		159,276		6,461		205,916		171,669		40,835		2,921,067		-		171,623		3,676,847
Bal., beginning of period		4,605,000		1,456,600		1,017,004		4,458,941		506,898		5,703,786		-		290,765		18,038,994
Less amounts written off		-		-		-		-		-		-		-		-		-
Balance, end of period	$	4,764,276	$	1,463,061	$	1,222,920	$	4,630,610	$	547,733	$	8,624,853	$	-	$	462,388	$	21,715,841

7.           MINERAL RIGHTS AND DEFERRED EXPLORATION COSTS (continued)

(a)         Don Fippi (Batopilas) Property

The Company has a 100% interest in the Don Fippi 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. To September 30, 2008 the Company has incurred $4,764,276 in exploration costs on the property.

(b)           Guigui Property

The Company has 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. To September 30, 2008 the Company has incurred $1,463,061 in exploration costs on the property.

(c)           Lagartos Properties

The Company has acquired 100% interest in 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.

During the period ended September 30, 2008, the Company entered into an option agreement to acquire 100% interest in certain mining concessions internal to the Lagartos SE property. The Company is obligated to make scheduled cash payments totalling US$500,000 (of which US$30,000 has been paid) to June 10, 2011.

To September 30, 2008 the Company has incurred $1,222,920 in exploration costs on the Lagartos NW property and $4,630,610 in exploration costs on the Lagartos SE property.

(d)           Sierra Ramirez Property

Under a 2003 agreement, as later amended in 2006, the Company has an option to acquire a 100% interest in certain mining concessions located in the Sierra Ramirez district in Durango, Mexico. 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 (of which US$200,000 has been paid or accrued) 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.  The Company also paid a finder’s fee of 25,000 common shares of the Company in relation to this property.  To September 30, 2008 the Company has incurred $547,733 in exploration costs on the property.

During the year ended December 31, 2007, the Company entered into four separate option agreements to acquire 100% interest in certain mining concessions all of which are internal to the Sierra Ramirez property. The Company is obligated to make scheduled cash payments totalling US$5,537,325 (of which US$316,875 has been paid) to January 21, 2012.

  (e)           Adargas Property

On February 14, 2004 the Company entered into an option agreement to acquire a 100% interest in the Adargas property. During the period ended June 30, 2007 the Company terminated its option agreement, and consequently, total deferred acquisition and exploration costs of $750,277 were written-off.

 (f)           Cinco de Mayo Property

On February 26, 2004 the Company entered into an option agreement 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. Under the terms of the agreement, as later amended, the Company was obligated to make scheduled cash and share payments together worth US$1,000,000 (US$650,000 in cash and share payments made) and incur certain exploration expenditures totalling US$1,000,000 by July 26, 2009 (incurred). To September 30, 2008 the Company paid US$550,000 in cash, issued 165,670 common shares at a value of $266,630 and completed approximately $8,624,853 in exploration costs.

During the period ended September 30, 2008, the Company acquired 100% interest in certain mining concessions internal to the Cinco de Mayo property from two separate vendors. The Company made a one-time payment of US$350,000 for these mining concessions.

(g) Sello Property

On December 8, 2006 the Company entered into an agreement to acquire a 100% interest in the Sello and Sello Uno claims located in Zacatecas State, by making scheduled option payments totalling US$1,000,000 plus applicable value added tax over a three year period (of which US$50,000 has been paid to March 31, 2008). During the current year the Company entered into an agreement to acquire a 100% interest in the El Oro claims located in Zacatecas State, by making scheduled option payments totalling US$125,000 plus applicable value added tax over one year (of which US$62,500 was paid to March 31, 2008). It was decided in April 2008 that the Company would terminate these option agreements, and consequently, total deferred acquisition and exploration costs of $1,221,019 were written-off as of June 30, 2008.

(h)           Other Properties

During the years ending December 31, 2007 and December 31, 2006 the Company optioned other exploration concessions on several mining claims. To September 30, 2008 the Company has paid $601,949 in acquisition costs. The Company has a US$100,000 option payment remaining on December 8, 2008.

During the period ended September 30, 2008, the Company optioned additional exploration concessions in Mexico. The Company is obligated to make scheduled cash payments totalling US$1,300,000 (of which US$60,000 has been paid) to June 12, 2013.

8.           SHARE CAPITAL

(a)           Issued and outstanding

During the period ended September 30, 2008 1,137,000 share purchase warrants were exercised for proceeds of $11,370,000 and 1,064,370 stock options were exercised for cash proceeds of $1,482,195.

During the year ended December 31, 2007 2,883,486 share purchase warrants were exercised for proceeds of $5,994,656 and 382,100 stock options were exercised for cash proceeds of $811,362.

On November 27, 2007 the Company closed a brokered private placement for 3,000,000 common shares of the Company at a price of $15.50 per share for gross proceeds of $46,500,000. The Company paid a 5.0% commission to the underwriters on this placement. Legal, syndicate, and filing costs totaled an additional $208,484.

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 was 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 until February 14, 2008. $15,999,799 of the gross proceeds was assigned to the common shares included in the units and $2,487,701 to the warrants. The Company paid 6.0% cash commission to the underwriters on this placement. Legal, syndicate, and filing costs totaled an additional $127,902.

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 until February 14, and 15, 2008.  $1,317,630 of the gross proceeds was assigned to the common shares included in the units and $204,870 to the warrants. The Company paid a 6.0% finder’s fee on this placement comprised of $91,350 in cash.

 (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 at September 30, 2008:

		Number		Weighted average		Weighted
		outstanding at		remaining		average
Exercise		Sept. 30,		contractual life		exercise
price		2008		(years)		price
$	1.00		60,000		2.17		1.00
	1.06		525,000		1.30		1.06
	1.14		15,000		2.01		1.14
	2.00		50,000		2.71		2.00
	2.46		145,000		2.81		2.46
	3.00		505,000		2.35		3.00
	3.12		18,000		2.92		3.12
	3.56		13,000		2.47		3.56
	4.04		152,830		2.50		4.04
	5.36		477,500		3.20		5.36
	7.56		35,000		3.32		7.56
	7.62		50,000		4.98		7.62
	8.80		200,000		3.40		8.80
	9.40		45,000		3.50		9.40
	10.01		241,202		4.75		10.01
	12.91		279,875		4.37		12.91
	13.75		25,000		4.02		13.75
	14.15		425,000		4.04		14.15
	14.70		50,000		3.84		14.70
			3,312,407		3.06	$	6.60

At September 30, 2008 a total of 3,243,657 of the outstanding share options were exercisable, having a weighted average remaining contractual life of 3.05 years and a weighted average exercise price of $6.54.

At the date the Agreements are entered into, the exercise price of each option is set no lower than the fair value of the common shares at the date of grant.

The following table summarizes the Company’s options:

	Period ended			Weighted		Period ended			Weighted
	Sept. 30,			average		Sept. 30,			average
	2008			exercise		2007			exercise
				price					price
Balance outstanding,
beginning of year		3,805,700		$	4.44		3,352,800		$	2.31
Activity during the period
Options granted		578,765			11.23		385,000			9.37
Options cancelled		(7,688	)		11.75		-			-
Options exercised		(1,064,370	)		1.39		(315,300	)		1.29
Balance outstanding,
end of period		3,312,407		$	6.59		3,422,500		$	2.99

During the period ended September 30, 2008 the Company granted 578,765 stock options, and later cancelled 7,688 of these, (September 30, 2007 – 385,000). The Company has recorded $2,445,726 (September 30, 2007 - $2,747,555) of compensation expense relating to stock options vested to employees and consultants in the period ended September 30, 2008.

For the period ended September 30, 2008, 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 49%, an annual risk free interest rate of 3.37% and expected lives of three years.  (September 30, 2007 – assuming: no dividends are to be paid, a weighted average volatility of the Company’s share price of 84%, an annual risk free interest rate of 4.11% and expected lives of three years.)

 (c)           Share purchase warrants

				Weighted
				average
	Number			exercise
	of warrants			price
Balance at December 31, 2006		2,640,486			1.35
Issued in connection with issuance of common
shares		1,380,000			10.00
Exercised and converted into common shares		(2,883,486	)		2.08
Balance at December 31, 2007		1,137,000		$	10.00
Exercised and converted into common shares		(1,137,000	)		10.00
Balance at September 30, 2008		-		$	-

9.           CAPITAL RISK MANAGEMENT

The Company’s objectives in managing its liquidity and capital are to safeguard the Company’s ability to continue as a going concern and provide financial capacity to meets its strategic objectives. The capital structure of the Company consists of equity attributable to common shareholders, comprising of issued share capital, common share purchase warrants, contributed surplus, accumulated other comprehensive income and accumulated deficit.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets.

In order to facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the Board of Directors. The Company does not pay out dividends.

As at September 30, 2008, the Company does not have any long-term debt and is not subject to any externally imposed capital requirements.

The Company expects its current capital resources will be sufficient to carry its exploration and development plans and operations through its current operating period.

10.           FINANCIAL RISK MANAGEMENT

The Company’s operations consist of the acquisition, exploration and development of district scale projects in the Mexican silver belt. The Company examines the various financial risks to which it is exposed and assesses the impact and likelihood of occurrence. These risks may include credit risk, liquidity risk, currency risk, interest rate risk and other price risks. Where material, these risks are reviewed and monitored by the Board of Directors.

(a)           Credit risk

Counterparty credit risk is the risk that the financial benefits of contracts with a specific counterparty will be lost if a counterparty defaults on its obligations under the contract. This includes any cash amounts owed to the Company by those counterparties, less any amounts owed to the counterparty by the Company where a legal right of set-off exists and also includes the fair values of contracts with individual counterparties which are recorded in the financial statements.

(i)           Trade credit risk

The Company is in the exploration stage and has not yet commenced commerical production or sales. Therefore, the Company is not exposed to significant credit risk and overall the Company’s credit risk has not changed significantly from the prior year.

(ii)           Cash and cash equivalents

In order to manage credit and liquidity risk we invest only in highly rated investment grade instruments that have maturities of three months or less. Limits are also established based on the type of investment, the counterparty and the credit rating.

(iii)           Derivative financial instruments

As at September 30, 2008, the Company has no derivative financial instruments. We may in the future enter into derivative financial instruments and in order to manage credit risk, we will only enter into derivative financial instruments with highly rated investment grade counterparties.

(b)           Liquidity risk

The Company has in place a planning and budgeting process to help determine the funds required to support the Company's normal operating requirements and its exploration and development plans. The annual budget is approved by the Board of Directors. The Company ensures that there are sufficient cash balances to meet its short-term business requirements.

The Company's overall liquidity risk has not changed significantly from the prior year.

(c)           Currency risk

The Company’s functional currency is the Canadian dollar and therefore the Company's net earnings and other comprehensive earnings are impacted by fluctuations in the value of foreign currencies in relation to the Canadian dollar. The Company's foreign currency exposures comprise limited amounts of cash and cash equivalents and accounts payable and accrued liabilities denominated in Mexican pesos and United States dollars. 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 United States dollars. The Company does not use any derivative instruments to reduce its exposure to fluctuations in foreign exchange rates.  Appreciation in the Mexican peso or the United States dollar against the Canadian dollar will increase our cost of operations. A decrease in the United States dollar or the Mexican peso against the Canadian dollar will result in a loss on our books to the extent we hold funds in either currency. The Company is also exposed to inflation risk in Mexico.

The sensitivity of the Company's net loss and other comprehensive loss for the nine months ended September 30, 2008 due to changes in the exchange rate for the Mexican peso in relation to the Canadian dollar is summarized in the following table expressed as the increase in the net loss and comprehensive loss for each 10% appreciation in the Canadian dollar:

Net Loss	$	206,420
Other comprehensive loss		568,044
Comprehensive loss	$	774,464

A 10% depreciation in the Canadian dollar against the Mexican peso would have a similar decrease in net loss.

 (d)           Interest rate risk

The Company’s interest revenue earned on cash and cash equivalents and on short term investments is exposed to interest rate risk.

11.           FAIR VALUE DISCLOSURES

The carrying values of cash and cash equivalents and accounts payable reported in the consolidated balance sheet approximate their respective fair values.

12.           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.

13.           RELATED PARTY TRANSACTIONS

For the three and nine months ended September 30, 2008 a private company controlled by an officer of the Company received $33,127 and $159,382 in compensation for consulting services (2007 - $30,960 and $132,880) including an annual performance bonus of $60,000 (2007 - $40,000)

For the period ended September 30, 2008 the Company’s CFO received $50,000 in compensation as a bonus for management services (2007 - $Nil).

The Company paid or accrued non-executive directors fees of $31,500 and $134,000 during the three and nine months ended September 30, 2008 (2007 - $Nil and $96,750).

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 period ended September 30, 2008 the Company accrued or paid Cascabel and IMDEX consulting, administration and travel fees totaling $118,186 (2007 - $102,223) and exploration costs totaling $1,804,955 (2007 - $909,631) 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., a company with a common director and common officer. During the three and nine months ended September 30, 2008 the Company accrued or paid Platinum Group Metals Ltd. $33,810 and $101,701 under the office service agreement (2007 - $34,110 and $102,305).

During the year ended December 31, 2007, the Company entered into a new two year office lease agreement with Anthem Works Ltd. (“Anthem”), a company with a common director.  During the three and nine months ended September 30, 2008 the Company accrued or paid Anthem $20,822 and $61,917 under the office lease agreement (2007 - $20,478 and $51,645).

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.

14.           CONTINGENCIES AND COMMITMENTS

The Company’s minimum payments under its office lease agreement which was entered into during the year ended December 31, 2007, are as follows:

2008		19,507
2009		58,519
	$	78,026

15.           SUBSEQUENT EVENTS

Subsequent to September 30, 2008, the Company issued 50,000 stock options at a price of $7.62.  These options vest with the first 10,000 vesting November 23, 2008 and every 30 days thereafter for four months.

Subsequent to September 30, 2008, Minera Los Lagartos, a wholly owned subsidiary of the Company, entered into an Option Agreement with Cascabel for the exclusive and irrevocable right to explore and acquire a one hundred percent (100%) right and interest in the Picucha Claims in the Salemex District of Mexico.  The terms of the agreement include an initial payment of $225,000 and subsequent payments amounting to $1,000,000 over the period of five years from the acceptance date.