3. Agreements

3 Months Ended

Aug. 31, 2012

Notes to Financial Statements

3. Agreements

Mining Option Agreement – Los Amoles, Mexico Property

On November 26, 2010, the Company entered into the definitive Option Agreement with Yale Resources to acquire a 70% interest in its wholly owned Los Amoles property located in the municipality of Villa Hidalgo, Sonora State, Mexico. The Chief Executive Officer of Yale Resources, Ian Foreman, is a member of the Company’s Advisory Board. Pursuant to the Option Agreement, the Company can earn up to 70% of interest before December 31, 2013 by performing, paying or issuing the following:

(a)	making $50,000 payment to Yale Resources prior to December 1, 2013 as follows:
	(i)	$25,000 upon the signing of the Letter of Intent dated October 4, 2010 (paid); and
	(ii)	an additional $25,000 upon signing of the Option Agreement (paid)
(b)	incurring or funding a total of $900,000 in expenditures on the Los Amoles Property prior to December 1, 2013 as follows:
	(i)	$200,000 on or before the first anniversary of the date of the Option Agreement ($100,000 of which are to be advanced with 6 months of the date of the Option Agreement). The Company incurred project expenses of $180,099 for the year ending November 30, 2011 and Yale Resources has accepted that an additional $30,000 will be spent by January 2012 (spent);
	(ii)	an additional $300,000 on or before the secondary anniversary of the date of Option Agreement; and
	(iii)	an additional $400,000 on or before the third anniversary of the date of Option Agreement;

Pursuant to the Option Agreement, Yale Resources will act as an operator and agreed to expend these funds pursuant to an agreed budget, however, if the Option Agreement is terminated by the Company prior to $100,000 of these expenditures being incurred, Yale will retain any unspent funds. Yale will charge a management fee of 15% on all expenditures which will be considered as part of the above required expenditures funding.

(c)	issuing shares of the Company to Yale totaling 1,000,000 shares prior to December 1, 2013 as follows:
	(i)	200,000 shares on signing of the Option Agreement (issued);
	(ii)	an additional 200,000 shares on or before the six month anniversary of the date of the Option Agreement (issued);
	(iii)	an additional 200,000 shares on or before the first anniversary of the date of the Option Agreement (issued);
	(iv)	an additional 200,000 shares on or before the second anniversary of the date of the Option Agreement; and
	(v)	an additional 200,000 shares on or before the third anniversary of the date Option Agreement.

Upon the fulfillment of the above noted, the Company would own an undivided 70% interest in the Los Amoles Property as tenants in common, with a 30% participating interest to be retained by Yale Resources. Also, upon the acquisition of a 70% interest in the Los Amoles Property, the Company and Yale agreed to bear the cost of further exploration and development in proportion to the respective interests in the Los Amoles Property on a joint venture basis.

The Company has commenced an underground work program and completed a NI 43-101 compliant technical report to define the potential vein structure and outcroppings and prepare for a planned drilling program later in 2012.

Mining Option Agreement- Jalisco, Mexico Property

On April 15, 2011, the Company entered into a mining option agreement with First Majestic Silver Corp. (NYSE:AG and TSX:FR, “First Majestic”) and Minera El Pilon S.A. de C.V., a subsidiary of First Majestic, whereby the Company has been granted an option (the “Option”) to acquire up to a 90% interest in certain mineral properties wholly owned by First Majestic located in the state of Jalisco, Mexico (the “Property”).

In consideration for the Option, the Company agreed to:

(a)	issue an aggregate of 10,000,000 shares of common stock with a fair market value of $0.34 per common share to First Majestic upon execution of the agreement (issued);
(b)	incur an aggregate of $3,000,000 over the first three years to earn a 50% interest in the Property (the “First Option”);
(c)	upon the exercise of the First Option, the Company will have the sole and exclusive option (the “Second Option”) to acquire an additional 20% interest in and to the Property by incurring an additional $2,000,000 no later than the fifth anniversary of the Agreement; and
(d)	upon the exercise of the Second Option, the Company will have the sole and exclusive option to acquire an additional 20% interest in and to the Property by completing a bankable feasibility study no later than the seventh anniversary of the Agreement.

First Majestic will retain a 10% free carried interest and a 2.375% net smelter return.

The Company agreed to file a registration statement with the Securities and Exchange Commission qualifying the shares and to maintain the registration statement effective for a period of not less than two years. If a registration statement has not been filed and declared effective within twelve months from the date of the Agreement or if the Company fails to maintain the registration statement effective for a period of two years, it has agreed to issue an additional 2,000,000 shares to First Majestic. On April 30, 2012, the Company issued 2,000,000 shares of restricted common stock to First Majestic which were valued at $0.20 per share or $400,000. A notice filing under Regulation D was filed with the SEC on June 7, 2012 with regard to these stock issuances.

Juan Miguel Ríos Gutiérrez, our Chief Executive Officer, was an employee of First Majestic until January 2011.

Mining Option Agreement- Ayones, Mexico Property

On August 10, 2011, the Company entered into a Mining Option Agreement (“Grupo Agreement”) with IMMSA Grupo México. Under the terms of the Grupo Agreement, they granted us an option to acquire a 100% interest in certain mining properties representing the Ayones project located in the municipality of Etzatlan, Jalisco State, Mexico.

Under the terms of the Grupo Agreement between Sonora’s wholly owned Mexican subsidiary Finder Plata and Grupo Mexico subsidiary, Industrial Minera Mexico, S.A. de C.V. (“Grupo Mexico”), Finder Plata has the right to purchase 100% of two mining concessions on 48 hectares, the old La Mazata Mine, the data of past diamond drill programs, studies and maps as well as the assets located within the mine areas in exchange for payments over three years. The Grupo Agreement requires a Net Smelter Royalty (“NSR”) payment of 2.0% by Finder Plata with Finder Plata having a first option to purchase the NSR for $ 1 million.

Under the terms of the Grupo Agreement, Finder Plata is required to pay the following cash payments totaling $1 million to exercise the option:

(a)	A payment of US $100,000 with the execution of the Grupo Agreement (paid);
(b)	A payment of US $100,000 within six months of execution of the Grupo Agreement (paid);
(c)	A payment of US $100,000 within twelve months of execution of the Grupo Agreement (paid);
(d)	A payment of US $175,000 within eighteen months of execution of the Grupo Agreement;
(e)	A payment of US $175,000 within twenty-four months of execution of the Grupo Agreement;
(f)	A payment of US $175,000 within thirty months of execution of the Grupo Agreement; and,
(g)	A payment of US $175,000 within thirty-six months of execution of the Grupo Agreement.

In addition, Finder Plata is required to spend a total of $1 million in exploration expenditures on the Ayones property as follows:

$200,000 within twelve months of execution of the Grupo Agreement ($12,818 was spent); An additional $300,000 on or before the second anniversary of execution of the Grupo Agreement; and An additional $500,000 on or before the third anniversary of execution of the Grupo Agreement.

On August 2, 2012, the parties signed an Additional Agreement extending the remaining $187,182 of the $200,000 of exploration expenditures due within twelve months of execution of the Grupo Agreement to the second anniversary of the execution of the Grupo Agreement.

Closing of the transactions contemplated in the Grupo Agreement on or before the third anniversary of execution requires the parties to enter into a Definitive Agreement. The Definitive Agreement would require Finder Plata to begin commercial production thirty months after the execution of the Definitive Agreement. If commercial production is not started in the thirty month period, Finder Plata is required to pay 15% NSR over the future capacity of the mine as established in a feasibility study completed by Finder Plata.

Mining Option Agreement- Corazon, Mexico Property

On September 5, 2011, the Company entered into Mining Option Agreements (“Corazon Agreements”) with eight Mexican citizens. Under the terms of the Corazon Agreements, the Company was granted an option to acquire a 100% interest in certain mining properties of the Corazon group of claims located in the municipality of Etzatlan, Jalisco State, Mexico.

Under the terms of the agreement between Sonora's wholly owned Mexican subsidiary Finder Plata S.A. de C.V. (“Finder Plata”) and the eight Mexican Citizen owner’s (“Corazon Owner’s”), Finder Plata has the right to purchase 96.7% now and the remaining 3.3 % upon the receipt of a court order for five mining concessions on 721 hectares surrounding the old La Mazata Mine and Ayones claims and prospect recently acquired by Finder Plata in the Mexican state of Jalisco on August 10, 2011.

Under the terms of the option agreement, to exercise the option, the Company is required to pay several cash installments totaling $800,000 as detailed below:

(a)	A payment of $96,700 with the execution of the Corazon Agreements (paid) and an additional $ 3,300 within six months of execution of the Corazon Agreements for the remaining 3.3% (paid);
(b)	A payment of an additional $55,000 within twelve months of execution of the Corazon Agreements (paid);
(c)	A payment of an additional $55,000 within twenty four months of execution of the Corazon Agreements;
(d)	A payment of an additional $55,000 within thirty six months of execution of the Corazon Agreements; and,
(e)	A payment of an additional $535,000 within forty two months of execution of the Corazon Agreements.

The Company has concluded phase one field work and established an estimated reserve of approximately 199,000 troy ounces of silver and 1,000 troy ounces of gold. Title to mineral properties and mining and exploration rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties when the Company acquires title to mineral properties either individually or through the acquisition of subsidiaries, the conveyance of such titles can be time consuming and subject to the interpretation of Mexican laws. The Company cannot give any assurance that title to such properties will not be challenged or impugned and cannot be certain that the Company will have valid title to its mining properties. The Company relies on title opinions by legal counsel who base such opinions on the laws of countries in which the Company operates.

Joint Venture and Benefits Agreement- Liz, Mexico Property

On May 17, 2012, Finder Plata entered into a Joint Venture and Benefits Agreement (“Liz Agreement”) with Mr. Ramiro Romero Aguirre, a Mexican citizen. Under the terms of the Liz Agreement, Finder Plata was granted the rights to acquire and explore old dumps with silver, gold contents in Liz mining property owned by Mr. Romero. The Liz project located in the municipality of Ayutla, Jalisco State, Mexico.

Under the terms of the Liz Agreement between Sonora’s wholly owned Mexican subsidiary Finder Plata and Mr. Ramiro Romero, Finder Plata was granted the right to acquire, process in site, and market the mineral products obtained from 100% of the dumps, which are estimated at 50,000 tons and are located on Liz mining claim and on surface of land owned by Mr. Romero. The Liz Agreement shall be exercised or finished on or before December 15, 2013 (“Agreement deadline”).

Finder Plata exercised the Liz LOI as follows:

i.	Pay $5,000 upon signing the LOI, including sixteen percent (16%) Mexican VAT tax (paid).
ii.	Pay $5,000 ninety days after signing the LOI and upon signing the Final Liz Agreement including sixteen percent (16%) Mexican VAT tax (paid).
iii.	After signing the final Liz agreement Finder Plata expects to make an estimated investment, of US$400,000 in capital expenditures to build the infrastructure, equipment, working capital, management and commissioning expenses to process the old dumps in site and marketing silver and gold content. All the capital expenditures, working capital, pre-operating, commissioning and during the process in commercial production of the old dumps are expected to be controlled by Finder Plata, well as the marketing of the silver and gold content.
iv.	Finder Plata agreed to pay to Mr. Romero, after subtracting of the Net smelter return (“NSR”) of each batch of concentrate, precipitate or ore sold end received the final liquidation, deductions, selling costs and expenses involved in the operation, 40% of earnings before interest, taxes, depreciation and amortization (“EBITDA”) on a monthly basis using Mexican generally accepted accounting practices.