2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Exploration Stage Accounting

The Company is an exploration stage company, as defined in pronouncements of the Financial Accounting Standards Board (FASB) and Industry Guide #7 of the Securities and Exchange Commission. Generally accepted accounting principles govern the recognition of revenue by an exploration stage enterprise and the accounting for costs and expenses. From Inception (January 21, 1998) to May 31, 2012, the Company has been in the exploration stage and all its efforts have been devoted to acquiring mining rights, drilling, mapping, and assaying. No revenue had been realized through May 31, 2012. The Company has incurred cash and non-cash losses to May 31, 2012 of $24,550,629.

b. Consolidated Statements

The consolidated financial statements include the accounts of the Company and the Mexican Sub. All significant intercompany balances and transactions have been eliminated in consolidation.

c. Cash Equivalents

The Company considers all short term investments purchased with an original maturity of three months or less to be cash equivalents.

d. Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash, a small portion of which is located in Mexico.

e. Recognition of Revenue

Revenue will be recognized when persuasive evidence of an arrangement exists, such as when a purchase order or contract is received from a customer, the price is fixed, title to the goods has passed, and there is reasonable assurance of collection. The Company has not yet entered into any contractual arrangement to deliver product or services.

f. Fair Value of Financial Instruments

The carrying amounts of the Company's financial instruments, which include cash, accounts payable, and convertible notes payable, approximate their fair values at May 31, 2012. The carrying amount of convertible notes payable approximates their fair value due to their short term maturities.

g. Fixed Assets

Fixed assets are recorded at cost. Depreciation is calculated on the straight line basis, based on the useful or productive lives of assets, ranging from three years for computer equipment to seven years for machinery and equipment.

h. Investments in Mining Rights

Mining rights held for development are recorded at the cost of the rights, plus related acquisition costs. These costs will be amortized when extraction begins.

i. Mine Development Costs

Mine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit surface mines and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines. Costs incurred at a mine site before proven reserves have been established are expensed as mine development costs. At the point proven reserves have been established at a mine site, such costs will be capitalized and will be written off as depletion expense as the minerals are extracted.

As of May 31, 2012, none of the mine concessions met the requirements for qualification as having proven reserves.

j. Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is expected to be realized. At May 31, 2012 and 2011, based upon its evaluation, the Company had a full valuation allowance against its deferred tax assets.

j. Income Taxes cont.

The Company files an income tax return in the U.S. federal jurisdiction and Florida. Tax returns since fiscal 2007 remain open for examination. The Company accounts for uncertainty in income taxes in accordance with ASC Topic 740, "Income Taxes". The Company's estimate of the potential outcome of any uncertain tax issues is subject to management's assessment of relevant risks, facts, and circumstances existing at that time. The Company uses a more likely than not threshold for financial statement recognition and measurement of tax position taken or expected to be taken in a tax return. To the extent that our assessment of such tax position changes, the change in estimate is recorded in the period in which the determination is made. At May 31, 2011 and 2010, there were no unrecognized tax benefits. Interest and penalties related to uncertain tax positions will be recognized in income tax expense. As of May 31, 2012 and 2011, no interest and penalties related to uncertain tax positions had been accrued.

k. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimated.

l. Advertising Costs

The Company will expense advertising costs when advertisements occur. There has been no spending thus far on advertising.

m. Net Income (Loss) Per Share

The Company computes net income (loss) per common share in accordance with Accounting Standards Update ("ASU"), Earning Per Share (Topic 260) which requires the presentation of both basic and diluted earnings per share ("EPS")on the

consolidated income statements.. Under these provisions, basic and diluted net income (loss) per common share are computed by dividing the net income (loss) available to common shareholders for each period by the weighted average number of shares of common stock outstanding during the period. At May 31, 2012 and 2011 there were warrants and options outstanding to purchase Company common stock and notes payable that are convertible into shares of the Company's common stock. The common share equivalents of these have not been included in the calculations of loss per share because such inclusions would have anti-dilutive effects as the Company incurred a loss from operations. At May 31, 2012 and 2011, they were 20,746,549 and 16,546,549 options and warrants to purchase common stock.

n. Segment Reporting

Management treats the operation of the Company as one segment.

o. Other Comprehensive Income (Loss)

The Company reports as other comprehensive income (loss) those revenues, gains and losses not included in the determination of net income. During the years ended May 31, 2012 and 2011, the Company did not have any gains and losses resulting from activities or transactions that resulted in comprehensive income or loss.

p. Foreign Currency Translation

The assets of the Mexican Sub are in Mexico. The Mexican Sub depends on the ability of the parent company to raise cash which is transferred to the subsidiary to meet its operating cash needs. Therefore, the Company's management has determined that the functional currency of the Mexican Sub is the US dollar. Since that is the case, the Company remeasures its subsidiary financial statements in US dollars. Any gains or losses are reflected on the Statements of Operations.

p. Foreign Currency Translation cont.

The accounts of the Mexican Sub are remeasured in US dollars as follows:

(a) Current assets, current liabilities, and long-term monetary assets and liabilities are translated based on the rates of exchange in effect at the balance sheet dates.

(b) Non-monetary assets, liabilities, and equity accounts are translated at the exchange rates prevailing at the times of acquisition of assets, assumption of liabilities or equity investments.

(c) Revenues and expenses are translated at the average exchange rates for each period, except for charges for amortization and depreciation of non-monetary assets which are translated at the rates associated with the assets.

r. Impairment

The Company performs a review for potential impairment of long-lived assets whenever an event or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

s. Stock Based Compensation

The cost of equity instruments issued to non-employees in return for goods and services is measured by the fair value of the goods or services received or the measurement date fair value of the equity instruments issued, whichever is the more readily determinable. The cost of employee services received in exchange for equity instruments is based on the grant date fair value of the equity instruments issued.

t. New Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.