6-K 1 silverwheaton6ktechreport.htm TECHNICAL REPORT DATED MARCH 15, 2007 Filed by EDF Electronic Data Filing Inc. (604) 879.9956 - Silver Wheaton - Form 6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
_____________

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of December, 2007

Silver Wheaton Corp.
(Translation of registrant's name into English)

Suite 3150, 666 Burrard Street, Vancouver, British Columbia V6C 2X8 CANADA
(Address of principal executive offices)

     Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20 F [   ] Form 40 F [ X ]

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [   ] No [ X ]

     If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________________

EXHIBIT INDEX

The following is a list of Exhibits included as part of this Report on Form 6-K:

Technical Report dated December 31, 2006

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.

  Silver Wheaton Corp.
  (Registrant)
     
Date: December 11, 2007 By: /s/ Peter Barnes  
         Name
     
  Its: President and Chief Executive Officer  
        (Title)


AN AUDIT OF THE
MINERAL RESERVES/RESOURCES
TAYOLTITA, SANTA RITA AND SAN ANTONIO MINES
AS OF DECEMBER 31, 2006
FOR
SILVER WHEATON CORP.

 

Velasquez Spring, P.Eng.
Senior Geologist

and

     Gordon Watts, P.Eng.
Senior Associate Mineral Economist

 

March 15, 2007 Watts, Griffis and McOuat Limited
Toronto, Canada Consulting Geologists and Engineers

Watts, Griffis and McOuat

TABLE OF CONTENTS

Page

1. SUMMARY 1

2. INTRODUCTION AND TERMS OF REFERENCE 12
  2.1 GENERAL 12
  2.2 TERMS OF REFERENCE 15
  2.3 UNITS AND CURRENCY 16
  2.4 DEFINITIONS 16
  2.5 LUISMIN APPROACH TO MINERAL RESERVE ESTIMATION 18
  2.6 DISCLAIMERS 18

3. RELIANCE ON OTHER EXPERTS 22

4. PROPERTY DESCRIPTION AND LOCATION 23
  4.1 LOCATION 23
  4.2 PROPERTY DESCRIPTION 23

5. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND  PHYSIOGRAPHY  26
  5.1 ACCESS 26
  5.2 CLIMATE 26
  5.3 LOCAL RESOURCES 26
  5.4 INFRASTRUCTURE 27
  5.5 PHYSIOGRAPHY 29

6. HISTORY 30
     
7. GEOLOGICAL SETTING 32
     
8. DEPOSIT TYPES 38
     
9. MINERALIZATION 39
     
10.  EXPLORATION 44
     
11.  DRILLING 46
     
12.  SAMPLING METHOD AND APPROACH 47

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(continued)

Page

13. SAMPLE PREPARATION, ANALYSES AND SECURITY 48
     
14. DATA VERIFICATION 49
     
15. ADJACENT PROPERTIES 50
     
16. MINING OPERATIONS 51
  16.1 GENERAL 51
  16.2 DESCRIPTION OF MINING OPERATIONS 52

17. MILLING OPERATIONS 56
  17.1 GENERAL 56
  17.2 TAYOLTITA MILL 56

18. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES 59
  18.1 GENERAL 59
  18.2 LUISMIN APPROACH 59
  18.3 PAH AUDIT 60
  18.4 VOLUME ESTIMATE 60
  18.5 TREATMENT OF HIGH GRADE ASSAYS 61
  18.6 TONNAGE FACTOR 61
  18.7 DILUTION 61
  18.8 CUTOFF GRADE 62
  18.9 CLASSIFICATION OF RESERVES 62
  18.10 RECONCILIATION BETWEEN RESERVES AND PRODUCTION 64
  18.11 DISCUSSION 64

19. SAN DIMAS TAILINGS MANAGEMENT 83
  19.1 GENERAL 83
  19.2 TAYOLTITA TAILINGS 83
  19.3 SAN ANTONIO TAILINGS 85
  19.4 EXPLORATION PROPERTIES 86

20. CAPITAL AND OPERATING COSTS 90
  20.1 CAPITAL COSTS 90
  20.2 OPERATING COSTS 91

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TABLE OF CONTENTS
(continued)

Page

21. MARKETS AND CONTRACTS 93
     
22. OBSERVATIONS, CONCLUSIONS AND RECOMMENDATIONS 94

CERTIFICATES 97
   
REFERENCES 101

LIST OF TABLES

1. Reconciliation between predicted grade and production 19
2. Luismin mine production 31
3. Luismin San Dimas mining operations for 2006 51
4. San Dimas mill performance 2006 56
5. Reconciliation between predicted Reserves and actual production – Tayoltita-Santa Rita (1978-2002) 66
6. Reconciliation between predicted Reserves and actual production – San Antonio 67
7. Inferred Mineral Resources of San Dimas district geology department (as of December 31, 2006) 69
8. Luismin, S.A. de C.V. operating mines Inferred Mineral Resources transformed into Mineral Reserves (1979-1998) 68
9. Luismin S.A. de C.V. Tayoltita Mine Inferred Resources 70
10. Luismin S.A. de C.V. Santa Rita Mine Inferred Resources 71
11. Minas Luismin, S.A. de C.V. San Antonio Area Inferred Resources 72
12. Mineral Reserves of San Dimas district - Luismin geology department (as of December 31, 2006) 79
13. Tayoltita Mineral Reserves 80
14. Santa Rita Mineral Reserves 81
15. Block Central Mineral Reserves 82
16. Minas Luismin, S.A. de C.V. - exploration project status, 2004 88
17. San Dimas capital budget, years 2007 to 2011 90
18. Luismin operating costs for 2006 92

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TABLE OF CONTENTS
(continued)

Page

LIST OF FIGURES

1. Luismin Organization Chart 13
2. Location map, Luismin's operating mines, Mexico 14
3. Grades and reconciliation - Luismin Operations (1978-2002), includes San Martin Mine in Queretero, Mexico 20
4. Location of Tayoltita, San Antonio and Santa Rita mines 24
5. Property map, San Dimas district 25
6. Infrastructure at Tayoltita 28
7. Geologic Map of the San Dimas District 33
8. Litho-stratigraphic column of the San Dimas District 34
9. Structural map of the San Dimas District 36
10. Geologic section across the San Dimas District 37
11. Longitudinal cross-section of San Luis Vein, Tayoltita Mine 40
12. Longitudinal cross-section of Guadalupe Vein 41
13. Longitudinal cross-section of San Antonio Vein 42
14. Schematic section of the Favourable Zone 45
15. Flowsheet of El Perihuete 2,100 tpd processing plant 58
16. Regional structure and known veins 65
17. Longitudinal section San Fernando 73
18. Longitudinal section Veta Roberta 74
19. Longitudinal section Veta Robertita 75
20. Longitudinal section Veta Marina I 76
21. Longitudinal section Veta Marina II 77
22. Longitudinal section Veta Santa Lucia 78
23. Mexican exploration projects 87

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1. SUMMARY

General

Watts, Griffis and McOuat Limited ("WGM") was retained by Silver Wheaton Corp. ("Silver Wheaton") to conduct an independent audit of the Mineral Reserves and Mineral Resources of three Mexican operating gold and silver mines in Durango Mexico, belonging to Luismin S.A. de C.V. ("Luismin") as of December 31, 2006, and to prepare a report in compliance with National Instrument 43-101 ("NI 43-101"). Silver Wheaton is a 64% owned company of Goldcorp Inc./Wheaton River Minerals Ltd. ("Wheaton") that has agreed to purchase all the silver produced by Luismin's mining operations in Mexico over a 25 year period (2005 to 2029). Wheaton purchased all of the shares of Luismin in 2002 and Luismin, a Mexican mining company, is now a wholly owned subsidiary of Wheaton. The purpose of the audit was to support disclosure in Silver Wheaton's Annual Information Form.

WGM has visited the three mines on several occasions during the past six years and produced independent Mineral Resource/Reserve audits of Luismin's operations as of: December 31, 2001; December 31, 2002; August 31, 2004 and December 31, 2004. Previously Pincock, Allen and Holt ("PAH") had conducted independent audits as of: June 30, 1998; December 31, 1999; and, October 31, 2000.

The three mining properties are each operated by wholly owned subsidiaries of Luismin and include: Tayoltita, Santa Rita and San Antonio mines in the San Dimas district, on the border of Durango and Sinaloa states. Exploration and exploitation concessions covering the three mines have a total area of 22,468.2 ha. This extensive land ownership covers the mines, as well as the most prospective surrounding areas, and forms an important asset for Luismin's future exploration programs.

All mines are underground operations using primarily mechanized cut-and-fill mining methods. After milling, cyanidation, precipitation and smelting, doré bars are poured and then transported for refining, 70% to Torreon, Mexico and 30% to Salt Lake City, Utah.

Luismin also holds numerous exploration projects throughout Mexico, most of which are in the grassroots stage of development.

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Luismin's production of gold and silver in the San Dimas District: during 2004 was 84,958 oz Au and 6,206,781 oz Ag; during 2005 was 115,913 oz Au and 7,380,755 oz Ag; and, during 2006 was 162,669 oz Au and 8,695,955 oz Ag.

The geological and engineering work done by Luismin is of high quality and follows accepted engineering practices, and record keeping is very good.

The three mines that comprise the San Dimas District, Tayoltita, Santa Rita and San Antonio are located some 125 km northeast from Mazatlan, Sinaloa or approximately 150 km west of the city of Durango, Durango. The district is accessed by aircraft in a one hour flight from either Mazatlan or Durango, or by driving some 10 hours from Durango.

The Santa Rita mine is located approximately 3 km upstream from the Tayoltita mine while the San Antonio mine is 7 km west of Tayoltita. Production from the three mines is processed in the central milling facility at Tayoltita. The San Antonio mill, that formerly processed production from the San Antonio mine, was put in care and maintenance in November 2003. The San Antonio mill is accessed from the Tayoltita mine by road, to the portal of the San Luis tunnel then through the tunnel and finally along a river bed or access road to the mill, about an hour and a half drive in total.

The San Dimas District has experienced a long history of mining since precious metal production was first reported in 1757. Historical production is estimated at 564.7 million ounces of silver and 10.46 million ounces of gold making the San Dimas District third in Mexico for precious metal production.

The geological setting at San Dimas shows two major volcanic successions, totalling 3,500 m in thickness, separated by an erosional and depositional unconformity. The Lower Volcanic Unit ("LVG") is predominantly composed of andesitic and rhyolitic flows and tuffs, while the Upper Volcanic Unit ("UVG") is composed of a lower andesitic horizon capped by rhyolitic ash flows and tuffs. The LVG is the host of the mineralized veins.

The district lies within an area of complex normal faulting. Five major, post-ore north-northwest trending faults have divided the district into five tilted blocks.

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The deposits are high grade, silver-gold epithermal vein deposits formed from the final stages of igneous and hydrothermal activity in two different vein systems. The first formed set of veins strikes east-west while the second strikes north-northeast. Both sets of veins pinch, swell, bifurcate and exhibit horse-tailing and cymoidal structures. The veins vary in width from a fraction of a centimetre to fifteen metres, but average 1.5 m. The ore shoots in the veins have variable strike lengths, and average 150 m. They can have up to 200 m down-dip extensions but the down-dip extensions are normally less than the strike length. The ore forming minerals are light coloured, medium to coarse grained quartz with intergrowths of base metal sulphides, pyrite, argentite, polybasite, native silver and electrum.

Typical of epithermal systems, the San Dimas District exhibits a vertical zonation with a distinct top and bottom that Luismin has termed the Favourable Zone. At the time of deposition, the Favourable Zone was in a horizontal position, paralleling the erosional surface of the LVG. Luismin has successfully located the Favourable Zone in fault tilted blocks from the position of the unconformity between the lower and upper volcanic units. At San Dimas, the Favourable Zone has a vertical extent of some 300 to 600 m. Past mining experience has shown that 30% of the volume/tonnage of structures in the Favourable Zone, when later developed, becomes ore. At the current mining rate, Inferred Mineral Resources are being successfully developed on a yearly basis into Mineral Reserves to replace mined out ore.

Exploration is done both by diamond drilling and by underground development work. The drilling is mainly done from underground stations.

The workings of the San Dimas District mines are sampled across the vein at 1.5 m intervals along the vein under the direction of the Geological Department. The splits are taken along the sample line to reflect geology but no sample is greater than 1.5 m. Once an ore block has been developed, the sample line spacing may be increased to 3.0 m. Sampling is by an approximately 10 cm wide chip-channel across the vein.

The samples are crushed, ground, split and homogenized at the mine assay laboratory to produce a representative 10 g sample for fire assaying. Routine quality control is carried out with check assays done at the mine assay laboratory, and between commercial assay mine laboratories.

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The method used by Luismin to estimate tonnage/grade at the mines in an ore shoot is the conventional block estimation method where the average width is multiplied by the area measured in a vertical plane (corrected for dip) to determine the volume. This volume is multiplied by the Specific Gravity ("SG") of 2.7 to give the estimated tonnage.

Grade corrections of 0.85 by silver grade and 0.95 by gold grade, have been applied. To account for narrow veins at the San Dimas mines, a dilution factor of 10% (at zero grade) is also applied to blocks of less than 5,000 tonnes. These grade corrections and dilution, where appropriate, are applied to both the Proven and Probable Mineral Reserves and the Inferred Mineral Resources.

Calculation of the minimum cutoff grade is based on market metal prices for gold and silver metal recovered in the mill and the average monthly production costs for mining/milling/overhead etc., to produce a minimum dollar per tonne cutoff grade.

The terminology used by Luismin to designate Measured and Indicated Mineral Resources and Proven and Probable Mineral Reserves is in general agreement with the CIM Standards as adopted in NI 43-101.

Luismin designates Proven Mineral Reserves only when mineralization above cutoff grade is exposed in a drift. The distance projected above and below the drift is a function of the exposed length of the above-cutoff grade mineralization in the drift.

Luismin also estimates Probable Mineral Reserves by diamond drilling. A square is drawn on the vertical longitudinal section with the drillhole centered on the square. The shape and size of the block depends upon the geological interpretation and thickness of the vein ranging from 25 by 25 m for veins less than 1.0 m thick to 50 by 50 m for veins greater than 1.5 m thick.

Drillhole blocks, based on drillhole assays 50 m or less from underground workings, are classified as "Probable Mineral Reserves from Drilling".

Mining has been conducted in the San Dimas District for more than 200 years and knowledge of the geology i.e. character of the more than 100 veins/structures has been obtained. Detailed mapping and record keeping has assisted in developing a working model. The economic mineralization is known to be confined to an epithermal zone with a distinct top and bottom.

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Experience has shown that the mineralization within the vein/structure in the favourable zone is very irregular but statistically occupies 30% of the vein/structure. The extent of extrapolation of an individual vein/structure within the favourable zone is defined on structural and stratigraphic relationships supported by geochemical trace element studies and by fluid inclusion studies. These studies have been published as various papers in Economic Geology (see bibliography).

Extrapolation of a particular vein/structure (generally from 200 m to 500 m but in some cases up to 1,000 m) is based on various criteria from: known underground workings, surface exposure, drillholes intercepts; continuity and width of the known part of the structure, etc.

WGM's audit of Luismin's Mineral Resource/Mineral Reserve estimates did not uncover any fatal flaws, and WGM believes that the methods used by Luismin to estimate the Mineral Resources/Mineral Reserves are reasonable.

Prior to 2004, the three Luismin mines in the San Dimas District were treated as separate mining units with production from the Tayoltita and Santa Rita mines processed at the Tayoltita mill and production from the San Antonio mine processed at the San Antonio mill. Late in 2003, the San Antonio mill was put on standby and closed, and with all mine production to be processed through the Tayoltita mill, a reclassification was made into three new mining units: Tayoltita, Santa Rita and the Central Block.

The Proven and Probable Mineral Reserves at the three operating mining units as of December 31, 2006 are 4.31 million tonnes at 388 g Ag/t and 5.73 g Au/t, as follows:

Proven and Probable Mineral Reserves - San Dimas
  Tonnes g Ag/t g Au/t
Proven Mineral Reserves      
Tayoltita 359,174 332 3.08
Santa Rita 206,351 497 3.59
Block Central 1,001,444 420 7.70
       
Probable Mineral Reserves      
Tayoltita 1,124,673 315 3.25
Santa Rita 476,629 358 5.38
Block Central 1,146,362 442 7.82

Notes to Reserve Statement

1. Reserves were estimated by Luismin and audited by WGM as of December 31, 2006.
2. Cutoff grade for the San Dimas District, based on total operating cost, was US$64.31 per tonne.
3. All reserves are diluted, a mining recovery factor has not been applied, but WGM estimates that the mining recovery will be approximately 90%.
4. The tonnage factor is 2.7 tonnes per cubic metre.
5. Cutoff values are calculated at a silver price of US$7.00 per troy ounce and US$450.00 per troy ounce for gold.

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The Inferred Mineral Resources at San Dimas, diluted, are about 7.99 million tonnes at an approximate grade of 321 g Ag/t and 2.9 g Au/t, and are separately reported and not included in the above total Mineral Reserve estimate, as Inferred Mineral Resources are not known to the same degree of certainty as Mineral Reserves and do not have demonstrated economic viability.

The three silver and gold mines in the San Dimas district are underground operations employing cut-and-fill mining and using load, haul, and dump ("LHD") equipment. Primary access is provided by adits and internal ramps. Milling operations are carried out at Tayoltita which has a capacity of 2,100 tpd. The ore is processed by conventional cyanidation followed by zinc precipitation of the silver and gold and refining for the production of doré.

In 2004, San Dimas district mined 397,646 tonnes at an average grade of 6.9 g Au/t and 525 g Ag/t for a production of 84,958 oz of gold and 6,206,781 oz of silver at recoveries of 96.8% and 92.5% respectively. In 2005, the San Dimas District mined 507,528 tonnes at an average grade of 7.4 g Au/t and 497 g Ag/t for a production of 115,913 oz of gold and 7,380,755 oz silver at recoveries of 96.1% and 91% respectively, in 2006, the production was 688,942 tonnes at an average grade of 7.76 g Au/t and 438 g Ag/t for a production of 162,669 oz of gold and 8,695,953 oz of silver at recoveries of 95.6% and 90.2% respectively.

Environmental Issues with Luismin Operations

Luismin’s practice in the design and operation of tailings containment sites complies with the requirements of Mexico and with the permits issued for the dams in use at San Dimas, however, improvements are necessary to bring the tailings dam designs and operations up to international guidelines. Various assessments and geotechnical testing were carried out in the past five years to investigate the safety of the dams and design improved operational procedures for the tailings deposits. Since the acquisition of Luismin, Wheaton River has initiated various construction work to increase the dam safety and to better manage the tailings operations. The San Dimas tailings now employ "dry tailings staking" one of the three dry tailings operation in Mexico.

Tailings previously were discharged from milling operations into unlined structures designed to settle the solids and to collect and drain solutions for recycle to the milling operations. The

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containment structures were constructed from the more dense and coarse underflow from cyclones operating on the tailings lines. Solutions from the cyclone overflows drained to decant structures in the central dam area and the solutions were recycled to the mill.

The deficiencies in the Luismin tailings dams were recognized and capital expenditures are being made to improve this area of the operations. The scope of work includes seepage controls, geotechnical investigations to support existing tailings dam and the installation at the San Antonio Tailings dam of a rock filled berm and a Roller Compacted Concrete ("RCC") stepped spillway.

In the San Dimas district, both the tailings dams at San Antonio and at Tayoltita require extensive work to stabilize the structures against erosion and possible failure. The remediation and stabilization works have started with construction of a reinforcing berm on the downstream side of the dam at Tayoltita. The operation at the San Antonio mill was shut down primarily due to depletion of tailings storage capacity. Reclamation of the San Antonio tailings dam has been designed and some approvals have been obtained. Work has started with development of an access road and covering of the exposed tailings surfaces with low strength concrete.

Improving the safety factor on the Tayoltita tailings dam includes the placement of a reinforcing berm downstream of the current dam and extension of the seepage collection system. The first phase of constructing the safety berm to stabilize the dam has been completed. The ten-stage tailings pumping system has been replaced with single stage positive displacement pumps as well as a new pipeline crossing of the river. The river crossing design includes spill protection in the event of a line failure. The installing of belt filters of the tailings, to allow dry placement of the tailings, is currently under construction at the Tayoltita operation.

With the remediation and stabilization works underway and the work planned for the future, Luismin's operations have moved considerably forward in bringing the tailings operations to international guidelines since acquisition of the operations by Wheaton River.

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Capital and Operating Costs

A series of capital expenditures is required to address the remaining environmental deficiencies with the Luismin operations, sustain the existing operations and complete planned expansions of the production capacity. The capital expenditures in 2005 and 2006 for environmental purposes totalled US$6 million.

Capital expenditures are also being made to expand the Tayoltita mill operation to 3,200 tpd as the central milling facility for the San Dimas mining operations at the Tayoltita Mine, Santa Rita Mine and the Central Block Mine (includes the former San Antonio Mine).

In addition to expenditures for expansion, capital is also committed to sustain the existing production facilities with equipment replacement and ongoing exploration and mine development.

Operating costs, in 2006, in the San Dimas District for the three mines averaged US$64.32 per tonne. Detailed operating costs are separately accounted for all aspects of the mining operations to determine the cutoff grade to plan and control the mining operations.

The Luismin operations have achieved significant reductions in operating costs from increasing the scale of operations as well as improvements in the efficiencies of operating methods. Various improvements such as the integration of the Santa Rita ore haulage with Tayoltita will continue to improve efficiencies and reduce the cost structure. All operations will incur some increase in operating costs associated with the future tailings operations and associated environmental monitoring.

Markets and Contracts

Luismin ships 70% of the silver and gold doré bars to Peñoles in Torreon, Mexico where a charge of US$4.25 per kilo of doré, based on 99.8% of the contained gold and silver, is made to Luismin. The remaining 30% of the doré bars are shipped to the Johnson Matthey refinery in Salt Lake City, where the payment to Luismin is based on 99.8% of the silver and gold content, less a refining charge of US$0.14 per troy oz of doré and US$1.00 per troy oz of gold.

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Although Luismin has successfully used a hedging policy in the past for its sale prices, virtually all hedge positions were fulfilled by late 2002 and there are no hedges in place at the time of this report.

Observations and Conclusions

WGM believes that the Inferred Mineral Resources are an important part of the overall planning for this project because:

  • Production from the San Dimas deposits has been sustained for more than 200 years;

  • Luismin has been successfully conducting mine operations at San Dimas for 25 years;

  • Capital investment of approximately US$175.9 million is currently planned by Luismin for a 50% production increase from the present production over the next 5 years (2007-2011);

  • A study in the main production area at San Dimas covering the period from 1979 to 1988 showed that Luismin was able to achieve a conversion rate of about 90% of the Inferred Mineral Resources into Mineral Reserves;

  • WGM believes that Luismin has successfully demonstrated that there is a high probability that Inferred Mineral Resources will be converted to Mineral Reserves;

  • Luismin operating practice has been to convert Mineral Resources into Mineral Reserves after drifting in the mineralization and completion of sampling and mining of the headings; and,

  • Due to the combination of ever expanding production requirements, better access to capital, the well understood geology and economic zone of the mineralization, and the historical success of the operations, Luismin will be better positioned to support mine development and Mineral Reserve definition with a normal level of diamond drilling prior to mining. This should provide for a higher level of Mineral Reserve definition prior to mining.

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Luismin has estimated Proven and Probable Reserves as of December 31, 2006. WGM's audit of the reserves of the Luismin mines incorporated the following steps:

  • A review of all the steps in the estimation process to confirm that the procedures are appropriate for each of the deposits;

  • An analysis of the system used to classify the reserves to determine whether it meets current international standards of practice in the mining industry (NI 43-101);

  • A review of any changes in the estimation process since December 31, 2003;

  • A review of the reconciliation between predicted reserves and actual results of mining over the period 1975 through December 31, 2006; and,

  • An analysis of operating results for 2006 to confirm that the reserves are in fact being mined and processed at a profit.

Interpretation and Conclusions

WGM has concluded that:

 
  		• Total Proven and Probable Mineral Reserves estimated as of December 31, 2006, for Luismin's three operating mines (Tayoltita, Santa Rita, San Antonio/Block Central) are 4.31 million tonnes at a grade of 388 g Ag/t and 5.73 g Au/t;
           
     
  		• The procedures used by Luismin to estimate the Mineral Reserves are reasonable and the reserves fairly represent the tonnage and grade that can be expected from an operation;
           
     
  		• The total Inferred Mineral Resources, estimated as of December 31, 2006, for the same three operating mines, and not included in the Mineral Reserves stated above, are about 7.99 million tonnes at an approximate grade of 321 g Ag/t and 2.9 g Au/t;
           
     
  		• The procedures used by Luismin to estimate the Inferred Mineral Resources are reasonable and there is a reasonable expectation the Inferred Resource will be converted to Indicated and Measured Resources;
           
     
  		• The experience and capabilities of the Luismin management team are regarded as excellent and important elements in the success of current and future operations;

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    • The potential for exploration, both on active mining properties as well as on exploration holdings, to expand the reserve base to both support and expand operations is excellent;

    • Future operations will incur additional capital and operating costs for management of tailings sites as well as remediation of existing sites;

    • Opportunities for future reductions in operating costs will be possible with capital investment in mining and processing equipment as well as changes to operating practices; and,

    • The past history of the Luismin operations shows growth in small increments where capital expenditures were justified on short term planning and assessments. This has resulted in "add on" style expansions and a variety of equipment sizes and types that reduces some efficiencies in operations and maintenance. The renewed support of capital and longer term planning should lead to better return on investments;

    Watts, Griffis and McOuat

    2. INTRODUCTION AND TERMS OF REFERENCE

    2.1 GENERAL

    At the request of Silver Wheaton Corp. ("Silver Wheaton"), Watts, Griffis and McOuat Limited ("WGM") revisited the three operating gold and silver mines in Mexico of the Mexican corporation Luismin S.A. de C.V. ("Luismin"). Silver Wheaton is a 64% owned company of Wheaton River Minerals Ltd. ("Wheaton") that has agreed to purchase all the silver produced by Luismin's mining operations in Mexico over a 25 year period (2004 to 2029). Wheaton purchased all of the shares of Luismin in 2002 and Luismin, a Mexican mining company, is now a wholly owned subsidiary of Wheaton.

    The three mining properties are each operated by wholly owned subsidiaries of Luismin and include: the Tayoltita, Santa Rita and San Antonio mines in the San Dimas district, on the border of Durango and Sinaloa states. The organization chart (Figure 1) illustrates the various wholly owned Luismin companies, which control the mining operations and exploration properties. The three mines cover an area of approximately 22,468 ha in exploration and exploitation concessions. This extensive land ownership covers the mines as well as the most prospective surrounding areas, which forms an important asset for Luismin's future exploration programs.

    All mines are underground operations using primarily mechanized cut-and-fill mining methods. After milling, cyanidation, precipitation and smelting, doré bars are poured and then transported for refining to Johnson Matthey in Salt Lake City, Utah. The locations of the mines are shown on Figure 2.

    Luismin also holds numerous exploration projects throughout Mexico, most of which are at the grassroots stage of development and some are being explored under option agreements.

    Gold and silver production from Luismin’s three San Dimas mines: during 2003 was 68,465 oz of gold and 5,455,958 oz of silver; during 2004 was 84,958 oz of gold and 6,206,781 oz of silver; during 2005 115,913 oz of gold and 7,380,7855 oz of silver and in the

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    Figure 1.    Luismin Organization Chart

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    Figure 2.    Location map, Luismin's operating mines, Mexico

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    past year (2006) 162,669 oz of gold and 8,695,953 oz of silver. Over the four year period (2003 to 2006) the Luismin gold production has increased by 139% and silver production by 59%.

    2.2 TERMS OF REFERENCE

    WGM was retained in 2004 by Silver Wheaton to conduct an independent technical review and to prepare a report in compliance with National Instrument 43-101 ("NI 43-101") following Form 43-101F1, on three operating silver-gold mines (Tayoltita, Santa Rita, San Antonio) in Mexico.

    WGM has previously in 2002 been retained by Wheaton River Minerals Ltd. to conduct an independent technical review and to prepare a technical report in compliance with NI 43-101 on the same three mines and also in 2003 WGM was again retained by Wheaton to conduct an independent audit on the three mines as of December 31, 2002 and again as of December 31, 2004. WGM is very familiar with the operations at the three mines.

    The purpose of the WGM independent technical review and audit of the Mineral Reserves is to support disclosure in Silver Wheaton's Annual Information Form.

    Velasquez Spring, a Senior Geologist of WGM revisited the three mining operations during January 17 to 19, 2007. Subsequent to the visit several telephone calls and discussions were held with Luismin engineers and geologists, at each of the operating mines, as well as with senior personnel at Luismin’s head office, regarding the mining/milling operations, exploration, and Mineral Resource/Reserve estimation procedures. During the site visit, a detailed review was made by WGM of the plans and capital budgets that were prepared by Luismin/Wheaton for the proposed underground expansions at each of the three Luismin mines.

    WGM checked the information provided during the visits to the mines and reviewed it for adequacy and completeness.

    The geological and engineering work done by Luismin is of high quality and follows accepted engineering practices. The record keeping with regard to Mineral Resource/Mineral Reserve estimates, i.e. plans, sections and calculation sheets, is very good. From 1994 to 2000,

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    Luismin retained the consulting firm of Pincock, Allen and Holt to conduct an independent audit on the Mineral Resource/Mineral Reserve estimates every two years.

    The opinions and conclusions presented in this report are based on information received from Luismin. WGM received the full cooperation and assistance of Luismin during the site visit and in preparation of this report.

    2.3 UNITS AND CURRENCY

    Throughout this report common measurements are in metric units. Tonnages are shown as tonnes (1,000 kg), linear measurements as metres ("m"), or kilometres ("km") and precious metal values as grams ("g"), grams of gold per tonne ("g Au/t"), and grams of silver per tonne ("g Ag/t"). Cubic feet per minute ("cfm") is used for ventilation air flow. Grams are converted to ounces based upon 31.103 grams per ounce.

    All economic data is quoted in US dollars ("US$"). When peso amounts required conversion into US dollars, the peso exchange rate used was 11.00 pesos equivalent to US$1.00.

    2.4 DEFINITIONS

    The classification of Mineral Resources and Mineral Reserves used in this report conforms with the definitions provided in the final version of National Instrument 43-101 ("NI 43-101"), which came into effect on February 1, 2001. We further confirm that, in arriving at our classification, we have followed the guidelines adopted by the Council of the Canadian Institute of Mining Metallurgy and Petroleum (the "CIM Standards"). The relevant definitions for the CIM Standards/NI 43-101 are as follows:

    A Mineral Resource is 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.

    An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity.

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    The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes.

    An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics, can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough for geological and grade continuity to be reasonably assumed.

    A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely enough to confirm both geological and grade continuity.

    A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This 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.

    A Probable Mineral Reserve is the economically mineable part of an Indicated, and in some circumstances a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This 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 Proven Mineral Reserve is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified.

    The terminology used by Luismin to designate Measured and Indicated Mineral Resources and Proven and Probable Mineral Reserves is in general agreement with the CIM Standards as

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    adopted in NI 43-101. Luismin’s Mineral Resource categories "potential resource" and "drill inferred resource" would, under the CIM Standards, be called Inferred Resources. We have used the term Inferred Mineral Resources for this material throughout the rest of this report.

    2.5 LUISMIN APPROACH TO MINERAL RESERVE ESTIMATION

    Rather than calculating Mineral Resources/Mineral Reserves over a minimum mining width and then applying corrections for dilution and mine losses to determine Mineral Reserves, Luismin estimates the reserve in each of the underground mining blocks by using the conventional mining block estimation methods for underground mines and later applying a tonnage and grade correction to determine Mineral Reserves. The minimum mining width is 0.9 m. However, on occasion, where very high grade values are encountered over intervals less than 0.9 m, the minimum mining width is calculated to 0.9 m, using zero grade gold and silver values for the additional width required to meet 0.9 m.

    Luismin’s success with predicting the tonnage and grade of the reserves over the period 1979-2002 for all operations is shown on Table 1. The table clearly shows that, although there are variances from year to year, the overall totals compare well. We have presented the actual silver and gold grades graphically in Figure 3.

    Table 1 shows the predicted tonnage and grade of reserves over the period 2003 to 2004 including production from the San Martin Mine in Queretero, and from years 2003 to 2006 (at the bottom of Table 1), and again the overall predicted tonnage and grades continue to show good comparisons.

    2.6 DISCLAIMERS

    WGM did not independently review the lease and land status information on the mines and the information as reported herein, was provided by Luismin.

    WGM did not independently sample or assay any of the mineralization at the mines. WGM did observe the pouring of numerous doré bars and receipts of payment from the sale of doré bars and we are satisfied that the mines are producing silver and gold. WGM did not carry out a formal due diligence review of environmental considerations as SRK Consulting ("SRK"),

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    TABLE 1

    RECONCILIATION BETWEEN PREDICTED GRADE AND PRODUCTION

                     
    YEAR   TONNES   SILVER GRADE   GOLD GRADE SILVER CONTENT (OZ) GOLD CONTENT (OZ)
          Variance   g Ag/t Variance g Au/t Variance     Variance     Variance
      Predicted      Actual % Predicted  Actual % Predicted Actual %  Predicted Actual % Predicted  Actual %
    LUISMIN OPERATIONS (1978-2004)*                      
    1978 156,000 159,628 2.3% 400 404 1.0% 7.00 7.10 1.4% 2,006,237 2,073,424 3.3% 35,109 36,439 3.8%
    1979 156,000 161,428 3.5% 400 395 -1.3% 7.00 6.50 -7.1% 2,006,237 2,050,094 2.2% 35,109 33,736 -3.9%
    1980 162,000 162,290 0.2% 390 381 -2.3% 6.40 6.40 0.0% 2,031,315 1,987,991 -2.1% 33,334 33,394 0.2%
    1981 162,000 155,837 -3.8% 390 468 20.0% 6.40 7.80 21.9% 2,031,315 2,344,845 15.4% 33,334 39,081 17.2%
    1982 162,000 158,163 -2.4% 390 483 23.8% 6.40 7.70 20.3% 2,031,315 2,456,121 20.9% 33,334 39,156 17.5%
    1983 195,000 176,643 -9.4% 383 422 10.2% 6.50 6.90 6.2% 2,401,215 2,396,661 -0.2% 40,752 39,187 -3.8%
    1984 216,000 200,256 -7.3% 396 424 7.1% 6.30 6.60 4.8% 2,750,088 2,729,915 -0.7% 43,751 42,494 -2.9%
    1985 202,800 197,864 -2.4% 422 433 2.6% 5.30 6.30 18.9% 2,751,555 2,754,561 0.1% 34,557 40,078 16.0%
    1986 236,300 222,295 -5.9% 396 423 6.8% 5.77 6.28 8.8% 3,008,546 3,023,206 0.5% 43,837 44,884 2.4%
    1987 274,471 235,459 -14.2% 340 307 -9.9% 4.21 3.93 -6.7% 3,001,255 2,320,810 -22.7% 37,171 29,738 -20.0%
    1988 315,520 315,551 0.0% 335 310 -7.6% 4.89 4.38 -10.3% 3,399,316 3,142,158 -7.6% 49,579 44,479 -10.3%
    1989 314,475 316,997 0.8% 313 261 -16.4% 4.32 3.95 -8.6% 3,163,238 2,664,293 -15.8% 43,710 40,283 -7.8%
    1990 319,607 308,593 -3.4% 287 240 -16.5% 3.68 3.58 -2.9% 2,949,143 2,378,476 -19.4% 37,843 35,483 -6.2%
    1991 239,760 249,947 4.2% 331 298 -9.9% 3.99 3.33 -16.5% 2,550,545 2,395,927 -6.1% 30,746 26,750 -13.0%
    1992 331,685 331,966 0.1% 347 326 -5.9% 3.30 3.49 5.8% 3,695,707 3,480,175 -5.8% 35,141 37,228 5.9%
    1993 387,449 360,606 -6.9% 301 313 3.9% 3.55 3.32 -6.5% 3,748,776 3,624,409 -3.3% 44,247 38,486 -13.0%
    1994 529,785 550,119 3.8% 267 235 -11.8% 3.29 2.95 -10.5% 4,548,809 4,163,776 -8.5% 56,103 52,142 -7.1%
    1995 614,390 649,874 5.8% 262 254 -2.9% 3.25 3.06 -5.9% 5,170,018 5,311,805 2.7% 64,138 63,865 -0.4%
    1996 720,670 753,517 4.6% 257 252 -2.1% 3.17 3.30 4.1% 5,953,125 6,094,302 2.4% 73,473 79,961 8.8%
    1997 796,042 843,504 6.0% 256 238 -6.9% 3.33 3.32 -0.2% 6,548,927 6,461,571 -1.3% 85,281 90,160 5.7%
    1998 847,388 873,460 3.1% 239 217 -9.5% 3.23 3.06 -5.1% 6,517,784 6,080,367 -6.7% 88,009 86,073 -2.2%
    1999 880,785 911,842 3.5% 222 215 -3.5% 2.97 3.05 2.7% 6,300,275 6,295,689 -0.1% 84,156 89,508 6.4%
    2000 944,110 982,710 4.1% 216 207 -4.2% 3.07 3.12 1.4% 6,560,586 6,543,742 -0.3% 93,306 98,435 5.5%
    2001 1,012,100 921,200 -9.0% 212 224 5.7% 2.98 3.55 18.9% 6,901,718 6,640,615 -3.8% 97,060 105,066 8.2%
    2002 837,077 801,480 -4.3% 242 253 4.4% 3.94 4.32 9.5% 6,519,449 6,515,789 -0.1% 106,152 111,266 4.7%
    2003 825,998 700,155 -15.2% 273 331 21.2% 3.35 4.95 47.8% 7,249,911 5,920,913 -18.3% 88,964 104,901 -17.9%
    2004 837,036 670,380 -19.9% 277 428 54.5% 4.11 6.11 49.0% 7,454,438 6,665,462 -10.6% 110,606 121,893 -10.2%
    Total 12,676,448 12,371,363 -0.1% 278 283 -1.8% 3.83 4.07 6.3% 113,250,845 108,517,098 -4.2% 1,558,806 1,604,164 -14.0%
                                   
    LUISMIN'S SAN DIMAS OPERATIONS (2003-2006)                    
    2003 513,296 423,674 -17.4% 350 427 22.0% 3.6 5.2 44.4% 5,401,391 5,455,958 1.0% 57,200 68,465 19.7%
    2004 530,913 397,646 -25.1% 385 525 36.4% 4.3 6.9 60.5% 6,112,952 6,206,781 1.5% 70,904 84,958 19.8%
    2005 583,531 507,528 -13.1% 371 497 34.0% 4.3 7.4 72.1% 7,306,424 7,380,755 1.0% 87,859 115,913 31.9%
    2006 709,800 688,941 -2.9% 497 438 -11.9% 6.0 7.7 28.3% 9,499,073 8,695,955 -8.5% 32,131 162,668 23.1%
    Total 2,337,540 2,017,789 -13.7% 408 468  14.7 4.7 6.9  46.8 28,319,840 27,739,449 -2.0% 348,094 432,004 24.1%

    * Also includes Luismin's San Martin Mine, Queretaro, Mexico

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    Figure 3.     Grades and reconciliation - Luismin Operations (1978-2002), includes

    San Martin Mine in Queretero, Mexico

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    at the request of Wheaton, had conducted a due diligence environmental review of Luismin’s mining properties in January 2002. The SRK review was to identify if any serious liabilities exist that would materially affect the economic performance of the operations over the next 10 years. The report is titled "Environmental Due Diligence Review of Active Mining Units Owned and Operated by Minas Luismin, S.A. de C.V., February 20, 2002" and has been reviewed by WGM as part of the technical review of the Luismin operations.

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    3. RELIANCE ON OTHER EXPERTS

    WGM did not independently review the lease and land status information on the San Dimas Project and the information as reported herein, was provided by Luismin.

    WGM prepared this study using the resource materials, reports and documents as noted in the text and "References" at the end of this report. WGM conducted an audit of the methods, parameters and documentation used and prepared by Luismin in the preparation of its Mineral Resource/Reserve estimates for the zones comprising the San Dimas Project.

    WGM did not prepare independent Mineral Resource/Reserve estimates for the San Dimas Project, however, is satisfied that those persons who prepared the estimates were qualified to do so and that the estimates are reliable. WGM accepts the estimates as supplied by Luismin.

    WGM has not verified title to the property, but has relied on information supplied by Luismin in this regard. WGM has no reason to doubt that the title situation is other than that which was reported to it by Luismin.

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    4. PROPERTY DESCRIPTION AND LOCATION

    4.1 LOCATION

    The San Dimas mining district is centered on latitude 24°06'N and longitude 105°56'W located about 125 km NE from Mazatlan, Sinaloa or approximately 150 km west of the city of Durango (Figure 4).

    4.2 PROPERTY DESCRIPTION

    Luismin’s three operating mines in the San Dimas district, on the border of Durango and Sinaloa states include San Antonio, Tayoltita and Santa Rita.

    The San Dimas properties are surveyed and contained in a contiguous block and held in the name of Minas San Luis S.A. de C.V. an area of 22,468.2 ha (Figure 5).

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    Figure 4.    Location of Tayoltita, San Antonio and Santa Rita mines

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    Figure 5.    Property map, San Dimas district

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    5.  ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

    5.1 ACCESS

    Access to the San Dimas area is by air or road from the city of Durango. By road the trip requires some 10 hours. Luismin maintains a de Havilland Twin Otter aircraft and a helicopter; both are based at Tayoltita. An approximate one hour flight in the Twin Otter is required from either Mazatlan or Durango to Tayoltita. Most of the personnel and light supplies for the San Dimas mines arrive on the company's regular flights from Mazatlan and Durango. Heavy equipment and supplies are brought in by road from Durango.

    Originally access to the Dimas district was from the town of San Ignacio, Sinaloa along a 55 km long narrow mule trail, carved in the steep valley wall above the high water level of the Piaxtla River. A rough road, paralleling the mule trail, now follows the river bed to San Ignacio but the road is only accessible for about six months of the year during the Spring dry season. San Ignacio is connected by 70 km of paved roads to Mazatlan.

    5.2 CLIMATE

    Regionally, the climate is variable from the coast to the high plateau.

    The climate of the San Dimas area is semi-tropical, characterized by relatively high temperatures and humidity, with hot summers (maximum about 35°C) and mild winters. At higher elevations in the Sierra, frosty nights occur in the winter (November to March). The majority of the precipitation occurs in the summer (June through September) however tropical rainstorms during October to January can result in considerable additional rainfall. The total average annual rainfall varies from about 66 to 108 cm.

    Weather does not affect the operations and mining is carried out throughout the year.

    5.3 LOCAL RESOURCES

    Sufficient pine, juniper and scattered oak trees grow on the higher ridges, to support a timber industry while the lower slopes, and valleys are covered with thick brush, cactus and grasses.

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    Subsistence farming, ranching, mining and timber cutting are the predominant activities of the region’s population. Tayoltita is the most important population centre in the area with approximately 8,000 inhabitants including mining company personnel. Population outside the mining and sawmill camps is sparse.

    Water for the mining operations is obtained from wells and from the Piaxtla River. Water is also supplied by Luismin to the town of Tayoltita from an underground thermal spring at the Santa Rita mine.

    Mining at both the Santa Rita and San Antonio mines is done by contract mining while at Tayoltita the mining is carried out by Luismin personnel.

    Electrical power is provided by a combination of Luismin's own system and the Federal Power Commission supply system. Luismin operates hydroelectric and back-up diesel generators which are interconnected with the Federal Power Commission supply system.

    Luismin's hydroelectrical power is being increased with additional turbines in a tunnel now under construction, as well the Federal Power Commission supply system is being increased both to manage the increase in power required for the 3,200 tpd mill under construction.

    5.4 INFRASTRUCTURE

    The infrastructure of the San Dimas district, roads, townsite, airport and mill tailings area for the operations of Tayoltita, San Antonio, and Santa Rita Mines is illustrated in Figure 6, around the town of Tayoltita.

    The Santa Rita mine is located three kilometres upstream from Tayoltita. The ore from the Santa Rita mine is trucked along a winding road that follows the Rio Piaxtla to the Tayoltita mill.

    The San Antonio mine is located 7 km west of the Tayoltita Mine in the State of Sinaloa. The mine is accessed, from Tayoltita, by road some 3 km through the town of Tayoltita to the portal of the San Luis Tunnel, through the tunnel and from the exit, by road, or along the San Antonio river bed to the San Antonio Mill, about an hour and a half drive in total.

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    Figure 6.    Infrastructure at Tayoltita

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    Infrastructure at the San Antonio mine includes a mill, small campsite, warehouse, analytical fire assay laboratory and maintenance shops.

    5.5 PHYSIOGRAPHY

    The San Dimas district is located in the central part of the Sierra Madre Occidental, a mountain range characterized by very rugged topography with steep, often vertical walled valleys and narrow canyons. Elevations vary from 2,400 m above mean sea level ("amsl") on the high peaks to elevations of 400 m amsl in the valley floor of the Piaxtla River.

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    6. HISTORY

    The San Dimas district has experienced a long mining history. Precious metal production was first reported in 1757 by a group of Spanish families living at Las Queleles (near the present town of Tayoltita). Government and religious authorities made several unsuccessful attempts to determine the location of the Queleles group of mines. By 1795, a town of 10,000 residents had been established upstream at Guarisamey where other gold and silver veins had been discovered. The Spanish continued working several of the mines until the start of the Mexican War of Independence (1810). Mining activity in the district then decreased and did not start up again until the 1880s when agents of William Randolph Hearst of San Francisco and American Colonel Daniel Burns arrived in the area. W.R. Hearst acquired the Tayoltita mine under the name of the San Luis Mining Company. In 1883, when Colonel Burns took control of the Candelaria mine, modern mining methods began. Later the Contraestaca (San Antonio) mine was discovered along with several large bonanza grade orebodies.

    In 1904, the first cyanide mill in Mexico was built at Tayoltita. By 1940, the Candelaria Mine had been mined out and the properties of the Mexican Candelaria and Contraestaca mines were purchased by the San Luis Mining Company.

    A mining law introduced in 1959 in Mexico required the majority of a Mexican mining company be held by Mexicans and forced the sale of 51% of the shares of the San Luis Mining Company to Mexicans. In 1961, the Minas de San Luis S.A. de C.V. was formed and assumed operations of the mine. In 1978, the remaining 49% interest was obtained by a group known as Luismin S.A. de C.V.

    Historical production through 2006 from the San Dimas District is estimated at 565 million ounces of silver and 10.5 million ounces of gold, placing the district third in Mexico for precious metal production after Pachuca and Guanajuato. Production from the San Dimas District during 2006 was approximately 162,700 ounces of gold and 8.7 million ounces of silver respectively, while production in 2005 was approximately 116,000 ounces of gold and 7.4 million ounces of silver respectively.

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    TABLE 2

    LUISMIN MINE PRODUCTION

           
    Area Tonnes   Mill Head Grade
          g Ag/t g Au/t
    Tayoltita        
    1996 259,807    275 1.3
    1997 281,011    272 2.4
    1998 294,979    242 2.3
    1999 302,248    247 2.7
    2000 279,164    254 2.8
    2001 241,445    278 3.0
    2002 178,334    262 3.5
             
    Santa Rita        
    1996 79,898    432 2.6
    1997 87,058    399 2.3
    1998 106,764    341 2.3
    1999 126,138    366 2.2
    2000 160,428    308 2.1
    2001 144,148    334 2.3
    2002 134,810    493 4.2
             
    San Antonio        
    1996 131,746    377 6.2
    1997 148,302    356 5.3
    1998 141,176    274 4.2
    1999 136,025    267 3.8
    2000 144,842    263 3.8
    2001 146,470    319 5.1
    2002 140,205    389 6.1
             
    San Dimas District        
    2003 423,673    428 5.2
    2004 397,646    665 7.2
             
    San Martin (no longer a Luismin mine operation)      
    1996 187,691    43 3.4
    1997 219,827    43 3.3
    1998 224,279    50 3.4
    1999 242,295    45 3.5
    2000 284,484    55 3.6
    2001 287,502    65 3.7
    2002 268,451    71 4.3
    2003 276,481    88 4.3
    2004 272,734    83 4.5
             
    La Guitarra (no longer a Luismin mine operation)      
    1996 94,375    287 3.6
    1997 107,305    294 4.3
    1998 106,262    319 3.8
    1999 105,136    312 4.0
    2000 113,808    254 3.3
    2001 101,549    230 4.0
    2002 79,679    201 3.5

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    7.  GEOLOGICAL SETTING

    The general geological setting of the San Dimas District is illustrated in Figure 7. Two major volcanic successions totalling approximately 3,500 m in thickness have been described, the Lower Volcanic Group ("LVG") and the Upper Volcanic Group ("UVG") separated by an erosional and depositional unconformity.

    The LVG is of Eocene age predominantly composed of andesites and rhyolitic flows and tuffs and has been locally divided into five units (Figure 8). The LVG outcrops along the canyons formed by major westward drainage systems and has been intruded by younger members of the batholith complex of granitic to granodioritic composition. The Socavón rhyolite is the oldest volcanic unit in the district, its lower contact destroyed by the intrusion of the Piaxtla granite.

    More than 700 m thick, the Socavón rhyolite is host for several productive veins in the district. Overlying the Socavón rhyolite is the 20 to 75 m thick, well-bedded Buelna andesite that is remarkably present throughout the area. The Buelna andesite is overlain by the Portal rhyolite, a grey, cream to purple coloured rock containing potassic feldspar and quartz cementing small (5 to 10 mm) volcanic rock fragments. It ranges in thickness from 50 to 250 m and is also prevalent throughout the district.

    The overlying Productive Andesite is more than 750 m in thickness and has been divided into two varieties based on grain size, but of identical mineralogy. One variety is fragmental (varying from a lapilli tuff to a coarse agglomerate), the other has a porphyritic texture (1 to 2 mm plagioclase phenocrysts).

    The overlying Camichin unit, composed of purple to red interbedded rhyolitic and andesite tuffs and flows, is more than 300 m thick. It is the host rock of most of the productive ore shoots of Patricia, Patricia 2, Santa Rita and other lesser veins in the Santa Rita Mine.

    The Las Palmas Formation, at the top of the LVG, consists of green conglomerates at the base and red arkoses and shales at the top, with a total thickness of approximately 300 m. This unit outcrops extensively in the Tayoltita area. The lower contact between the LVG and the underlying Productive Andesite is unconformable.

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    Figure 7.    Geologic Map of the San Dimas District

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    Figure 8.    Litho-stratigraphic column of the San Dimas District

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    The predominant plutonic events in the district resulted in intrusion of the LVG by granitic to granodioritic intrusives, part of the Sinaloa composite batholith.

    Other intrusives cutting the LVG include the Intrusive Andesite, the Elena aplite and the Santa Rita dacitic dikes. The even younger Bolaños rhyolite dike, and the basic dykes intrude both the LVG and UVG. Intrusive activity in the western portion of the Sierra Madre Occidental has been dated continuously from 102 to 43 million years.

    The UVG overlies the eroded surface of the LVG unconformably. In the San Dimas District, the UVG is divided into a subordinate lower unit composed mainly of lavas of intermediate composition called Guarisamey Andesite and an upper unit called the Capping Rhyolite. The Capping Rhyolite is mainly composed of rhyolitic ash flows and air-fall tuffs and is up to 1,500 m thick in the eastern part of the district however within most of the district is about 1,000 m thick.

    The San Dimas district lies within an area of complex normal faulting along the western edge of the Sierra Madre Occidental. Compressive forces first formed predominantly east-west and east-northeast tension gashes, that were later cut by transgressive north-northwest striking slip faults. The strike-slip movements caused the development of secondary north-northeast faults, with right lateral displacement.

    Five major north-northwest-trending normal faults divide the district into five tilted fault blocks generally dipping 35° to the east (Figures 9 and 10). In most cases, the faults are post ore in age and offset both the LVG and UVG.

    All major faults display northeast-southwest extension and dip from near vertical (Peña fault) to less than 55° (Guamuchil fault). Offsets on the blocks range from a downthrow of 150 m on the Peña and Arana faults, to more than 1,500 m on the Guamuchil fault.

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    Figure 9.    Structural map of the San Dimas District

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    Figure 10.    Geologic section across the San Dimas District

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    8. DEPOSIT TYPES

    The deposits of the San Dimas district are high grade, silver-gold-epithermal vein deposits characterized by low sulphidation and adularia-sericitic alteration formed during the final stages of igneous and hydrothermal activity from quartz-monzonitic and andesitic intrusions.

    As is common in epithermal deposits, the hydrothermal activity that produces the epithermal vein mineralization began a few million years after the intrusion of the closely associated plutonic rocks and several million years after the end of the volcanism that produced the rocks that host the hydrothermal systems. At San Dimas, based on age determinations, the average period between the end of late stage of plutonism and the hydrothermal activity is 2.1 million years, however hydrothermal activity continued for at least another 5.0 million years. Older veins appear more common in the eastern part of the district whereas younger veins are found in the western part.

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    9. MINERALIZATION

    The mineralization is typical of epithermal vein structures with banded and drusy textures. Within the district, the veins occupy east-west trending fractures except in southern part of Tayoltita where they strike mainly northeast and in the Santa Rita mine where they strike north-northwest. The veins were formed in two different systems. The east-west striking veins were the first system developed, followed by a second system of north-northeast striking veins. Veins pinch and swell and commonly exhibit bifurcation, horse-tailing and cymoidal structures. The veins vary from a fraction of a centimetre in width to 15 m, but average 1.5 m. They have been followed underground from a few metres in strike-length to more than 1,500 m. Examples of veins with mineralization in the Favourable Zone extending over considerable distances are illustrated in the following three mined veins, each vein extending for more than 2,000 m, in the Tayoltita Mine, the San Luis Vein (Figure 11) and in the San Antonio Mine the Guadalupe Vein (Figure 12) and San Antonio Vein (Figure 13).

    Three major stages of mineralization have been recognized in the district:

    1. an early stage;
       
    2. an ore forming stage; and,
       
    3. a late stage quartz.

    Three distinct sub-stages of the ore forming stage also have been identified, each characterized by distinctive mineral assemblages with ore grade mineralization always occurring in the three sub-stages:

    a) quartz-chlorite-adularia;
       
    b) quartz-rhodonite; and,
       
    c) quartz-calcite.

    The minerals characteristic of the ore forming stage are composed mainly of white, to light grey, medium to coarse grained crystalline quartz with intergrowths of base metal sulphides (sphalerite, chalcopyrite and galena) as well as pyrite, argentite, polybasite, stromeyerite, native silver and electrum.

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    Figure 11.    Longitudinal cross-section of San Luis Vein, Tayoltita Mine

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    Figure 12.    Longitudinal cross-section of Guadalupe Vein

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    Figure 13.    Longitudinal cross-section of San Antonio Vein

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    The ore shoots within the veins have variable strike lengths (5 to 600 m); however, most average 150 m in strike-length. Down-dip extensions of ore shoots are up to 200 m but are generally less than the strike length.

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    10. EXPLORATION

    Typical of epithermal systems, the silver and gold mineralization at the San Dimas District exhibits a vertical zone with a distinct top and bottom that Luismin has termed the Favourable Zone (Figure 14). At the time of deposition, this Favourable Zone was deposited in a horizontal position paralleling the erosional surface of the LVG on which the UVG was extruded.

    This favourable, or productive, zone at San Dimas is some 300 to 600 m in vertical extent and can be correlated, based both on stratigraphic and geochronologic relationships, from vein system to vein system and from fault block to fault block. Using this concept of the dip of the unconformity at the base of the UVG, Luismin is able to infer the dip of the Favourable Zone and with considerable success explore and predict the Favourable Zone in untested areas.

    At the Tayoltita deposit, Ag:Au ratios have been a useful exploration tool. In most of the veins, detailed studies have shown that Ag:Au ratios increase progressively within the ore zone with the contours strongly elongated along the strike of the vein. The horizontal elongations of the Ag:Au ratios are thought to represent the former flow path of the ore fluids which were subhorizontal at the time of the ore deposition suggesting ore shoots can be found along these possible fluid paths (Figure 14).

    Luismin applies a 30% probability factor to the volume of the favourable zone to estimate the volume/tonnage of Inferred Mineral Resources that will later be discovered in the zone. For more than 30 years, Luismin has historically and successfully applied the 30% factor. The factor was originally developed by comparing the explored area of the active veins at that time (San Luis, Guadalupe, Cedral etc.) to the mined out area plus the Mineral Reserve area. After a review of numerous longitudinal vein sections for our August 2002 report, WGM concluded that the application of the 30% factor was justified.

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    Figure 14.    Schematic section of the Favourable Zone

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    11. DRILLING

    Exploration of the Favourable Zone at San Dimas District is done both by diamond drilling and by underground development work. Diamond drilling is predominantly done from underground stations as both the rugged topography, (i.e. access to surface drill stations) and the great drilling distance from the surface locations to the target(s) makes surface drilling both challenging and expensive. All exploration drilling and the exploration underground development work is done in-house by Luismin. Diamond drilling is of NQ/HQ size with excellent core recoveries (in the range of +95%) at a cost of approximately US$45/m.

    Luismin conducts a continuous program of exploration/development diamond drilling throughout the year at each of its mines with its own rigs. Twelve diamond drill rigs and crews are employed in the mines. Generally two rigs are stationed at the San Martin mine with eight rigs in the mines at San Dimas, although sometimes one of the rigs may be moved to a particular mine if required.

    Given that the majority (70%) of the Favourable Zone is not mineralized and the magnitude of the number of mine vein workings, it is WGM's opinion that confirmatory diamond drilling was not warranted and Wheaton did not conduct any independent diamond drilling during its due diligence exercise in 2002. WGM also visited an operating diamond drill rig underground and observed the core handling, and, later at the core shack, examined the drill core in detail, the sample splitting by diamond sawing, the bagging, tagging and shipment to the mine assay laboratory. All operations, observed by WGM, were being done in a professional manner. Core boxes are well marked and stored and very detailed geological logging is carried out.

    An additional diamond drilling rig was purchased in 2005 to assist in Luismin's planned expansion of mine production.

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    12. SAMPLING METHOD AND APPROACH

    Other than the control samples collected at the mill for material balance, two principal types of samples are collected daily from the mine workings:

    1. Samples of the mineralized zones exposed by the mine workings; and,
    2. Samples of the diamond drill core from the exploration/development drilling.

    Samples are also collected but on a less routine basis, from mine cars and from the blasted rock pile in a stope.

    Individual samples collected from a mineral shoot in certain veins can show considerable variation both vertically and horizontally in the vein as observed by samples from subsequent slices of the stope or from samples taken from the top of the pile of blasted rock in the stope compared to the samples from the back. Grade control in these veins is achieved in part by the considerable number of samples taken.

    Drill core samples after being sawn in half are bagged, tagged and sent to the mine assay laboratory. Several hundreds of samples are collected and processed every month at the mine assay laboratories.

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    13. SAMPLE PREPARATION, ANALYSES AND SECURITY

    At each of the mines, the mine workings are sampled under the direction of the Geological Department initially across the vein, at 1.5 m intervals. Splits are also taken along the sample line to reflect geological changes. No sample length is greater than 1.5 m. Once the ore block has been outlined and the mining of the block begins the sample line spacing may be increased to 3.0 m. Sampling is done by chip-channel (the channel approximately 10 cm wide), cut across the vein. Sample chips of similar size are collected on a canvas sheet then broken into smaller sized fragments, coned and quartered to produce a 1 to 2 kg sample, which is sent for fire assay to the mine assay laboratory. Sampled intervals are clearly marked on the underground rock faces with spray paint.

    Samples are crushed, homogenized, ground and split at the mine assay laboratory to produce a 10 g representative pulp sample for fire assaying. Routine quality control is carried out with every tenth sample repeated as a check assay done at the mine assay laboratory, and check assays between the Luismin mine laboratories. Routine assaying of standards is also carried out at the mine assay laboratory.

    WGM reviewed all the steps in the sample handling at the two mine assay laboratories (Tayoltita and San Antonio) from the initial recording and control of the numbers of incoming samples through the crushing, splitting, grinding and collecting of a subsample for fire assay. This is followed by the preparation for fire assay and cupellation and the weighing of the silver-gold and gold beads.

    The procedures used by Luismin's assay laboratories are those introduced by the former American mine owners. Certain steps have through time become somewhat slack and could be improved i.e. more rolling of the pulp sample to be better homogenized, better control of the dust, rock chips in the crushing-grinding area, the need for air conditioning in the balance room for the bead weighing etc. WGM believes, however, that the sample preparation, analysis and security process is without any serious problems. WGM believes that the introduction of a new program of quality control would be advantageous and helpful.

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    14. DATA VERIFICATION

    WGM did not collect any individual samples to verify the silver-gold mineralization at the Luismin mines. However, WGM did observe the gold-silver beads in the crucibles as taken from the fire assay furnace and their subsequent weighing. WGM also observed the pouring of numerous doré bars and receipts of payment from the sale of the doré bars.

    Luismin, starting in September 2005, has been sending on a regular basis (monthly or trimonthly), an approximate average of 70 duplicate samples per month to a commercial laboratory (SGS or Chemex). The samples are analyzed for their Au and Ag contents to check the analytical results of the Tayoltita mine laboratory. Samples are analyzed at the commercial laboratories using the same analytical procedures as the mine laboratory. During 15 months from September 2005 to December 2006, a total of 1,078 samples have been analysed with only a small percentage 15% to 30% showing good agreement between the two laboratories for both their gold and silver analyzed contents. Luismin plans to continue to monitor its mine assay results. WGM recommends that blind mine standards (high, medium low grade) and blind blanks be introduced into the analytical stream process for both laboratories and that a thorough review of the sample preparation procedures be made.

    In 2000, Luismin sent a suite of 199 samples (approximately 40 from each deposit) to three laboratories, DMC Durango, Bondar Clegg and Barringer, for check assays for silver and gold. These samples were also assayed at the Tayoltita, San Antonio and San Martin laboratories. In general, there was good correlation between the San Dimas laboratories and the outside laboratories and between the San Dimas laboratories.

    As part of the verification of the reported precious metal production by Luismin, a review was carried out by WGM of the reported silver and gold ounces of production from the Luismin mining (smelting) operation and compared to the reported settlement of ounces for silver and gold. There was excellent agreement between the reported metal production (ounces) and the settlement (ounces) by the refinery.

    Luismin's experience has shown considerable variation in grade within the mineralized shoots of the veins, and sampling of the muck piles is not routinely carried out.

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    15. ADJACENT PROPERTIES

    Exploration over the past few years has been concentrated on finding new Mineral Resources/Mineral Reserves in the immediate area of the present mine workings. Luismin holds a very large land position around the present/past mine workings and as such there are no adjacent properties. More than 120 mineralized veins are known within the San Dimas district land holdings.

    Luismin has a number of exploration properties throughout Mexico that are described later in this report.

    Tunnels driven to provide better access to the numerous producing mines continually cross-cut and discover new veins. In a helicopter flight over the land holdings surrounding the mines, WGM observed untested, relatively unknown, extensively hydrothermally altered areas characteristic of epithermal vein mineralization. These lands hold promise for future exploration.

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    16. MINING OPERATIONS

    16.1 GENERAL

    The current mines of Luismin in the San Dimas district consist of three underground gold and silver mining operations at Tayoltita, Central Block and Santa Rita. With the current and near term mine plans, these three mining areas are scheduled to contribute equally to the San Dimas mine production. Production is presently coming from: 9 veins (34 stopes) in the Central Block; 10 veins (17 stopes) in the Tayoltita Mine; and, 9 veins (21 stopes) in the Santa Rita Mine. The typical mining operations employ mechanized cut-and-fill mining with primary access provided by adits and internal ramps from an extensive tunnel system through the steep mountainous terrain. Production is presently coming from 9 veins (34 stopes) in the Central Block, from 10 veins (17 stopes) in the Tayoltita Mine and 9 veins (21 stopes) in the Santa Rita Mine. All milling operations are now carried out at a central milling facility at Tayoltita. The ore processing is by conventional cyanidation followed by zinc precipitation of the silver and gold followed by refining to doré.

    The San Antonio Mill operation was put into care and maintenance in November 2003 with all milling consolidated to the Tayoltita Mill and all former San Antonio mine production considered part of the Central Block Mine operation.

    San Dimas, the largest centre of Luismin operations, is located on the border of Durango and Sinaloa States. The district is characterized by the very rugged terrain of the Sierra Madre Occidental mountains with steep walled canyons and high mountain peaks which has presented challenges to the establishment of mining operations and haulage routes, mill sites and tailings management areas. Table 3 summarizes the San Dimas operations in 2006.

    TABLE 3
    LUISMIN SAN DIMAS MINING OPERATIONS FOR 2006

             
      Ore Production   Grade
      Tonnes   Gold (g/t) Silver (g/t)
    Tayoltita 225,907              2.80 423
    Santa Rita 78,969              2.87 375
    Central Block/San Antonio 400,180              9.22 638
    Total 705,057              6.46 540

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    16.2 DESCRIPTION OF MINING OPERATIONS

    16.2.1 TAYOLTITA MINE

    The Tayoltita Mine is the oldest operating mine in the San Dimas area. The main access is a 4.4 km tunnel from a portal approximately 400 m northeast of the Tayoltita Mill. About 570,000 cfm of ventilation air is supplied by a combination of natural flow from the access tunnel as well as fan driven through a system of raises. Raises for ventilation and ore and waste passes are typically developed with boring machines.

    The mining method employs mechanized cut-and-fill mining on vein mineralization using waste rock as backfill. The veins vary from 1 to 3 m in width and generally dip at 75° to 80°.

    Production drilling is completed with jackleg drills or single boom jumbos depending on the vein thickness. Ore is hauled from the stoping areas, using LHD equipment, then by rail haulage to surface through the main access tunnel. The rail haulage has a trolley system using 8 tonne cars.

    With completion of the San Luis Tunnel, development of the Central Block mine has evolved to connect with the San Antonio mining area. This mining area is characterized by veins that dip 75°, with variable widths, and is currently being developed as an important mining area for Tayoltita.

    16.2.2 SANTA RITA MINE

    The Santa Rita Mine main access is by adit approximately 3 km to the northeast of the Tayoltita Mill site. The mining method employs cut-and-fill mining on vein mineralization. The vein dip can vary from subvertical to as low as 35°. In some of the flatter lying areas, the vein thickness allows for a room and pillar mining operation. Ventilation is maintained by three exhaust fans providing 530,000 cfm.

    The ore haulage is by LHD equipment either to an internal shaft or directly to rail haulage on the main access tunnel where 2.5 -tonne rail cars are used on a trolley line to surface. The shaft employs a double drum hoist with 2.2 -tonne skips. A tunnel excavation to connect the rail haulage to the Tayoltita tunnel has been completed and has reduced ore transport costs by

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    elimination of the transfer to trucks at surface. With the haulage integrated into the Tayoltita haulage system it provides for more blending of the mill ore supply.

    16.2.3 SAN ANTONIO AND CENTRAL BLOCK

    The San Antonio Mine is located northwest of Tayoltita and is connected by 20 km of winding dirt road over the mountains. In 2001, the San Luis Tunnel was completed which provides for easier access between San Antonio and Tayoltita as well as integration of support services of the two locations.

    Mining operations at San Antonio work veins that vary in thickness from 1 to 6 m and employ mechanized cut-and-fill mining methods. Ventilation is by a combination of natural and fan forced methods supplying 290,000 cfm of air to the operations. Ore haulage is by a combination of LHD equipment with highway type trucks used to haul the ore to the Tayoltita mill.

    The San Antonio site includes a mill and some limited accommodation for the workforce. The mill operation was shutdown in November 2003 and all milling consolidated at the expanded Tayoltita mill facility. Following the San Antonio mill shutdown all underground production was integrated into the Central Block mine area. Ore haulage from the Central Block Mine utilizes a short tunnel on the north side of the Piaxtla River that provides ore haulage to the Tayoltita mill and bypasses the townsite. The decision to terminate the San Antonio milling operations was made primarily due to the exhaustion of the tailings storage capacity.

    16.2.4 GROUND SUPPORT FOR MINING

    The ground conditions throughout most of the San Dimas operations are good. Routine operations do not employ rockbolting or any other ground support with any regular pattern. In wider stopes where the veins are flat lying, some split sets are used and low-grade pillars are left for support. Apart from some minor problem areas, no bolting is used in the main haulage ramps and drifts. In areas that require ground support, steel arches and lagging has been used as well as shotcrete and screening. Luismin now employs a rock mechanics engineer to review ground conditions and mine planning on an ongoing basis.

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    16.2.5 GRADE CONTROL

    Grade control in the San Dimas operations is difficult to manage because of the inherent dilution of narrow vein mining. Additionally, the veins at San Dimas pinch and swell and have significant variation in grade over relatively short distances. Dilution is also added by uncemented waste rock that is used to backfill the stopes and used as a working base for subsequent cuts. Fill lines are marked by paint for reference while mucking on top of fill to reduce dilution. Chip sampling is completed at regular intervals across the back as headings are advanced. Mine geologists also mark grades directly on the stope walls to guide the mining advance. The visibility of the vein contacts and to a lesser extent the higher grade ore zones help to guide grade control within each stope.

    During 2004, the operations at San Dimas mill throughput had to be reduced to maintain high recoveries from the higher grade ore being processed. The reduced milling rate ensured that the leach extraction and metal recoveries from solution could be optimized with the limited capacity limitation of this part of the mill circuit. This has provided the mining operations the opportunity to blend the ores to a more uniform grade and produce for a more stable mill operation. At the end of August 2004, the Tayoltita Mill operation was processing ores at gold and silver grades of 6.9 g/t and 524 g/t which are 60% and 36% higher than plan respectively.

    High grade gold and silver ores continued to be mined in the years 2005 and 2006 requiring continued blending of the ore for the mill.

    16.2.6 OPERATIONS WORKFORCE

    Luismin employs a combination of union and contracted workforce at the San Dimas operations with a total current workforce of 1,142 with 671 at Tayoltita, 140 at Santa Rita and 331 in the Central Block of which approximately 598 are contracted.

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    16.2.7 DISCUSSION

    WGM regards the diligence and work ethic of the Luismin management team as major contributors to the success of the Luismin operations. Their efforts are evident in the general order and cleanliness of the mines and mills and a testament to well run operations. Over the past 12 years the operations have made significant improvements in productivity. Over the past seven years the accident frequency per 1,000,000 man-hours has been reduced considerably. There has been considerable progress, since the initial site visits in 2002, in the introduction of international guidelines throughout the operations.

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    17. MILLING OPERATIONS

    17.1 GENERAL

    The San Dimas district now has one milling facility at Tayoltita to process the production from the three active mining areas in San Dimas. The Tayoltita Mill has a conventional process flowsheet that employs cyanidation and zinc precipitation for recovery of the gold and silver. The mill currently has an installed leaching capacity of 2,100 tpd.

    The construction and installation to increase the Tayoltita crushing and grinding capacity of the mill to 3,200 tpd is currently well underway and expected to be completed at end of 2008. In 2006, the mill averaged 1,935 tpd.

    Table 4 summarizes the performance of the San Dimas milling operations during 2006

    TABLE 4
    SAN DIMAS MILL PERFORMANCE 2006

             
      Tayoltita Santa Rita Central Block Total
    Tons milled 214,063 78,265 396,614 688,942
    Grade Ag (g/t) 252 346 551 438.2
    Grade Au (g/t) 2.32 3.54 11.40 7.76
    Recovery (Ag) 90.21 90.21 90.21 90.21
    Recovery (Au) 95.57 95.57 95.57 95.57
    Oz (Au) 29,310 14,713 118,647 162,669
    Oz (Ag) 1,566,842.4 786,507.8 6,342,602.8 8,695,953

    17.2 TAYOLTITA MILL

    The Tayoltita mill presently employs two-stage crushing and single stage ball milling to achieve 80% passing 200 mesh. Leaching is completed in a series of tanks providing 72 hours of leach residence time. The pregnant solution is recovered in a counter current decant ("CCD") circuit with the gold and silver recovered from solution in a zinc precipitation circuit. Two positive displacement pumps operating in parallel move a high density tailings slurry to a box canyon east of the mill site for permanent disposal. Refining uses an induction furnace to produce 1,000 oz silver and gold doré bars.

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    The Tayoltita Mill has undergone a series of plant expansions over its operating life which has resulted in three small ball mills in parallel as well as a series of small tanks in the leaching and CCD circuit. An expansion at Tayoltita in 2003 increased the nominal capacity to 1,500 tpd to replace the capacity required for shutdown of the San Antonio Mill. Currently the Tayoltita Mill is at 2,100 tpd and undergoing further expansion to increase the capacity to 3,200 tpd.

    The 2,100 tpd expansion included a new cone crusher and dust collection/system and the installation of a 1,000 hp ball mill providing two stage grinding (Figure 15). The expansion retrofited a number of existing tanks for higher capacity for solid liquid separation. Included in the expansion was increased automation and process controls as well as a general upgrade of the plant power distribution and control system. At the time of the site visit in late January, the building's steel structure and ball mill installation for the 3,200 tpd was well underway. The start-up of the expanded 3,200 tpd capacity is anticipated in 2009.

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    Figure 15.    Flowsheet of El Perihuete 2,100 tpd processing plant

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    18. MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

    18.1 GENERAL

    The Proven and Probable Mineral Reserves, estimated by Luismin as of December 31, 2006 for the three operating mines in the San Dimas District, Tayoltita, Santa Rita and San Antonio/Central Block are 4.31 million tonnes at 388 g Ag/t and 5.73 g Au/t.

    Similarly an Inferred Mineral Resource, separately reported and estimated by Luismin for the same three mines, is about 7.99 million tonnes at an approximate grade of 321 g Ag/t and 2.9 g Au/t. Inferred Mineral Resources are not known with the same degree of certainty as Proven and Probable Mineral Reserves and do not have demonstrated economic viability.

    WGM reviewed the estimation methods used by Luismin and found them reasonable, and believes that the above Mineral Reserve and Mineral Resource estimates fairly represent the Mineral Reserve/Mineral Resource potential.

    18.2 LUISMIN APPROACH

    Rather than calculating Mineral Resources/Mineral Reserves over a minimum mining width and then applying corrections for dilution and mine losses to determine Mineral Reserves, Luismin estimates the reserve in each of the underground mining blocks by using the conventional mining block estimation methods for underground mines and later applying a tonnage and grade correction to determine Mineral Reserves. The minimum mining width is 0.9 m; however, on occasion where very high grade values are encountered over intervals less than 0.9 m, the minimum mining width is calculated to 0.9 m, using zero grade gold and silver values for the additional width required to meet 0.9 m.

    Luismin's practice is to apply gold and silver correction factors to the grades as estimated for the in situ mineralization to correlate with the head grades of the mill feed. The correction factors account for losses in gold and silver values in the cut-and-fill mining method as well as for dilution.

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    18.3 PAH AUDIT

    Luismin has retained Pincock, Allen and Holt (“PAH”) on three occasions to audit the reserves and resources of the operations. PAH visited the three mines of San Dimas and the San Martin mines in December 1999. PAH has produced three reports1 dated September 1998, April 2000 and January 2001 reporting on Luismin Resource/Reserve estimates dated June 30, 1998, December 31, 1999 and October 31, 2000.

    PAH’s approach to audit the Mineral Reserves was to:

    • review the parameters used to estimate resources and reserves;
    • review the methods of estimation and classification;
    • check calculations of grade, width and/or tonnage on individual blocks of reserves; and,
    • review the predicted reserves against production for the same areas on an annual basis.

    The results of PAH’s audit found no significant errors in calculation of the Mineral Reserves.

    PAH also reviewed Luismin’s estimate of Inferred Resources and stated:

    "Based on a historical review of the tonnage of material that was originally estimated as…[Inferred Resources]…and the tonnage of material that was ultimately mined or defined as mineable reserves, it is PAH’s opinion that there is a high probability that further exploration and mine development will convert a substantial amount of these resources into mineable reserves."

    PAH’s statement of Inferred Resources in the January 2001 report is essentially equivalent to the statement of Inferred Resources in this report. While there are minor discrepancies between the PAH and the WGM reports, in our opinion these are not material.

    18.4 VOLUME ESTIMATE

    The sample data are posted on level plans, and a geologist defines the limits of mineralization across and along the vein to determine the block lengths for mining and Mineral Reserve

    _______________________________
    1 Reports included audit of the previous owned and operated La Guitarra Mine.

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    estimation. The data are then transferred to longitudinal sections and the volume of the block is calculated based on the average mineralized width of the vein and the measured longitudinal area (corrected for the dip of the vein).

    18.5 TREATMENT OF HIGH GRADE ASSAYS

    Cutting of high grade values is sometimes carried out by the geologist estimating the tonnage and grade of a block. Luismin informed us that the rule for the cutting of high grade silver values, i.e. those greater than 350 g Ag/t, is to average the high grade value with the silver values of the samples immediately adjacent on either side of the high grade sample, i.e. the average of three sample values. If the high grade value of the sample is equal to, or greater than three times the average then both the silver and gold values of the high grade sample are cut in half.

    18.6 TONNAGE FACTOR

    The tonnage factor for the mines that use the metric system is to multiply the volume in cubic metres by 2.7 (SG) to give tonnes and similarly in the mines using the English system to divide the volume, in cubic feet, by 13 to give tonnes. WGM believes that these factors are reasonable.

    18.7 DILUTION

    Prior to October 2000, an empirical dilution curve was applied to correct the silver and gold values at the mines of the San Dimas District. The curve was developed from years of experience measuring the head grade in the mill at the Tayoltita mine. However, as the silver grades mined decreased, a statistical study in 1999 showed that the empirical dilution curve was no longer appropriate. The 1999 statistical study was based on more than 12,000 data entries from the various mines compared to the head grades of the mill. The results indicated the need to apply the following new correction factors to both silver and gold values.

    Since November 2000, grade corrections of -15%, or 0.85 by silver grade, and –5%, or 0.95 by gold grade, have been applied. The adjustments incorporate, in WGM's opinion, grade differences due principally to dilution and to mining losses but also correct, according to Luismin, other factors that affect the results of the silver and gold assays, namely: 1) the

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    collecting and splitting of the samples; 2) grinding contamination in the assay lab; 3) contamination during the cupellation of samples with very high values in silver and gold; and, 4) weighing errors in determining the gold and silver grades of the samples. A tonnage mining dilution of 10% is applied after the grade correction.

    To account for narrow veins, an additional dilution factor of 10% (at zero grade) is also applied to blocks less than 5,000 tonnes at the San Dimas mines.

    Luismin does not apply a mining recovery factor but since the reserve tonnes balance well with the tonnage mined, WGM estimates that mining recovery is already included in the estimation.

    18.8 CUTOFF GRADE

    The calculation of the minimum cutoff grade is based on market metal prices (adjusted monthly) for gold and silver metal recovered in the mill and the average monthly production costs for mining/milling/overhead etc., to produce a minimum dollar per tonne cutoff grade. The same cutoff grade is applied to each of the mining areas in the San Dimas district. The cutoff grade, for estimation of reserves at the San Dimas mines, as of December 31, 2006, was US$64.31/t.

    18.9 CLASSIFICATION OF RESERVES

    The terminology used by Luismin to designate Measured and Indicated Mineral Resources and Proven and Probable Mineral Reserves is in general agreement with the CIM Standards as adopted in NI 43-101. Luismin’s Mineral Resource categories "potential resource" and "drill inferred resource" would, under the CIM Standards, be called Inferred Mineral Resources. We have used the term Inferred Mineral Resources for this material throughout this report.

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    Watts, Griffis and McOuat

    The following criteria are used by Luismin to classify Proven and Probable Mineral Reserves. The distance for vertical projections for Proven Mineral Reserves and Probable Mineral Reserves is a function of the length of the block, defined as follows:

    Block Length Maximum Vertical Projection for Maximum Vertical Projection for
      Proven Mineral Reserves Probable Mineral Reserves
    Less than 15 m (50 ft) 4 m (12 ft) 8 m (24 ft)
    15 to 45 m (50 to 148 ft) 8 m (24 ft) 16 m (52 ft)
    45 to 85 m (148 to 279 ft) 16 m (52 ft) 32 m (105 ft)
    Greater than 85 m (279 ft) 20 m (65 ft) 40 m (135 ft)

    Blocks are adjusted to reflect faults, old workings and/or vein intersections.

    Luismin also estimates Probable Mineral Reserves by diamond drilling. A square is drawn on the vertical longitudinal section with the drillhole centered on the square. The shape and size of the block depends upon the geological interpretation with the maximum size of the block based on the thickness of the vein as follows:

      Vein Thickness Size of Block
      Less than  1.0 m 25 x 25 m 
      1.0 to 1.5 m 35 x 35 m 
      Greater than 1.5 m 50 x 50 m 

    Drillhole blocks, based on drillhole assays 50 m or less from underground workings, are classified as "probable reserves from drilling". If the drillhole assays are more than 50 m from sampled underground workings or adjacent drillholes, the block is classified as Inferred Resources.

    Luismin also estimates Inferred Mineral Resources based on the geological interpretation of partially explored veins and the vertical extent of the "Favourable Zone" of the epithermal mineralization. An average grade is determined from the average metal values of widely spaced samples collected variously, when present, from outcrops, widely spaced drillholes and underground workings.

    Past mining experience shows that economic mineralization is confined to an epithermal zone with a distinct top and bottom called the Favourable Zone and that mineralization within a vein in the Favourable Zone is very irregular but statistically occupies 30% of vein in the zone. The extent of extrapolation of an individual vein in the Favourable Zone is based on

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    Watts, Griffis and McOuat

    structural and stratigraphic relationships supported by geochemical trace element studies and fluid inclusion studies. The extrapolation of a particular vein is based on various individual criteria, e.g. the height of the Favourable Zone, the knowledge of the structure and its extension through the interception of the structure in underground workings, by surface exposure and/or by intersection with diamond drillholes. The strength, width and character of the individual vein determine the geological confidence in the distance of the extrapolation of the vein.

    A total of more than 100 veins, at Tayoltita, San Antonio and Santa Rita (Figure 16), comprise the Inferred Mineral Resource of the San Dimas District. The various veins and the corresponding length, width and height projected are used to determine the total volume/tonnage of the Favourable Zone and ultimately the 30% of the total tonnage figure represents the Inferred Mineral Resources.

    18.10 RECONCILIATION BETWEEN RESERVES AND PRODUCTION

    The most useful test of a Mineral Reserve estimate at an operating mine is a review of the tonnes and grade predicted by the reserve estimate against the results of production from the same area. Reconciliation between the reserves of the Tayoltita/Santa Rita mines and the San Antonio mine, and production from the same areas for the period 1978 to 2002 is shown on Tables 5 and 6. In November 2003, the mill at San Antonio was closed and all milling operations from the three mines are now carried out at the Tayoltita mill. However the reconciliation between the two mill/mine operations showed very close agreement and the same is expected at the Tayoltita mill.

    18.11 DISCUSSION

    Luismin does not include the Inferred Mineral Resources in its Mineral Reserve Estimate. The Inferred Mineral Resources are targets to develop additional reserves. To determine how successful they had been in converting Inferred Mineral Resources into Mineral Reserves, Luismin geologists studied a number of veins in each of the four mines. It is important to note that the study did not include all the veins that were mined during the period and thus the mine production for the same period will be greater. Table 7 illustrates the percentage of the resources that Luismin has successfully transferred into reserves from selected veins, at each

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    Watts, Griffis and McOuat

    Figure 16.    Regional structure and known veins

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    Watts, Griffis and McOuat

    TABLE 5
    RECONCILIATION BETWEEN PREDICTED RESERVES AND ACTUAL PRODUCTION – TAYOLTITA-SANTA RITA
    (1978-2002)

                         
    YEAR   TONNES     SILVER GRADE   GOLD GRADE SILVER CONTENT   GOLD CONTENT
          Variance g Ag/t Variance   g Au/t Variance            Contained oz Variance      Contained oz Variance
      Predicted Actual % Predicted Actual   % Predicted Actual   % Predicted Actual % Predicted Actual %
    1978 156,000 159,628 2.3% 400 404 1.0%    7.00 7.10 1.4% 2,006,237 2,073,424 3.3% 35,109 36,439 3.8%
    1979 156,000 161,428 3.5% 400 395 -1.3%    7.00 6.50 -7.1% 2,006,237 2,050,094 2.2% 35,109 33,736 -3.9%
    1980 162,000 162,290 0.2% 390 381 -2.3%    6.40 6.40 0.0% 2,031,315 1,987,991 -2.1% 33,334 33,394 0.2%
    1981 162,000 155,837 -3.8% 390 468 20.0%    6.40 7.80 21.9% 2,031,315 2,344,845 15.4% 33,334 39,081 17.2%
    1982 162,000 158,163 -2.4% 390 483 23.8%    6.40 7.70 20.3% 2,031,315 2,456,121 20.9% 33,334 39,156 17.5%
    1983 195,000 176,643 -9.4% 383 422 10.2%    6.50 6.90 6.2% 2,401,215 2,396,661 -0.2% 40,752 39,187 -3.8%
    1984 216,000 200,256 -7.3% 396 424 7.1%    6.30 6.60 4.8% 2,750,088 2,729,915 -0.7% 43,751 42,494 -2.9%
    1985 202,800 197,864 -2.4% 422 433 2.6%    5.30 6.30 18.9% 2,751,555 2,754,561 0.1% 34,557 40,078 16.0%
    1986 236,300 222,295 -5.9% 396 423 6.8%    5.77 6.28 8.8% 3,008,546 3,023,206 0.5% 43,837 44,884 2.4%
    1987 224,055 200,323 -10.6% 348 310 -10.9%    3.90 3.60 -7.7% 2,506,869 1,996,596 -20.4% 28,094 23,186 -17.5%
    1988 222,520 226,756 1.9% 346 319 -7.8%    3.67 3.54 -3.5% 2,475,386 2,325,665 -6.0% 26,256 25,808 -1.7%
    1989 224,475 224,142 -0.1% 312 262 -16.0%    3.33 2.11 -36.6% 2,251,751 1,888,088 -16.2% 24,033 15,206 -36.7%
    1990 229,607 214,025 -6.8% 287 248 -13.6%    2.50 1.90 -24.0% 2,118,677 1,706,530 -19.5% 18,455 13,074 -29.2%
    1991 149,760 158,120 5.6% 335 275 -17.9%    2.90 1.94 -33.1% 1,613,015 1,398,032 -13.3% 13,963 9,862 -29.4%
    1992 234,685 237,580 1.2% 341 311 -8.8%    2.26 2.49 10.2% 2,572,986 2,375,571 -7.7% 17,053 19,020 11.5%
    1993 293,885 297,581 1.3% 285 303 6.3%    2.90 2.90 0.0% 2,692,899 2,898,982 7.7% 27,401 27,746 1.3%
    1994 300,150 300,711 0.2% 307 286 -6.8%    2.30 1.90 -17.4% 2,962,610 2,765,114 -6.7% 22,195 18,370 -17.2%
    1995 303,891 323,803 6.6% 315 301 -4.4%    2.00 1.70 -15.0% 3,077,699 3,133,611 1.8% 19,541 17,698 -9.4%
    1996 334,225 339,704 1.6% 311 312 0.3%    1.90 2.10 10.5% 3,341,928 3,407,634 2.0% 20,417 22,936 12.3%
    1997 366,206 368,069 0.5% 306 299 -2.3%    2.20 2.30 4.5% 3,602,837 3,538,328 -1.8% 25,903 27,218 5.1%
    1998 388,163 401,743 3.5% 274 264 -3.6%    1.85 2.29 23.8% 3,419,499 3,409,965 -0.3% 23,088 29,579 28.1%
    1999 414,400 428,386 3.4% 294 278 -5.4%    2.37 2.52 6.3% 3,917,101 3,828,933 -2.3% 31,577 34,708 9.9%
    2000 432,690 439,590 1.6% 288 274 -4.9%    2.50 2.54 1.8% 4,003,443 3,868,390 -3.4% 34,710 35,898 3.4%
    2001 440,720 385,660 -12.5% 273 299 9.7%    2.33 2.72 16.8% 3,861,269 3,706,692 -4.0% 32,972 33,689 2.2%
    2002 330,225 313,145 -5.2% 350 361 3.1%    3.40 3.8 10.9% 3,716,000 3,634,536 -2.2% 36,098 37,956 5.1%
    Total 6,537,757 6,453,742 -1.3% 329 326 -0.8%    3.50 3.57 2.1% 69,151,791 67,699,488 -2.1% 734,875 740,402 0.8%

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    Watts, Griffis and McOuat

    TABLE 6
    RECONCILIATION BETWEEN PREDICTED RESERVES AND ACTUAL PRODUCTION – SAN ANTONIO
    (1987-2002)

                   
    YEAR TONNES                SILVER GRADE   GOLD GRADE SILVER CONTENT GOLD CONTENT
          Variance          g Ag/t   Variance g Au/t Variance Contained oz Variance Contained oz Variance
      Predicted Actual % Predicted Actual      % Predicted Actual % Predicted Actual % Predicted Actual %
    1987 50,416 35,136 -30.3%    305 287 -5.9%    5.60 5.80 3.6% 494,386 324,214 -34.4% 9,077 6,552 -27.8%
    1988 93,000 88,795 -4.5%    309 286 -7.4%    7.80            6.54 -16.2% 923,930 816,493 -11.6% 23,323 18,671 -19.9%
    1989 90,000 92,855 3.2%    315 260 -17.5%    6.80            8.40 23.5% 911,488 776,205 -14.8% 19,677 25,077 27.4%
    1990 90,000 94,568 5.1%    287 221 -23.0%    6.70            7.37 10.0% 830,467 671,946 -19.1% 19,387 22,408 15.6%
    1991 90,000 91,827 2.0%    324 338 4.3%    5.80            5.72 -1.4% 937,530 997,895 6.4% 16,783 16,887 0.6%
    1992 97,000 94,386 -2.7%    360 364 1.1%    5.80            6.00 3.4% 1,122,721 1,104,604 -1.6% 18,088 18,208 0.7%
    1993 93,564 63,025 -32.6%    351 358 2.0%    5.60 5.30 -5.4% 1,055,878 725,427 -31.3% 16,846 10,740 -36.2%
    1994 93,185 90,235 -3.2%    340 359 5.6%    5.10            5.90 15.7% 1,018,645 1,041,519 2.2% 15,280 17,117 12.0%
    1995 98,286 114,201 16.2%    373 359 -3.8%    6.30 6.20 -1.6% 1,178,686 1,318,142 11.8% 19,908 22,765 14.3%
    1996 115,913 131,747 13.7%    381 366 -3.9%    6.10 6.04 -1.0% 1,419,890 1,550,314 9.2% 22,733 25,584 12.5%
    1997 138,688 148,302 6.9%    385 333 -13.5%    5.80            5.17 -10.9% 1,716,712 1,587,775 -7.5% 25,862 24,651 -4.7%
    1998 144,000 141,176 -2.0%    386 259 -32.9%    5.70            4.03 -29.3% 1,787,094 1,175,597 -34.2% 26,390 18,292 -30.7%
    1999 132,188 136,025 2.9%    261 251 -3.8%    3.40 3.43 0.9% 1,109,252 1,097,716 -1.0% 14,450 15,001 3.8%
    2000 134,990 144,840 7.3%    267 263 -1.5%    3.60 3.75 4.2% 1,158,806 1,224,735 5.7% 15,624 17,463 11.8%
    2001 152,720 146,470 -4.1%    315 334 6.0%    3.65 5.07 38.9% 1,546,693 1,572,870 1.7% 17,922 23,876 33.2%
    2002 154,267 140,205 -9.1%    309 389 25.9%    5.08 6.14 20.9% 1,532,601 1,753,520 14.4% 25,196 27,678 9.8%
    Total 1,768,217 1,753,793 0.8%    320 315 -4.6%    5.39 5.51 2.3% 18,744,779 17,738,971 -5.4% 306,546 310,969 1.4%

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    Watts, Griffis and McOuat

    TABLE 7
    LUISMIN, S.A. DE C.V. OPERATING MINES
    INFERRED MINERAL RESOURCES TRANSFORMED INTO MINERAL RESERVES
    (1979-1998)

                     
    Mine Inferred Mineral
    Resources1     		Grade Production2 Grade  Actual Grade Production & Transfer4
                Reserves3     Actual Reserves  
        (g Ag/t) (g Au/t) (t) (g Ag/t) (g Au/t) (t) (g Ag/t) (g Au/t)   (%)
    Tayoltita 4,300,000 406 3.8 3,201,919 419 4.22 633,000 307 2.69 3,835,000 89
    Santa Rita 900,000 336 3.4 479,646 440 2.84 340,000 381 2.73 819,000 91
    San Antonio 2,100,000 336 4.8 1,162,752 334 5.67 349,000 223 2.52 1,511,000 72
    San Martin* 1,200,000 45 3.7 899,583 43 3.34 1,065,000 45 3.46 1,965,000 164
    La Guitarra** 800,000 350 3.0 466,952 246 3.27 363,000 292 2.96 830,000 104
    Total 9,300,000 330 3.9 6,210,900 337 4.18 2,750,000 202 3.00 8,961,000 96

    1. Inferred Mineral Resources at the beginning of the project of veins selected for study.
    2. Not the total production from the mines for the period.
    3. Reserves of the veins analyzed for Tayoltita, Santa Rita and San Antonio, does not include total reserves for those mines.
    4. Percentage of resources transformed into reserves.
    5. Figures rounded.

    * San Martin Mine (previously owned Luismin Mine).
    * La Guitarra mine (a previously owned Luismin mine).

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    of the mines, over the 20 year period (1979 to 1998). Luismin records, over the 20 year period, show that follow-up exploration has converted on average almost 90% of the Inferred Mineral Resources into Mineral Reserves.

    The Inferred Mineral Resources of the San Dimas District as of December 31, 2006 as estimated by Luismin and reviewed by WGM are shown in Table 8. Tables 9, 10 and 11 give the breakdown of the individual veins summarized in Table 8.

    TABLE 8
    INFERRED MINERAL RESOURCES OF SAN DIMAS DISTRICT GEOLOGY DEPARTMENT
    (as of December 31, 2006)

               
    Area SG % Metric    Average Grade Content (Troy oz) x 103
        Probability Tonnes x 106 (g Ag/t) (g Au/t) (Ag) (Au)
    Tayoltita 2.70 30 7.99    321 2.9 82,407 737
    Santa Rita 2.70 30 4.06    329 2.3 42,933 299
    San Antonio 2.70 30 5.23    314 4.3 52,802 724
    Total     17.27    321 3.2 178,142 1,760

    All Mineral Resources are diluted. Inferred Mineral Resources are not known to the same degree of certainty as Mineral Reserves and do not have demonstrated economic viability.

    During WGM’s review of Luismin’s Resource/Reserve estimation procedures, a detailed step-by-step estimation of a block by WGM produced a similar tonnage and grade estimate to that produced by Luismin.

    Recent exploration of five veins along the San Fernando Tunnel (Figure 17) in the area known as the Central Block has outlined more than 2.1 million tonnes of Mineral Reserves containing significant gold and silver values.

    Figures 18 through 22 illustrate the Mineral Reserve blocks along longitudinal sections of the five veins.

    WGM's review of Luismin's Mineral Resource/Mineral Reserve estimates at the three operating mines at the San Dimas District did not uncover any fatal flaws, and WGM believes that the methods used by Luismin to determine Mineral Resource/Mineral Reserve estimates are reasonable and, as presented in Tables 8 and 12, fairly represent the Mineral Reserve/Mineral Resource potential. WGM has rounded Luismin's reported tonnage figures

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    Watts, Griffis and McOuat     

    TABLE 9
    LUISMIN S.A. DE C.V.
    TAYOLTITA MINE INFERRED RESOURCES
    (As of December 31, 2006)

                         
      Longitud  Height  Wide  Density  Probability  Metric Ag Au Ounces Ounces
        (F.Z.)        Tonnes          
    Vein (m) (m) (m) 2.7 30%   (g/t)   (g/t) (Ag)  (Au) oz Au Eq.
     Tayoltita                      
     Arana 530 250 2.50 2.70 0.30 268,305 278 2.80 2,398,121 24,154 60,697
     Cedral Este 900 350 2.00 2.70 0.30 510,300 262 1.50 4,298,576 24,610 90,112
     Arana Centro-Norte 268 150 2.00 2.70 0.30 65,223 314 2.20 658,458 4,613 14,647
     Culebra (Alto de Arana) 400 120 1.50 2.70 0.30 58,320 299 2.80 560,643 5,250 13,793
     Veta de Crucero 177 122 1.20 2.70 0.30 126,213 511 6.43 2,073,589 26,092 57,690
     Veta 19-560 500 200 1.50 2.70 0.30 121,500 250 2.50 976,594 9,766 24,647
     Veta 25-730 500 200 1.50 2.70 0.30 121,500 270 2.50 1,054,721 9,766 25,838
     Vetas Tipo Manto 6 200 100 1.50 2.70 0.30 145,800 250 2.50 1,171,913 11,719 29,577
     Veta 27-317 475 100 1.50 2.70 0.30 57,713 264 2.00 489,864 3,711 11,176
     Veta San Luis 300 150 1.50 2.70 0.30 54,675 358 5.10 629,317 8,965 18,555
     Veta 15-207 350 150 1.50 2.70 0.30 63,788 251 1.87 514,767 3,835 11,679
     Maria Elena 300 100 1.50 2.70 0.30 36,450 248 1.80 290,634 2,109 6,538
     Veta 27-326 375 150 1.50 2.70 0.30 68,344 258 2.10 566,915 4,614 13,253
     Veta 22-930 300 150 1.50 2.70 0.30 54,675 233 1.60 409,583 2,813 9,054
     Veta 27-312 309 150 1.50 2.70 0.30 56,360 233 1.65 422,205 2,990 9,423
     Veta 27-328 350 150 1.50 2.70 0.30 63,788 223 1.44 457,343 2,953 9,922
     Arana del Bajo 200 150 1.50 2.70 0.30 36,450 253 3.34 296,494 3,914 8,432
     Ramaleos Este de Arana 100 150 1.50 2.70 0.30 18,225 319 3.20 186,920 1,875 4,723
     Victoria del Bajo 200 150 1.50 2.70 0.30 36,450 251 2.40 294,150 2,813 7,295
     Veta Nueva 200 150 1.50 2.70 0.30 36,450 182 1.60 213,288 1,875 5,125
     Veta 25-300 133 150 1.50 2.70 0.30 24,300 379 2.37 296,103 1,852 6,364
     Veta 25-065 200 100 1.50 2.70 0.30 24,300 296 1.95 231,257 1,523 5,047
     Sistema 25-830 (Alto Arana) 600 200 1.50 2.70 0.30 145,800 300 2.50 1,406,295 11,719 33,148
     Subtotal           2,194,929 282 2.46 19,897,751 173,533 476,737
                           
    Alto Arana San Eduardo Tunnel                    
     Blendita Vein System 680 200 2.00 2.70 0.30 220,320 450 3.00 3,187,602 21,251 69,824
     Alejandra 770 200 2.00 2.70 0.30 249,480 450 5.00 3,609,491 40,105 95,107
     Caludia 770 200 2.00 2.70 0.30 249,480 400 3.00 3,208,436 24,063 72,954
     El Carrizo 470 200 2.00 2.70 0.30 152,280 250 6.00 1,223,998 29,376 48,027
     Liliana-Ofelia 1000 350 2.70 2.7 0.30 765,450 399 1.80 9,819,456 44,298 193,928
     Pochote 1000 350 2.00 2.7 0.30 567,000 318 4.00 5,797,061 72,919 161,255
     Agua Caliente 1000 350 2.00 2.7 0.30 567,000 350 3.00 6,380,413 54,689 151,915
     Subtotal           2,771,010 373 3.22 33,226,459 286,702 793,010
                           
     Tahonitas Area                      
     Minitas 800 200 1.20 2.70 0.30 155,520 350 3.00 1,750,056 15,000 41,668
     El Pinito 600 200 1.20 2.70 0.30 116,640 350 3.00 1,312,542 11,250 31,251
     Tahonitas 600 200 1.20 2.70 0.30 116,640 350 3.00 1,312,542 11,250 31,251
     Chirimollo 600 200 1.20 2.70 0.30 116,640 350 3.00 1,312,542 11,250 31,251
     Subtotal           505,440 350 3.00 5,687,683 48,752 135,421
     Area Tinajas                      
     San Francisco Oeste 900 350 2.50 2.70 0.30 637,875 290 1.90 5,947,457 38,966 129,594
     San Francisco Este 500 350 2.50 2.70 0.30 354,375 290 1.90 3,304,143 21,648 71,997
     Subtotal           992,250 290 1.90 9,251,600 60,614 201,591
                           
     TOTAL           6,463,629 328 2.74 68,063,493 569,600 1,606,758
                           
     El Cristo Area                      
     La Luz 400 300 2.00 2.7 0.3 194,400 300 3.50 1,875,060 21,876 50,448
     Santa Gertrudis 687.5 300 2.00 2.7 0.3 334,125 250 4.00 2,685,633 42,970 83,894
     Santa Cruz 350 250 1.00 2.7 0.3 70,875 300 3.50 683,616 7,976 18,393
     Joliet 500 200 1.00 2.7 0.3 81,000 250 4.00 651,063 10,417 20,338
     Olivia 400 200 1.00 2.7 0.3 64,800 280 3.00 583,352 6,250 15,139
     Guadalupe 4 250 200 1.00 2.7 0.3 40,500 280 2.50 364,595 3,255 8,811
     Camichin 540 250 2.00 2.7 0.30 218,700 300 3.00 2,109,443 21,094 53,238
     Tejas 540 250 2.00 2.7 0.30 218,700 300 3.00 2,109,443 21,094 53,238
     Verdosa 576 250 2.50 2.7 0.30 291,600 350 3.50 3,281,355 32,814 82,815
     Subtotal           1,514,700 295 3.44 14,343,560 167,746 386,315
     GRAND TOTAL           7,978,329 321 2.87 82,407,053 737,347 1,993,073

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         TABLE 10
    LUISMIN S.A. DE C.V.
    SANTA RITA MINE INFERRED RESOURCES
    (As of December 31, 2006)

                           
    Vein Longitud   Height Wide    Density Probability    Metric Ag Au Ounces Ounces
        (F.Z.)       Tonnes          
      (m) (m) (m) 2.7 30%   (g/t)  (g/t) (Ag)  (Au) oz Au Eq.
    Santa Rita 200 40 2.30 2.7 0.3 14,904 438 2.67 209,882 1,279 4,478
    Patricia I 206 100 1.80 2.7 0.3 29,970 390 2.33 375,794 2,245 7,972
    Magdalena del bajo 240 100 2.50 2.7 0.3 48,600 265 2.15 414,076 3,359 9,669
    Lupita 300 150 2.00 2.7 0.3 72,900 536 2.31 1,256,290 5,414 24,558
    Patricia II 300 100 1.80 2.7 0.3 43,740 340 2.00 478,140 2,813 10,099
    Magdalena del bajo 500 200 1.00 2.7 0.3 81,000 380 3.00 989,615 7,813 22,893
    Marisa 350 100 1.60 2.7 0.3 45,360 400 2.91 583,352 4,244 13,133
    Cristina-Nancy   250.6 200 2.12 2.7 0.3 86,066 490 2.97 1,355,894 8,218 28,880
    Promontorio 900 250 2.40 2.7 0.3 437,400 325 1.97 4,570,459 27,704 97,349
    Blendita 680 200 2.00 2.7 0.3 220,320 291 2.04 2,061,316 14,450 45,861
    Porvenir 600 150 1.50 2.7 0.3 109,350 358 2.78 1,258,634 9,774 28,953
    Gabriela 600 150 1.50 2.7 0.3 109,350 250 1.50 878,935 5,274 18,667
    Animas 1000 250 3.00 2.7 0.3 607,500 265 2.15 5,175,948 41,994 120,865
    America 500 250 1.00 2.7 0.3 101,250 353 2.40 1,149,125 7,813 25,323
    Tacuacha 800 180 1.20 2.7 0.3 139,968 353 2.40 1,588,551 10,800 35,007
    Trinidad 1000 250 1.20 2.7 0.3 243,000 353 2.40 2,757,901 18,751 60,776
    Cristina del Alto 300 200 2.50 2.7 0.3 121,500 309 2.15 1,207,070 8,399 26,792
    Carolina 500 200 1.00 2.7 0.3 81,000 325 1.97 846,381 5,130 18,028
    San Jose 500 200 1.00 2.7 0.3 81,000 325 1.97 846,381 5,130 18,028
    San Carlos 700 350 1.50 2.7 0.3 297,675 274 2.55 2,622,350 24,405 64,365
    Concepcion 600 350 1.50 2.7 0.3 255,150 353 2.40 2,895,796 19,688 63,815
    Guarisamey   487.5 350 2.00 2.7 0.3 276,413 353 2.40 3,137,113 21,329 69,132
    El Rincon 600 350 1.50 2.7 0.3 255,150 353 2.40 2,895,796 19,688 63,815
    Santa Barbara 700 350 1.50 2.7 0.3 297,675 353 2.40 3,378,429 22,969 74,450
    TOTAL           4,056,241 329 2.29 42,933,230 298,684 952,905

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    TABLE 11
    MINAS LUISMIN, S.A. DE C.V.
    SAN ANTONIO AREA INFERRED RESOURCES
    (As of December 31, 2004)

    Vein Longitud Height   Wide   Density   Probability    Metric Ag Au Ounces  Ounces
        (F.Z.)        Tonnes          
      (m) (m) (m) 2.7 30%   (g/t)  (g/t)    (Ag)  (Au) oz Au Eq.
    West Block                      
    San Antonio 150 150 2.20 2.7 0.3 40,095 270 5.00 348,058 6,446 11,749
    Santa Rosa 300 100 2.50 2.7 0.3 60,750 270 5.00 527,361 9,766 17,802
    Guadalupe 300 110 1.50 2.7 0.3 40,095 312 3.40 402,200 4,383 10,512
    Carmen 800 250 0.90 2.7 0.3 145,800 190 2.70 890,654 12,657 26,229
    San Ricardo 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Sin Nombre 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Santa Cruz 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Agua Dulce 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Santa Maria 1 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Santa Maria 2 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Marshal 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Franklin 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Cata 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Rosario 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Macho Bayo 200 250 1.00 2.7 0.3 40,500 300 4.00 390,638 5,209 11,161
    Peggy 250 200 1.00 2.7 0.3 40,500 350 4.00 455,744 5,209 12,153
    Santa Teresa 450 250 2.50 2.7 0.3 227,813 245 3.10 1,794,495 22,706 50,051
    Coronado Trinidad 1000 250 2.00 2.7 0.3 405,000 300 3.00 3,906,376 39,064 98,589
    Subtotal           1,405,553 279 3.49 12,621,901 157,523 349,856
                           
    Central Block                      
    El Oro System 750 200 1.65 2.7 0.3 200,475 350 4.50 2,255,932 29,005 63,381
    Los Queleles system 827 200 1.70 2.7 0.3 227,813 340 3.00 2,490,320 21,973 59,921
    Santa Lucia 750 200 1.65 2.7 0.3 200,475 370 5.00 2,384,842 32,228 68,568
    Santa Gertrudis 500 250 1.48 2.7 0.3 149,850 350 5.00 1,686,252 24,089 49,785
    Zacatera 500 250 1.48 2.7 0.3 149,850 350 5.00 1,686,252 24,089 49,785
    Castellana 862 250 1.50 2.7 0.3 261,954 343 3.70 2,888,796 31,162 75,182
    Celia 560 300 0.90 2.7 0.3 122,472 322 3.73 1,267,916 14,687 34,008
    Capitana 200 250 0.75 2.7 0.3 30,375 428 4.80 417,982 4,688 11,057
    Soledad 460 300 0.90 2.7 0.3 201,204 311 3.40 2,011,846 21,994 52,651
    Marina I 592 300 0.90 2.7 0.3 258,854 260 4.27 2,163,844 35,537 68,510
    Marina II 600 300 0.90 2.7 0.3 262,440 260 5.27 2,193,821 44,467 77,897
    Gloria 417 200 0.90 2.7 0.3 60,750 312 5.54 609,395 10,821 20,107
    Roberta 447 300 2.50 2.7 0.3 271,483 510 9.24 4,451,543 80,651 148,485
    Robertita 182 300 2.20 2.7 0.3 97,040 455 8.00 1,419,580 24,960 46,591
    Mariana 528 250 0.92 2.7 0.3 98,415 300 3.00 949,249 9,492 23,957
    Pozolera 528 250 0.92 2.7 0.3 98,415 317 3.70 1,003,040 11,707 26,992
    Frapopan Sur 556 200 0.90 2.7 0.3 81,000 370 3.00 963,573 7,813 22,496
    Frapopan Norte 600 350 0.90 2.7 0.3 153,090 370 3.00 1,821,152 14,766 42,517
    Noche Buena 840 300 1.00 2.7 0.3 204,120 327 3.60 2,146,006 23,626 56,327
    Subtotal           3,130,075 346 4.65 34,811,341 467,756 998,215
                           
    San Vicente Area                      
    Luz y Reyes 800 250 1.25 2.7 0.3 202,500 286 4.40 1,862,039 28,647 57,021
    San Rafael 820 250 1.51 2.7 0.3 250,736 227 5.30 1,829,954 42,726 70,611
    Hedionda 200 250 1.20 2.7 0.3 48,600 212 3.40 331,261 5,313 10,360
    Esperanza 500 250 1.20 2.7 0.3 121,500 212 3.40 828,152 13,282 25,901
    Tescalama 250 250 1.50 2.7 0.3 75,938 212 3.40 517,598 8,301 16,188
    Subtotal           699,274 239 4.37 5,369,004 98,268 180,081
                           
    TOTAL           5,234,902 314 4.30 52,802,245 723,547 1,528,153

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    Figure 17.    Longitudinal section San Fernando

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    Figure 18.    Longitudinal section Veta Roberta

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    Figure 19.    Longitudinal section Veta Robertita

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    Figure 20.    Longitudinal section Veta Marina I

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    Figure 21.    Longitudina l section Veta Marina II

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    Figure 22.    Longitudinal section Veta Santa Lucia

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    to conform to CIM Standards. Tables 13 to 15 illustrate the detailed Mineral Reserves of individual veins of each of the mining units.

    TABLE 12
    MINERAL RESERVES OF SAN DIMAS DISTRICT - LUISMIN GEOLOGY DEPARTMENT
    (as of December 31, 2006)

             
       Metric     Total Contained
      Tonnes g Ag/t g Au/t (oz Ag) (oz Au)
    Proven Reserves          
    Tayoltita 359,174 332 3.08 3,839,434 35,543
    Santa Rita 206,351 497 3.59 3,298,114 23,807
    Block Central 1,001,444 420 7.70 13,529,993 247,893
    Total Proven Reserves 1,566,969 410 6.10 20,667,541 307,243
               
    Probable Reserves          
    Tayoltita 390,062 356 3.78 4,460,378 47,405
    Santa Rita 181,860 403 2.71 2,357,812 15,838
    Block Central 542,597 429 7.69 7,486,806 134,107
    Total Probable Reserves 1,114,519 399 5.51 14,304,996 197,350
               
    Proven and Probable Reserves          
    Tayoltita 749,236 345 3.44 8,299,811 82,948
    Santa Rita 388,211 453 3.18 5,655,926 39,645
    Block Central 1,544,041 423 7.70 21,016,799 382,000
    Total Proven and Probable Reserves 2,681,489 406 5.85 34,972,536 504,593
               
    Probable Reserves by Diamond Drilling          
    Tayoltita 734,611 294 2.97 6,947,552 70,211
    Santa Rita 294,769 330 7.03 3,125,457 66,643
    Block Central 603,765 453 7.93 8,800,273 153,895
    Total Probable Reserves by Diamond Drilling 1,633,146 359 5.54 18,873,282 290,749
               
    GRAND TOTAL Proven and Probable Reserves 4,314,635 388 5.73 53,845,818 795,342

    Notes to Reserve Statement

    1. Reserves were estimated by Luismin and audited by WGM as of December 31, 2004.
    2. Cutoff grade based on total operating cost for Tayoltita, Santa Rita and Block Central (US$56.00/t).
    3. All reserves are diluted, a mining recovery factor has not been applied, but WGM estimates that the mining recovery will be approximately 90%.
    4. The tonnage factor is 2.7 tonnes per cubic metre.
    5. Cutoff values are calculated at a silver price of US$5.50 per troy ounce and US$375.00 per troy ounce for gold.
    6. Rounding of figures may alter the sum of individual columns.

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    TABLE 13
    TAYOLTITA MINERAL RESERVES
    (December 31, 2006)

                   
      Tonnes Ag Au kg Ag kg Au      oz Ag oz Au
        (g/t) (g/t)        
    Proven              
    VETA SANLUIS 350 305 3.13 107 1.1 3,436 35
    FRONTERA 751 284 3.09 213 2.3 6,846 75
    MINA ARANA 44,480 398 5.14 17,683 228.6 568,513 7,349
    ARANA DEL ALTO 92,139 298 3.34 27,466 308.0 883,040 9,904
    CULEBRA 24,701 434 4.24 10,727 104.8 344,884 3,371
    CANDELARIA 16,044 364 3.87 5,841 62.1 187,782 1,997
    CEDRAL 6,204 250 2.18 1,554 13.5 49,948 434
    15-207 9,438 324 2.08 3,056 19.6 98,262 630
    EL CRISTO 4,363 223 3.89 973 17.0 31,296 546
    TSL ( SANTA LUCIA ) 158,588 323 2.16 51,241 343.0 1,647,435 11,027
    TSL ( EL ORO ) 2,116 264 2.59 560 5.5 17,993 176
    Total Proven 359,174 332 3.08 119,420 1,105.5 3,839,434 35,543
                   
    Probable              
    VETA SAN LUIS 1,029 305 3.13 314 3.2 10,091 104
    VETA FRONTERA 1,758 284 3.09 499 5.4 16,036 175
    MINA ARANA 72,812 368 4.56 26,791 332.2 861,338 10,681
    ARANA DEL ALTO 105,374 320 3.68 33,668 387.4 1,082,447 12,454
    MINA CULEBRA 44,535 446 4.41 19,844 196.4 637,992 6,314
    MINA CANDELARIA 28,801 368 3.93 10,601 113.1 340,843 3,637
    MINA CEDRAL 13,435 249 2.21 3,352 29.7 107,755 954
    VETA 15-207 3,265 233 1.93 761 6.3 24,478 203
    EL CRISTO 7,183 220 3.81 1,578 27.4 50,745 880
    TSL ( SANTA LUCIA) 109,928 373 3.35 40,972 368.2 1,317,283 11,837
    TSL ( EL ORO ) 1,942 182 2.67 354 5.2 11,370 166
    Total Probable 390,062 356 3.78 138,733 1,474.5 4,460,378 47,405
                   
    Total Proven and Probable 749,236 345 3.44 258,153 2,580.0 8,299,811 82,948
    Probable Reserves by DDH 734,611 294 2.97 216,093 2,183.8 6,947,552 70,211
                   
    GRAND TOTAL 1,483,847 320 3.21 474,246 4,763.8 15,247,363 153,159

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    TABLE 14
    SANTA RITA MINERAL RESERVES
    (December 31, 2006)

                   
      Tonnes  Ag Au kg Ag kg Au    oz Ag oz Au
        (g/t) (g/t)        
    Proven              
    VETA SANTA RITA 9,188 358 2.54 3,292 23.3 105,835 751
    VETA PEÑA 1,118 537 4.16 600 4.7 19,295 150
    VETA 11-210 1,132 461 4.54 522 5.1 16,767 165
    VETA 16-804 818 322 2.71 264 2.2 8,475 71
    VETA MARLENNE 2,451 303 2.21 742 5.4 23,844 174
    VETA PATY I 7,530 414 2.27 3,116 17.1 100,174 549
    VETA LUPITA 7,487 304 1.98 2,274 14.9 73,115 478
    VETA PATY II 358 282 2.49 101 0.9 3,251 29
    VETA MAGDALENA 2,148 739 7.62 1,587 16.4 51,021 526
    VETA MARISA 34,624 322 1.86 11,160 64.5 358,815 2,075
    VETA MISACHE 14,969 283 1.78 4,230 26.6 135,984 856
    VETA CRISTINA 2,653 302 2.04 802 5.4 25,785 174
    VETA CRISTINA DEL ALTO 12,500 347 2.67 4,341 33.4 139,563 1,074
    VETA PROMONTORIO 6,489 391 2.40 2,539 15.6 81,640 502
    VETA BLENDITA FW 1,623 262 1.98 425 3.2 13,663 103
    VETA BLENDITA HW 8,206 290 1.62 2,377 13.3 76,412 427
    VETA LA LUZ 706 288 2.49 203 1.8 6,532 57
    VETA AMERICA 30,340 1,333 9.87 40,430 299.4 1,299,854 9,625
    VETA NANCY 33,314 515 4.50 17,161 149.9 551,741 4,819
    VETA CLAUDIA 2,854 202 1.31 577 3.7 18,539 120
    VETA FABIOLA 1,353 288 1.13 390 1.5 12,534 49
    VETA ALEXIA 2,203 192 1.71 423 3.8 13,589 121
    VETA CAROLINA 6,873 227 1.23 1,560 8.5 50,170 273
    VETA SARITA 1,089 210 1.36 228 1.5 7,346 48
    VETA LIZETH 14,326 226 1.29 3,240 18.4 104,167 593
    Total Proven 206,351 497 3.59 102,583 740.5 3,298,114 23,807
                   
    Probable              
    VETA SANTA RITA 4,844 354 2.49 1,715 12.1 55,140 388
    VETA PATY I 19,310 420 2.30 8,102 44.4 260,483 1,429
    VETA LUPITA 2,526 317 1.52 801 3.8 25,768 123
    VETA MAGDALENA 3,085 739 7.62 2,279 23.5 73,265 756
    VETA MARISA 24,245 314 1.83 7,620 44.5 244,992 1,430
    VETA MISACHE 6,907 286 1.81 1,974 12.5 63,451 403
    VETA CRISTINA 4,261 271 1.83 1,156 7.8 37,165 251
    VETA CRISTINA DEL ALTO 11,681 357 2.74 4,170 32.0 134,054 1,028
    VETA PROMONTORIO 11,969 402 2.56 4,816 30.6 154,823 983
    VETA BLENDITA FW 3,245 262 1.98 850 6.4 27,326 207
    VETA LA LUZ 599 288 2.49 172 1.5 5,545 48
    VETA AMERICA 18,423 1,071 7.61 19,732 140.1 634,397 4,506
    VETA NANCY 16,076 452 3.72 7,274 59.8 233,850 1,923
    VETA FABIOLA 3,333 288 1.13 961 3.8 30,883 121
    VETA ALEXIA 5,654 192 1.71 1,085 9.7 34,877 311
    VETA CAROLINA 14,256 249 1.36 3,555 19.4 114,293 625
    VETA SARITA 2,187 210 1.36 459 3.0 14,759 95
    VETA LIZETH 29,258 226 1.29 6,617 37.7 212,741 1,211
    Total Probable 181,860 403 2.71 73,336 492.6 2,357,812 15,838
                   
    Total Proven and Probable 388,211 453 3.18 175,919 1,233.1 5,655,926 39,645
                   
    Probable Reserves by DDH 294,769 330 7.03 97,213 2,072.8 3,125,457 66,643
                   
    GRAND TOTAL 682,980 400 4.84 273,132 3,305.9 8,781,383 106,288

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    TABLE 15
    BLOCK CENTRAL MINERAL RESERVES
    (December 31, 2006)

                   
      Tonnes Ag Au kg Ag kg Au    oz Ag oz Au
        (g/t) (g/t)        
    Proven              
    LUZ Y REYES 8,459 236 3.96 1,996 33.5 64,160 1,077
    SAN RAFAEL 9,523 201 4.99 1,912 47.5 61,482 1,529
    CELIA II 38,050 366 3.43 13,945 130.6 448,347 4,199
    CAPITANA 2,338 434 5.07 1,015 11.9 32,637 381
    SOLEDAD 30,402 351 4.10 10,682 124.7 343,429 4,008
    MARINA I 113,258 322 6.23 36,506 705.9 1,173,686 22,696
    MARINA II 40,456 446 8.08 18,040 327.1 580,000 10,516
    ROBERTITA 229,837 568 11.82 130,634 2,716.3 4,199,992 87,331
    NOCHE BUENA 58,882 320 3.94 18,816 232.3 604,955 7,468
    ROBERTA 392,269 397 7.52 155,826 2,948.4 5,009,906 94,793
    GLORIA 16,666 709 12.50 11,816 208.3 379,886 6,698
    KATIA 3,172 503 10.03 1,595 31.8 51,266 1,022
    CASTELLANA 50,788 321 3.55 16,320 180.5 524,715 5,804
    SAN SALVADOR 7,344 235 1.57 1,727 11.6 55,533 372
    Total Proven 1,001,444 420 7.70 420,830 7,710.3 13,529,993 247,893
                   
    Probable              
    LUZ Y REYES 11,429 248 4.25 2,836 48.6 91,185 1,562
    SAN RAFAEL 10,890 189 5.13 2,059 55.9 66,186 1,796
    CELIA II 26,205 435 3.61 11,391 94.7 366,226 3,043
    CAPITANA 3,895 473 5.51 1,843 21.5 59,241 690
    SOLEDAD 16,909 308 4.24 5,216 71.6 167,701 2,303
    MARINA I 45,560 249 5.38 11,336 245.0 364,451 7,876
    MARINA II 18,629 498 8.10 9,277 151.0 298,256 4,854
    ROBERTITA 107,669 707 14.40 76,147 1,550.2 2,448,184 49,840
    NOCHE BUENA 9,386 307 3.70 2,881 34.7 92,622 1,116
    ROBERTA 209,959 389 7.27 81,718 1,525.7 2,627,290 49,051
    GLORIA 9,098 672 12.29 6,116 111.8 196,645 3,594
    KATIA 7,700 503 10.03 3,871 77.2 124,460 2,482
    CASTELLANA 41,063 320 3.47 13,142 142.5 422,509 4,581
    SAN SALVADOR 24,207 208 1.69 5,034 41.0 161,850 1,319
    Total Probable 542,597 429 7.69 232,866 4,171 7,486,806 134,107
                   
    Total Proven and Probable 1,544,041 423 7.70 653,696 11,882 21,016,799 382,000
                   
    Probable Reserves by DDH 603,765 453 7.93 273,719 4,787 8,800,273 153,895
                   
    GRAND TOTAL 2,147,807 432 7.76 927,415 16,668.2 29,817,072 535,895

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    19. SAN DIMAS TAILINGS MANAGEMENT

    19.1 GENERAL

    At the time of Wheaton River’s acquisition of the Luismin operations, the practice in the design and operation of tailings containment sites in the San Dimas district complied with the requirements of Mexico and with the permits issued for the dams. To bring the facilities to international guidelines, a series of improvements were identified as necessary to reduce risk as well as the potential environmental impact. Since the acquisition, a number of improvements have been made and extensive work is ongoing to further improve the standard of the tailings operation.

    Luismin’s practice had been to discharge tailings from the cyanidation mills to unlined structures designed to settle the solids and collect solutions for recycle to the milling operations. The containment dams were typically constructed with cyclone underflow, and the overflow drains to decant structures in the central portion of the dam. Previously the tailings containment sites had not been subjected to comprehensive geotechnical investigations before construction, normal safety factors in dam design nor monitoring or control of seepage.

    The deficiencies with the tailings management aspect of the operations are being addressed by Luismin and capital investments are currently being made to upgrade the containment structures and tailings operations to bring them more in line with accepted practice. In 2005 US$1.34 million was spent on the San Antonio tailings, and US$2.19 million in 2006, and on the Tayoltita tailing US$1.87 million in 2005 and US$0.59 million in 2006. Environmental requirements in Mexico can be expected to become more aligned with world standards in the future. The planned capital expenditures and changes to upgrade the Luismin tailings management operations are expected to continue to comply with the operating standards required in Mexico, and to ultimately achieve compliance with international guidelines.

    19.2 TAYOLTITA TAILINGS

    The very rugged mountainous terrain and steep walled canyons in the San Dimas district have presented formidable challenges to tailings management as the scale of operations grew and

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    storage areas were depleted. The Tayoltita operation has developed numerous tailings disposal sites in the valley near the mill and in more recent years, the tailings dam has been moved up the valley to the east of the mill. At that time the operation relied on 10 pumping stations to elevate the tailings to the containment site. The operation included the tailings line and solution return line on cable supports to cross the river valley without any provisions for spill containment in the event of a line failure.

    The historical construction practice has been to gradually build containment basins on the steep hillsides using thickened tailings while continuously decanting the solutions for recycle to the mill. On abandonment, the dried tailings have been left to dehydrate and efforts to establish a natural vegetation cover have been undertaken. The abandoned dams in the area are subject to erosion and instability until remediation measures are taken. On three of the older tailings dams near the Tayoltita mill, the land has been reclaimed for use as a soccer field, a softball field, and a garden nursery.

    Monitoring of the Piaxtla River downstream of the Tayoltita tailings deposits has not shown any environmental impact on the water quality, but WGM expects that it is impacted with higher suspended solids in periods of heavy rainfall.

    Under the current San Dimas plan, the Tayoltita Mill operation and future expansion will process all ore mined in the district with all tailings deposited in the currently active tailings disposal dam. Since the acquisition by Wheaton River in 2002 significant capital improvements have been made at the Tayoltita tailings operation and further improvements to the dam and operating practices are planned.

    The 10 relay tailings pumping stations have been replaced with four positive displacement pumps operating in parallel with the capacity to pump high density tailings the full distance to the dam. High capacity thickeners have been added to the mill to increase the tailings density and reduce the solution containment, hydrostatic heads, and return capacity required at the tailings dam. At the river crossing, the tailings lines are suspended in a spill recovery trough with provision to divert any spills into a containment area. At the time of the visit in January, installation of a tailings filtration plant, to allow for dry placement of tailings, was near completion.

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    Construction of the initial phase of an earthen berm against the downstream side of the dam has been completed to increase the safety factor of the containment structure. The project includes the construction of a seepage drainage and collection channel below the dam.

    19.3 SAN ANTONIO TAILINGS

    Due primarily to the exhausted capacity of the tailings dam, the San Antonio Mill operation was shutdown in 2003. The tailings dam site is located in a turn in a steep walled river canyon downstream of the mill operation. The river has been diverted through two tunnels which have been excavated in the canyon wall on the inside of the river bend. A third tunnel for road access has been excavated and also serves as an additional channel for the river in high flow periods. In the 2002 due diligence by Wheaton River, the San Antonio tailings dam was identified as a risk to failure due to a low safety factor in the dam, risk associated with an unknown hydrostatic head in the active tailings deposition area, and possible erosion due to a flood event in the adjacent river.

    Since the shutdown of the mill operations, some of the risk has been removed by elimination of the hydrostatic head in the dam and diversion of a local drainage channel. It has been proposed that the dam safety factor be increased by extending the concrete wall on the upstream side of the dam and protection of the downstream side by covering with mine waste rock. These measure would also decrease the erosion potential of the tailings. Some of this work has been initiated while options to close and reclaim the tailings dam were studied.

    Luismin has now received approval to reclaim the San Antonio dam by stabilizing the tailings in their current location subject to the submittal of an environmental assessment that demonstrates the validity of the plan in the second quarter of 2005. Expenditures in 2004 totalled US$0.11 million and expenditures in 2005 and 2006 were US$1.34 million and US$2.19 million, respectively. An access road is being constructed and covering of the tailings with low strength concrete was delayed due to rain in the fall of 2006 and now it is expected to be carried out in mid-2007. Construction of a rock filled berm and a Roller Compacted Concrete stepped spillway has begun.

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    19.4 EXPLORATION PROPERTIES

    19.4.1 INTRODUCTION

    In addition to the three operating mines, Luismin owns or has an interest in 23 exploration properties throughout Mexico. The properties range from the more advanced exploration stage to preliminary grassroots stage. WGM has not visited these properties, but has completed a review of available data and held discussions with Luismin exploration staff. Table 16 summarizes the geology and work completed on the properties.

    Eight of the properties have signed joint venture agreements with other mining companies who operate the properties and one is presently being explored by Luismin.

    Figure 23 shows the location of these exploration properties. The particular details of each property are listed in Table 16.

    19.4.2 DISCUSSION

    Since its acquisition by Wheaton River Minerals, Luismin has been active in evaluating and acquiring joint venture partners to explore and develop the exploration properties. WGM believes that the properties warrant further exploration and some, particularly those at a more advanced stage, appear to have very promising potential to develop Mineral Resources/Mineral Reserves.

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    Figure 23.    Mexican exploration projects

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    TABLE 16
    MINAS LUISMIN, S.A. DE C.V. - EXPLORATION PROJECT STATUS, 2004

    No.   Project Name    PartnershipStatus   Claim
    Area          		Location State Latitude or UTM North  Longitude
    or UTM East         		Deposit Type Commodity Host Rock Lithology  Ore Mineralogy  Gangue Mineralogy  Alteration Geophys Geochem Typ  Drillholes   Mine Develop.  Historic Production Royalties Comments
      (ha)                   Type   # Samples   Qty, (m)   (m) Tonnes Grade g/t,%)    
    1  Corralitos Available 416 45 Km N38E Of Nuevo Casas Grandes Chihuahua 3,402,679 N 247,451 E Epithermal And Mesothermal Veins, Skarn Zn, Cu, Pb, Au, Ag Limestone, Sandstone, Siltstone, Quartz Diorite Au, Py, Cpy, Bo, Pr, Gal, Sphal Qtz, Ca, Py, Skarn Minerals Ca, Sil, Prop No 50 8 (2,000) Kilometres 3,000,000 1-2grAuAg, 2%Cu,10%ZnPb  3% To San Luis Sight of significant former production. To be combined with La Fortuna as a package
    2  La Fortuna Available 265 25 Km S30E Of Nuevo Casas Grandes Chihuahua 3,341,284 N 231,100 E Epithermal Veins Ag, Au Rhyolitic Tuffs And Flows Ag, Au, Gal, Sphal, Py, Mangan, Barite Qtz, Ca, Ba, Clays Sil, Argil, Prop, Hem, Jar, Chlor IP, AR 120 2-3 (1,000) 2,300 Drift 390 Shaft 40,000 300grAg 3% To San Luis Collapsed caldera. Project needs resource definition through drilling, u/g development. To be combined with Corralitos as a package.
    3  Yécora Available 676 25 Km N77W Of Yécora Town  Sonora 3,139,537 N 670,362 E Tourmaline Breccias,  Stockwork, Por Cu, Mo, W Cu, Pb, W, Mo (Ag-Au) Monzonites And Qtz.-Monz, Tourmaline Breccia Cpy, Au, Ag, WO3, Gal, Sphal, MOS2 Qtz, Tourmaline, Silica, K-spar, Kaol  K-spar, Silica, Jarosite, Hem IP, AR 350 4-5? None None None 3% To San Luis Drilled by IMMSA. Large district of tourmaline breccia pipes-Los Verdes, La Providencia, Las Mantequillas, Tres Piedras, Penasco Blanco, plus gold, silver, copper veins. Old Cominco ground.
    4  El Salitre JV With Mauricio Hochschild 12,963 27 Km N20E Of Santiago Papasquiaro Durango 2,794,000 N 467,000 E Epithermal Veins Au, Ag Andesite, Dacite, Rhyolite, Domes, Dykes Au, Arg, Gal, Sphal, Cpy, Barite, Mercury Qtz, Calcite, Barite, Vuggy Silica Argil, Adv Argil, Hem, Alunite No Rocks, Soils, 1,000 5 (1,500) Minor Old UG Works  5-10,000 5-10 gr Au Equiv.? 3% To San Luis On Some Claims/Others No NSR  Presently A Joint Venture With Mauricio Hochschild. Former JV partners completed surface prospecting, mapping, sampling and diamond drilling in 2003. Hochschild has also completed a daimond drilling program.
    5  Altares Available 655 15 Km E Of Baridaguato Town Sinaloa 25º 20' 46.9" 107º 21' 23.5" Epithermal Veins Au, Ag Clastic Sediments Free Au Qtz, Tourmaline Prop, Ser, Tourmaline No No No Old Tunnels/Shafts 40,000 ? 3% To San Luis Possible bulk tonnage low grade gold copper deposit.
    6 Guadalupe De Los Reyes  JV with Canasil Corp 4,117 20 Km SE Of Cosalá Town Sinaloa & Durango  2,685,000 N 344,000 E Epithermal Veins Au, Ag Andesite, Rhyolite Au, Arg, Ac, Po, El Qtz, Ca, Rhodocrosite Sil, Prop, Ser IP, AR 150 Numerous Underground Workings 900,000 ounces gold equivalent 900,000 ounces gold equivalent 3% To San Luis Presently A Joint Venture With Canasil Corp. 200,000 ounces drill defined by Northern Crown. Peripheral claims mainly untested.
    7   La Preciosa JV With Orko Silver Corp. 1,134 47 Km N25E Of Durango City Durango 2,702,147 N 555,230 E Epithermal Veins Ag, Au Andesite, Rhyolite, Basalt, Volcanic Breccia Au, Arg, Sph, Gal, Barite Qtz, Ca, Gal, Sphal, Py Sil, Prop, Arg IP >1,000 7, (1,319) 2,500 Metres 30-40,000 238Ag, 0.7 Au, 0.17%Zn 3% To San Luis On Some Claims/Others
    No NSR         		Presently A Joint Venture With Orko Silver Corp. Excellent exploration/development opportunity. Good infrastructure.
    8  Santa Monica JV With Orko Gold Corp. 16,386 47 Km N25E Of Durango City Durango 2,702,147 N 555,230 E Epithermal Veins Ag, Au Andesite, Rhyolite, Basalt, Volcanic Breccia Au, Arg, Sph, Gal, Barite Qtz, Ca, Gal, Sphal,Py Sil, Prop, Arg IP 50 None None None None None Presently A Joint Venture With Orko Gold Corp. Excellent exploration opportunity. Large land position located between La Preciosa to the west and Avino Mines to the east. Large block of land to north held by Penoles.
    9  Santo Domingo Available 418 44 Km NW Of Tayoltita, 53 Km NE San Ignacio  Sinaloa 2,680,000 N 365,000 E Porphyry Au, Cu Au, Cu Quartz Monzonite Au, Cpy Qtz, Py, Sphal, Gal, Cpy, Feox Ad, Ser, Prop, Arg, Ox No 50 3, (520) None None None 3% To San Luis Battle Mtn. Gold DDH's cut significant anomalies in Cu-Au.
    10  Cebollas Available 1,861 14 Km SE Of Tayoltita, Close To Cebollas Ranch Durango 2,760,000 N 420,000 E Epithermal Veins Au, Ag Capping, Rhyolite Au, Ag, Arg, Po, Ac, Sph, Gal Qtz, Ca, Py, Sph, Gal, Lim, Mnox Prop, Arg, Ser, Ad, Sil, K-spar No 60 No Pits And Small Ug Workings 1,500 3,000Ag, 40Au None Los Laureles vein outcrops 1500 m, 2-14 m width. Good infrastructure, near Tayoltita. Near a small mine with limited Au/Ag production called El Duraznito.
    11  El Candelero Available 2,281 21 Km West Of Tayoltita Sinaloa 2,665,000 N 380.000 E Epithermal Veins Ag, Au Andesite, Granite Au, Ac, Proustite, Pyrargyrite Qtz, Py, Sphal, Gal, Cpy Prop, Ser, Adularia,  No 30 No None None None None Narrow veins from 0.5 to 0.8 m, hosted in Lower Volcanics. Clean title, no San Luis NSR.
    12  Ventanas JV with Capstone 3,570 110 Km S84W Of Durango City Durango 2,643,000 N 423,000 E Epithermal Veins, Stockworks Ag, Au Andesite, Rhyolite, Lower- Upper Volcanic Series Au, Ac, Po, Sphal, Gal, Manganese  Qtz, Ca, Py, Sphal, Gal, Cpy Prop, Ser, Arg No 300 + New Sampling 21(>5,000)+ 4 New  Kilometres 400,000 490Ag, 2.5 Au None Poject Drilled And Abandoned By Capstone Gold Corp. The district includes Ventanas and Mala Noche, >125K Au equiv ounces historic production. Considered the geological and mineralogical twin to Tayoltita.
    13  La Blanca Available 188 43 Km N50W Of Sombrerete Town Durango 2,643,181 N 609,474 E Epithermal Veins Au, Ag, Zn, Pb, Cu Limestone, Shale, Sandstone, Dolomite Au, Arg, Sph, Ga, Cpy Qtz, Ca, Jasperoid, Fluorite Sil, Ca No 200 3 (600) 500 m 2,000 ? 3% To San Luis Epithermal Carlin-style veining diststal to Sacrificio skarn. Excellent infrastructure.
    14  Villa de Ramos Available 1,088 70 Km N85E Of Zacatecas City San Luis Potosi 2,526,038 N 205,100 E Epithermal Veins Ag, Au, Cu, Pb, Zn Phyllite, Andesite, Basalt, Limestone Au, Ag, Sphal, Arg, Gal, Cpy, Tet, Mal, Az Qtz, Clay, Calcite, Barite Sil, Argil, No No No Kilometres, Adjac Mines 3,000,000 300-500Ag, 2-3Au, CuPbZn  3% To San Luis On Some Claims/Others
    No NSR          		 Excellent access and infrastructure.
    15  El Porvenir Available 960 40 Km N30E Of Aguas Calientes Aquas Calientes 2,462,000 N 798,000 E Mesothermal-Epithermal Veins-Skarns   Zn, Pb, Cu, Au, Ag Phyllite, Sandstone, Siltstone,  Limestone, Dolomite, Andesite Au, Ag, Sphal, Gal, Cpy, Te, Arg  Qtz, Ca, Fl, Da, Bak, Go, He, Ce Ser, Sid, Chl, Act, Hed, Jasperoid IP, AR 1,500 143, (26,261), Core, Rev.Circ. Kilometres, Lower Works 2,000,000 150Ag, 4.5Zn,2Cu  3% To San Luis Nine million tonnes are oxides and 5 million tonnes are sulfides.
    16  Dolores JV With Kings Minerals NL 1,665 25 Km WSW Of Dolores Hidalgo Townsite Guanajuato 2,334.000 N 279,000 E Porphyry Cu-Mo Cu, Mo, Au, Ag, Pb, Zn Granodiorite, Diorite, Andesite Cu, Mo, Au, Ag, Pb, Zn Qtz, Clay, Pyrite, Argillic, Phyllic, Potassic IP 200 No No No No 3% To San Luis Presently A Joint Venture With Kings Minerals. Extensive alteration system, mainly argillic with zones of pyrite/quartz stockwork.
    17  San Antón JV With Kings Minerals NL 7,480 15 Km WSW Of Dolores HidalgoTownsite Guanajuato 21º 04' 19.2" 101º 02' 53.0" Porphyry Cu-Au-Hornfels Au, Ag, Cu, Pb, Zn Qtz Monzonite, Hornfels Au, Arg (Py, Sph, Ga, Cpy) Qtz, Py, Bornite, Copper Oxides K-spar, Ser, Diopside, Biotite IP, AR (20km) 4,000 14, (3,550) None None None 3% To San Luis Presently A Joint Venture With Kings Minerals. Other distal concessions are grassroots targets, and need evaluation.

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    TABLE 16
    MINAS LUISMIN, S.A. DE C.V. - EXPLORATION PROJECT STATUS, 2004
    (continued)

    No.   Project
    Name         		 Partnership Status  Claim
    Area          		Location State Latitude or UTM North Longitude or UTM East Deposit Type Commodity    Host Rock Lithology   Ore Mineralogy  Gangue Mineralogy Alteration Geophys   Geochem Typ  Drillholes  Mine Develop. Historic Production Royalties Comments
        (ha)                   Type   # Samples   Qty, (m)   (m)   Tonnes   Grade (g/t,%)    
    18  Xichu Available 2,500 85 Km East Of San Luis De La Paz Guanajuato 2,358.564 N 393,012 E Skarn/Vein, Pb, Zn, Ag, Cu Zn, Pb, Ag, Cu Limestone, Chert, Dolomote, Shale, Acid Intermed. Dykes, Sills  PbS, ZnS, Cpy, Ac, Py, Po, Asp, Pr, Pyr, Chal, Ten  Calcite, Qtz, Goeth, Hem, Lim, Ba, Fl, Dol, Gypsum, Mt,.  Carbonates,
    Skarn          		No ? ? Extensive Old Works 500,000-2,000,000  250-750Ag, 3.5% Pb, 5% Zn, 2-7% Cu 1.5% To Teck Cominco Acquired when Miranda Mining purchased. Polymetallic base/precious metal skarn system.
    19  El Oro JV With Candente-Canaco 14,942 75 Km N45W Of Toluca City Mexico-Michoacan  19º 47' 32.8" 100º 09' 27.8" Epithermal Veins Au, Ag Phyllite, Carbonaceous Shale, Andesite Au, Arg, Sphal, Gal, Py Qtz, Calcite Argillic, Prop, Sil, Ser, K-spar RSIP-CSAMT  Placer, MMI,  +1,700  9, (1,543) NewDiamond & Rev. Circ.  Drifts, Shafts, Stopes 30,000,000 15Au, 200Ag 3% To San Luis On Some Claims/Others 
    No NSR          		 Presently A Joint Venture With Candente-Canaco. Very significant production history, >20 million Au equiv ounces. Placer Dome is earning an interest.
    20  Cerro de Dolores   JV With Starcore International Ventures Ltd 697 120 Km S33E Of Cuernavaca City Puebla-Guerrero  1,983,700 N 539,745 E VMS, Vein, Karst, Manto Replacement Ag, Pb, Zn, Cu Phyllite, Quartzite (Chert), Limestone, Andesite Ag, Sphal, Gal, Ruby Ag, Cpy , Qtz, Sparry Calcite Barite, Py   Sil, Chl, Ser IP, AR 500 >30 (5,000m) 4,000 <5,000 1kgAg 30%ZnPb  3% To San Luis On Some Claims/Others
    No NSR      		Presently A Joint Venture With Starcore International Ventures Ltd. Ag/Pb/Zn potential. Good infrastructure, excellent exploration potential.
    21  Ana Paula Presently Being Explored By Luismin 4,000+ West of Iguala Guerrero 1,997,500 N 410,000 E Skarn/Intrusive Hosted Gold/Silver  Au, Ag, Cu Limestone, Granodiorite, Diorite Au, Ag, CuOx Calc-silicates, Hem, Mt, Clays   Endo-Exoskarn, Jasperoid, Felds, Qtz, Ser, Clays Airborne Magnetic Anomaly 50 Nil Some Small Adits 100 15Au No This project came with the Los Filos acquisition. Lies north of the Rio Balsas. Magnetic anomaly associated with Exoskarn/Endoskarn.
    22  El Limon  21.2% WRM/78.8% 26,262 West of Iguala Guerrero 1,990,000 N 420,000 E Skarn/Intrusive Hosted Gold/Silver Au, Ag, Cu Limestone, Granodiorite, Diorite Au, Ag, CuOx Calc-silicates, Hem, Mt, Clays Endo-Exoskarn, JAsperoid, Felds, Qtz, Ser, Clays  Airborne Magnetic, I.P. 1,000's 100+ Some Small Adits, Surface Trenches No No JV This project came with the Los Filos acquisition. Lies south of Balsas. Teck-Cominco is actively exploring.
    23  La Gitana Yautepec JV With Chesapeake Gold Corp. Teck Cominco 494 120 Km S60E Of Oaxaca De Juarez Oaxaca 16º 31' 15.1" 95º 45' 50.1" Epithermal Veins, Disseminated Au, Ag Au, Ag Rhyolite Porphyry, Andesite Au, Ag Opaline Quartz Veinlets, Qtz, Clay, Stockworks No 50 No Pits, Trenches No No 3% To San Luis Presently A Joint Venture With Chesapeake Gold Corp. Almaden-San Carlos, LUISMIN-Gitana vein. Poor exposure, difficult access.

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    20. CAPITAL AND OPERATING COSTS

    20.1 CAPITAL COSTS

    20.1.1 GENERAL

    Capital costs have been estimated by Luismin in three general categories to the year 2011 for the San Dimas operations. These include capital to sustain the existing operations, capital investment to expand the production capacity in the short term, and capitals to remove currently identified risks with tailings management facilities and bring the tailings operating practices in line with international guidelines.

    The estimates have been developed internally by Luismin with additional input from external consultants for more specialized areas in the mill expansions and tailings dam projects. As is common industry practice, Luismin has used lease purchase options available from suppliers of major mining equipment to defer capital expenditures and prepared budgets on this basis. WGM has used these projections in the economic analysis of future operations.

    Table 17 summarizes the capital requirements estimated for a life of mine plan to 2011 for the Luismin San Dimas operations.

    TABLE 17
    SAN DIMAS CAPITAL BUDGET, YEARS 2007 TO 2011
    (US$ thousands)

                   
        2007 2008 2009 2010 2011 TOTAL
    Sustaining: Mine 18,436 18,239 19,057 19,057 19,057 93,844
               Plant 338 1,504 1,504 1,504 1,504 6,355
               Facilities 709 - - - - 709
    Total Sustaining 19,484 19,743 20,561 20,561 20,561 100,908
                   
    Improvement: Mine 666 8,257 757 757 757 11,195
      Plant 657 1,546 - - - 2,203
      Facilities 576 - - - - 576
    Total Improvement 1,900 9,803 757 757 757 13,974
                   
    Expansion: Mine 6,151 8,000 2,134 320 320 16,925
      Plant 12,425 5,771 - - - 18,196
      Special Projects 23,078 698 698 698 698 25,872
    Total Expansion 41,655 14,469 2,833 1,018 1,018 60,994
                   
    Total Capital 63,038 44,015 24,150 22,336 22,336 175,876

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    20.1.2 CAPITAL EXPENDITURES FOR ENVIRONMENTAL MITIGATION AND UPGRADE OF TAILINGS MANAGEMENT PRACTICE.

    The environmental capital expenditures planned for the next two years are primarily for remediation work on existing tailings operations at the two mine sites that was identified by the environmental due diligence review completed by SRK for Wheaton in February 2002. The SRK cost estimates for the environmental work have subsequently been updated with more extensive site investigations and more detailed planning of the field work required.

    In the San Dimas District construction work for stabilizing the main Tayoltita tailings dam is underway and erosion protection for the San Antonio dam has been started following studies of possible options.

    20.1.3 CAPITAL EXPENDITURES FOR EXPANSION OF PRODUCTION

    The capital requirements to meet the planned changes and expansions to the mill operations have been estimated by the Luismin internal engineering group. To reduce capital requirements, Luismin is using some refurbished used equipment, a fairly common practice for major processing equipment procurement which has the added advantage of reducing delivery times.

    The mill expansion at Tayoltita is to replace the capacity resulting from the shutdown of the San Antonio milling operations as well as bring the capacity up to 3,200 tpd as part of the planned expansion and update of the operation. This capacity will better utilize the mining capacity available from the three mining operations and contribute to a lower unit cost structure. Since 2002 the capacity at Tayoltita will have been increased by 62%.

    20.2 OPERATING COSTS

    Luismin maintains a cost centre for the San Dimas mine operating units that forms the basis for the cutoff grade used to control the mine operations. An additional annual head office cost of approximately US$6 million for general and administrative expenses is not distributed by Luismin to the individual operating units.

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    The San Dimas district has a higher cost structure than normal due to the remote location of the operations and required townsite infrastructure. In 2003 and 2004, the Tayoltita Mill has been run at reduced capacity due to the higher grades taxing the metal recovery circuit in the mill to the limit resulting in an overall higher cost per tonne for the district.

    Table 18 shows the costs for the San Dimas operating division for 2006.

    TABLE 18
    LUISMIN OPERATING COSTS FOR 2006
    US$/t San Dimas
    US$/t mined 64.31
    * This does not include G&A (Durango Office) costs

    WGM has used the San Dimas operating costs projected by Luismin where economies of the increased scale of the operations as well as the capital improvements should make the projected operating costs possible. The mill expansion will provide the metal recovery circuit to achieve scheduled recoveries on the full nameplate capacity of the mill and reduce the current cost structure at San Dimas.

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    21. MARKETS AND CONTRACTS

    Gold and silver dore in the form of bullion that is produced from the mines is shipped 70% to Peñoles refinery in Torreon, Mexico and 30% to the Johnson Matthey refinery in Salt Lake City, Utah. The terms of the Peñoles refinery contract a charge of US$4.25/kg of doré at 99.8% of Au and Ag content, while the terms of the Johnson Matthey refinery contract provide for payment of 99.8% of the gold and silver content with treatment charges of $0.14/troy oz of dore and refining charges of US$I.OO/troy oz of gold. Payment is due 20 days following receipt of the bullion at the refinery.

    The Luismin dore is a clean product with few impurities. There are numerous refineries around the world available to take the dore.

    Luismin has used hedging in the past to considerable advantage in sales prices realized but terminated virtually all hedge positions in September 2001.

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    22. OBSERVATIONS, CONCLUSIONS AND RECOMMENDATIONS

    WGM's review of Luismin's three operating mines, previous operating records as well as the currently identified Mineral Reserves and Mineral Resources has concluded that profitable operations should be sustainable for at least the next 15 years. Based on the operating history of Luismin, the potential for additional reserves being found on current land holdings, and the high success rate in turning resources into reserves, it is also probable that profitable operations will be extended much beyond the 15 year period that has been considered by WGM in its analysis.

    In addition to the general conclusion on the future viability of the Luismin operations, WGM has also reached the following conclusions:

    • Total Proven and Probable Mineral Reserves estimated as of December 31, 2006, for Luismin's four operating mines are 4.31 million tonnes at a grade of 388 g Ag/t and 5.73 g Au/t as follows:
           Tonnes Grade
            g Ag/t g Au/t
      Proven Tayoltita 359,174  332 3.08
        Santa Rita 206,351  497 3.59
        Block Central 1,001,444  420 7.70
               
      Probable Tayoltita 1,124,673  315 3.25
        Santa Rita 206,351  358 5.38
        Block Central 1,146,362  442 7.82
    • The procedures used by Luismin to estimate the Mineral Reserves are reasonable and the reserves fairly represent the tonnage and grade that can be expected from an operation;

    • The total Inferred Mineral Resources, estimated as of December 31, 2006, for the same four operating mines, and not included in the Mineral Reserves stated above, are about 7.99 million tonnes at an approximate grade of 321 g Ag/t and 2.9 g Au/t;

    • The procedures used by Luismin to estimate the Inferred Mineral Resources are reasonable and the Inferred Resource estimate represents a reasonable expectation of potential;

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    • The experience and capabilities of the Luismin management team are regarded as excellent and important elements in the success of current and future operations;

    • The potential for exploration, both on active mining properties as well as on exploration holdings, to expand the reserve base to both support and expand operations is excellent;

    • Future operations will incur additional capital and operating costs for management of tailings sites as well as remediation of existing sites;

    • Opportunities for future reductions in operating costs will be possible with capital investment in mining and processing equipment as well as changes to operating practices;

    • It is evident that the Luismin operations have grown gradually over time where capital expenditures have been justified on short term planning and assessments. This has resulted in "add on" style expansions and a variety of equipment sizes and types that reduces some efficiencies in operations and maintenance that could otherwise be realized with longer term planning;

    • An economic analysis of the Proven and Probable Reserves of the operations completed in March 2007 demonstrated that the reserves can be mined and processed at a profit; and

    • A review of production and costs for 2005 and 2006 has demonstrated that the March 2007 economic analysis is valid.

    As a result of WGM’s most recent review of the Luismin operations and comparison to the review completed at the time of the Wheaton acquisition in 2002, the following additional observations and conclusions are provided:

    • The capital investment made available for exploration has resulted in the development of significant new mining areas in the San Dimas district that have substantially increased the grades being mined;

    • The capital investment in mining equipment and the process plant have allowed the mine to develop the new areas and bring them into production quickly;

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    • Luismin management has made considerable progress in implementing safer practices in the underground operations by introducing rock mechanics expertise and modern ground control techniques to reduce the risks inherent in the operations;

    • Although there is more work planned, substantial progress has been made in improving tailings management, in on site awareness of the international guidelines in regard to tailings dams, and in introducing lower risk techniques to generally upgrade this aspect of the operations; and,

    • Site management has ongoing focus on reducing costs and improving the efficiencies of the operations through a very thorough data collection and reporting system.

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    CERTIFICATE

    To Accompany the Report titled
    "An Audit of the Mineral Reserves/Resources Tayoltita, Santa Rita and San Antonio
    Mines, as of December 31, 2006, for Silver Wheaton Corp."
    dated March 15, 2007

    I, Velasquez Spring, do hereby certify that:

    1. I reside at 1020 Walden Circle, Unit 17, Mississauga, Ontario, Canada, L5J 4J9.
       
    2. I am a graduate from the University of Toronto, Toronto, Ontario with a B.A.Sc. Degree in Applied Geology (1957), and I have practised my profession continuously since that time.
       
    3. I am a member of the Association of Professional Engineers Ontario (Membership Number 43927011).
       
    4. I am a Senior Geologist with Watts Griffis and McOuat Limited, a firm of consulting geologists and engineers, which has been authorized to practice professional engineering by Professional Engineers Ontario since 1969, and professional geoscience by the Association of Professional Geoscientists of Ontario.
       
    5. I am a qualified person for the purpose of NI 43-101 with regard to epithermal mineral deposits and resource and reserve audits.
       
    6. I visited the three mining properties on five occasions between January 16 to 26, 2002, March 7 to 11, 2002, January 18 to 22, 2003, September 27 to October 3, 2004, and January 17 to 19, 2007.
       
    7. I was solely responsible for all sections except Section 20.
       
    8. I have no personal knowledge as of the date of this certificate of any material fact or change, which is not reflected in this report.
       
    9. Neither I, nor any affiliated entity of mine, is at present, under an agreement, arrangement or understanding or expects to become, an insider, associate, affiliated entity or employee of Silver Wheaton Corp., or any associated or affiliated entities.
       
    10. Neither I, nor any affiliated entity of mine own, directly or indirectly, nor expect to receive, any interest in the properties or securities of Silver Wheaton Corp., or any associated or affiliated companies.

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    11. Neither I, nor any affiliated entity of mine, have earned the majority of our income during the preceding three years from Silver Wheaton Corp., or any associated or affiliated companies.
       
    12. I have read NI 43-101 and Form 43-101F1 and have prepared the technical report in compliance with NI 43-101 and Form 43-101F1; and have prepared the report in conformity with generally accepted Canadian mining industry practice, and as of the date of the certificate, to the best of my knowledge, information and belief, the technical report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

     

    Velasquez Spring, P.Eng., B.A.Sc.
    March 15, 2007

     

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    CERTIFICATE

    To Accompany the Report titled
    "An Audit of the Mineral Reserves/Resources Tayoltita, Santa Rita and San Antonio
    Mines, as of December 31, 2006, for Silver Wheaton Corp."
    dated March 15, 2007

    I, Gordon Watts, do hereby certify that:

    1. I reside at Suite 1301, 80 Mill Street, Toronto, Ontario, Canada, M5A 4T3.
       
    2. I am a graduate from the University of Toronto, Toronto, Ontario with a B.A.Sc. Degree in Mining Engineering (1966), and I have practised my profession continuously since 1969.
       
    3. I am a member of the Association of Professional Engineers Ontario (Membership Number 49149016).
       
    4. I am a Senior Associate Mineral Economist with Watts Griffis and McOuat Limited, a firm of consulting geologists and engineers, which has been authorized to practice professional engineering by Professional Engineers Ontario since 1969, and professional geoscience by the Association of Professional Geoscientists of Ontario.
       
    5. I am a qualified person for the purpose of NI 43-101.
       
    6. I have not visited the mining properties.
       
    7. I was solely responsible for Section 20.
       
    8. I have no personal knowledge as of the date of this certificate of any material fact or change, which is not reflected in this report.
       
    9. Neither I, nor any affiliated entity of mine, is at present, under an agreement, arrangement or understanding or expects to become, an insider, associate, affiliated entity or employee of Silver Wheaton Corp., or any associated or affiliated entities.
       
    10. Neither I, nor any affiliated entity of mine own, directly or indirectly, nor expect to receive, any interest in the properties or securities of Silver Wheaton Corp., or any associated or affiliated companies.

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    Watts, Griffis and McOuat

    11. Neither I, nor any affiliated entity of mine, have earned the majority of our income during the preceding three years from Silver Wheaton Corp., or any associated or affiliated companies.
       
    12. I have read NI 43-101 and Form 43-101F1 and have prepared the technical report in compliance with NI 43-101 and Form 43-101F1; and have prepared the report in conformity with generally accepted Canadian mining industry practice, and as of the date of the certificate, to the best of my knowledge, information and belief, the technical report contains all scientific and technical information that is required to be disclosed to make the technical report not misleading.

    Gordon Watts, B.A.Sc., P.Eng.
    March 15, 2007

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    REFERENCES

    Minas Luismin S.A. de C.V.

    Jan. 2002 Data Room Index (selected items were reviewed by WGM from the following sections:
      Section 5 Reserves and Resources, p. 18.
      Sections 6.0 to 6.5 Operative Mines: Tayoltita, Santa Rita, San Antonio, San Martin and La Guitarra, pp. 19 to 50.
      Section 7 Exploration Projects, pp. 35 to 50.


    Society of Economic Geologists

    2001 Geology of the Santa Rita Ag-Au Deposit, San Dimas District Durango, Mexico. SP8, pp. 39 to 58.


    SRK Consulting

    2002 Environmental Due Diligence Review of Active Mining Units Owned and Operated by Minas Luismin S.A. de C.V.


    Watts, Griffis and McOuat Limited

    2002 A Technical Review of the Tayoltita, Santa Rita, San Antonio, La Guitarra and San Martin Operating Silver and Gold Mines in Mexico for Wheaton River Minerals Ltd.
       
    2002 Technical review letter report re: Project Armstrong, pp. 1 to 18.


    Wheaton River Minerals Ltd.

    2002 Trip Report by R. Gagnon.
    2002 Trip Report by R.D. Bergen.
    2002 Trip Report by Randy Smallwood.

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