ITEM 3. KEY INFORMATION

We were incorporated as Silver Duke Mining Ltd. (N.P.L.) on December 15, 1967 under the Company Act of British Columbia (the "Company Act") .  We changed our name to Totem Resources Ltd. (N.P.L.) on February 3, 1976 and subsequently to Paragon Resources Ltd. (N.P.L.) on June 9, 1978.  On May 13, 1981, we became a limited company instead of a specially limited company and our name became Paragon Resources Ltd.  We changed our name to SAMEX Mining Corp. on September 11, 1995     (s ee Item 4 "Information on the Company - History and Development of the Company").

SAMEX Mining Corp. is a junior resource company engaged in the acquisition and exploration of mineral properties in South America.  We currently own or have interests in mineral exploration properties in southwestern Bolivia and in central Chile.  The Company focuses its exploration activities on the search for precious metal deposits.  

The Company holds an interest in six mineral exploration properties in Bolivia; El Desierto, Eskapa, Santa Isabel, Walter, Wara Wara, and Yaretani; and the Los Zorros district gold, copper, silver prospects in Chile (see Item 4 "Information on the Company - D escription of Properties" for individual property details).  We are an exploration stage company and ha ve no mineral producing properties at this time.  All of our properties are exploration projects, and we receive no revenues from production.  All work presently planned by us is directed at defining mineralization and increasing our understanding of the characteristics and economics of that mineralization.  There is no assurance that a commercially viable ore deposit exists in any of our properties until further exploration work and a comprehensive evaluation based upon unit cost, grade, recoveries and other factors conclude economic feasibility.  The information contained herein respecting our mineral properties is based upon information prepared by, or the preparation of which was supervised by, Robert Kell, a Director and the Vice President-Exploration of SAMEX.  Mr. Kell is a "qualified person" pursuant to Canadian Securities National Instrument 43-101 concerning Standards Of Disclosure For Mineral Projects.

SAMEX is a reporting issuer in British Columbia and Alberta and trades in Canada on the TSX Venture Exchange under the symbol SXG .   The Company is also quoted in the United States on the NASD OTC Bulletin Board under the symbol SMXMF .

Selected Financial Data.

This data is derived from our audited consolidated financial statements, which were prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP") as opposed to accounting principles generally accepted in the United States ("U.S. GAAP").  The following selected financial data has been extracted from the more detailed consolidated financial statements included herein (stated in Canadian Dollars, being the foreign currency our financial statements are denominated in, see "Currency and Exchange Rates") and is qualified in its entirety by, and should be read in conjunction with, the consolidated financial statements and notes thereto included elsewhere herein.   The following information should be read in conjunction with "Item 5.  Operating and Financial Review and Prospects".

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⁽¹⁾   See Note 11 to attached Consolidated Financial Statements to November 30, 2003.

(1)

See Note 11 to attached Consolidated Financial Statements to November 30, 2003.

(2)

Current portion of Notes Payable ( $290,786) was included in Current Liabilities of $365,755

There are several material differences between Canadian GAAP and U.S. GAAP as is applicable to the financial information disclosed or summarized herein.  Reference is made to Note 11 in the attached financial statements for an explanation of all material differences between Canadian GAAP and U.S. GAAP.

See "Currency and Exchange Rates" for disclosure of exchange rates between Canadian dollars and United States dollars.  Unless indicated otherwise, all references to dollars in this annual report are to Canadian dollars.

Capitalization and indebtedness.

Not Applicable

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Reasons for the offer and use of proceeds.

Not Applicable

Risk F actors.

In addition to other information in this Report, the following risk factors should be carefully considered in evaluating our business because such factors currently may have a significant impact on our business, operating results and financial condition.  As a result of the risk factors set forth below and elsewhere in this Report, and the risks discussed in our other Securities and Exchange Commission filings, actual results could differ materially from those projected in any forward - looking statements.  See "Special Note Regarding Forward Looking Statements".

We have a history of losses.

We have historically incurred losses and have no revenue from operations .  We incurred losses from operations of $1,013,414, $570,612 and $686,373 for the fiscal years ended November 30, 2003, 2002 and 2001, respectively.   As of November 30, 2003, we had a cumulative net loss from operations of $7,961,944 and a cumulative deficit of $15,313,377 .  There can be no assurance that either the Company or any of our subsidiaries will achieve profitability in the future or at all .

We have not identified any commercially viable mineral deposits.  We have not commenced development or commercial production on any of our properties.  We have no history of earnings or cash flow from operations.  We do not have a line of credit and our only present source of funds available may be through the sale of our equity shares or assets.  Even if the results of exploration are encouraging, we may not have the ability to raise sufficient funds to conduct further explorations to determine whether a commercially mineable deposit exists on any of our properties.  While additional working capital may be generated through the issuance of equity or debt, the sale of properties or possible joint venturing of the properties, we cannot assure you that any such funds will be available for operations on acceptable terms, if at all.  

In addition, should we be unable to continue as a going concern, realization of assets and settlement of liabilities in other than the normal course of business may be at amounts significantly different from those contained in our financial statements.

Our success depends on our ability to raise additional capital.

As of November 30, 2003 , we had working capital of $3,545,178 (November 30, 2002: Deficit of $165,574) .  While we believe our working capital is sufficient to fund our operations and intended exploration activities for the next 12 months, w e do not currently have any cash flow from operations and cannot currently satisfy anticipated operational requirements and cash commitments after that time .  Failure to obtain additional financing on a timely basis could cause us to forfeit all or a portion of our interests in the assets or rights now held by us and our ability to continue as a going concern.   As described in Note 2 to our consolidated financial statements, our consolidated financial statements have been prepared on the assumption that we will continue as a going conc ern, meaning that we will continue in operation for the foreseeable future, and will be able to realize assets and discharge our liabilities in the ordinary course of operations.  There can be no assurance that we will be able to continue as a going concern.

We currently have no external sources of liquidity, and all additional funding required for our activities for the foreseeable future will be obtained from the sale of our securities.  Should we elect to satisfy our cash commitments through the issuance of securities, by way of either private placement or public offering, there can be no assurance that our efforts to raise such funding will be successful, or achieved on terms favorable to us or our shareholders.  Such financings, to the extent they are available may result in substantial dilution to our existing shareholders .

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The business of mineral exploration is highly competitive and there is no assurance we can compete with other competitors for financing, qualified personnel and other resources related to the operation of our business.

Significant competition exists for the limited number of property acquisition opportunities available in Bolivia, Chile, and elsewhere.  As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than our Company, we may be unable to acquire attractive mining properties on terms we consider acceptable.  Competition in the precious metals mining industry is primarily for mineral rich properties which can be developed and exploited economically; the technical expertise to find, develop, and produce such properties; the labor to operate the properties; and the capital for the purpose of funding such properties.  Many competitors not only explore for and mine precious metals and minerals but conduct refining and marketing operations on a worldwide basis.  Such competition may result in our being unable to acquire desired properties, to recruit or retain qualified employees or to acquire the capital necessary to fund our operations and develop our properties.  Our inability to compete with other mining companies for these resources may have a material adverse effect on our results of operation and business.  There can be no assurance that our exploration and acquisition programs will yield any reserves or result in any commercial mining operation.

Our operations are subject to the inherent risk associated with mineral exploration activities.

Mineral exploration activities and, if warranted, development activities generally involve a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to overcome.  Environmental hazards, industrial accidents, unusual or unexpected geological formations, fires, power outages, labor disruptions, flooding, explosions, cave-ins, land slides and the inability to obtain suitable or adequate machinery, equipment or labor are other risks involved in the operation of mines and the conduct of exploration programs.  Operations and activities in which we have a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of precious and base metals, any of which could result in work stoppages, damage to or destruction of mines, if any, and other producing facilities, damage to life and property, environmental damage and possible legal liability for any or all damage.  We plan to obtain insurance, in amounts that we consider to be adequate, to protect ourselves against certain of these mining risks once we commence mining operations.  However, we may become subject to liability for certain hazards which we cannot insure against or which we may elect not to insure against because of premium costs or other reasons.  The payment of such liabilities may have a material, adverse effect on our financial position.  At the present time, we do not conduct any mining operations and none of our properties are under development, and, therefore, we do not carry insurance to protect us against certain inherent risks associated with mining.  Reclamation requirements vary depending on the location and the managing regulatory agency, but they are similar in that they aim to minimize long-term effects of exploration and mining disturbance by requiring the operating company to control possible deleterious effluents and to re-establish to some degree pre-disturbance landforms and vegetation.

The prices of precious metal and base metal directly impact on our business activities.

Our business activities are significantly affected by the prices of precious metals and base metals on international markets.  The price of minerals affects our ability to raise financing, the commercial feasibility of our properties, the future profitability of our properties should they be developed and our future business prospects. The prices of precious metals and base metals fluctuate widely and are affected by numerous factors beyond our control, including expectations with respect to the rate of inflation, the strength of the U.S. dollar and of other currencies, interest rates, and global or regional political or economic crisis.  The demand for and supply of precious metals and base metals may affect precious metals and base metals prices but not necessarily in the same manner as supply and demand affect the prices of other commodities.

Our business is affected by market fluctuations in the prices of minerals sought (gold being the predominant metal, followed by silver, copper, and zinc), which are highly volatile.  Depending on the price of gold, silver, copper or other metals, we may determine that it is impractical to continue our exploration activities or, if warranted, to commence commercial development or production of our properties, if a mineral deposit

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is identified.  The prices of gold, silver, copper, zinc and other metals have fluctuated in recent years.

Gold, silver, copper and zinc prices may fluctuate widely and are affected by numerous industry factors, such as demand for precious metals, forward selling by producers, central bank sales and purchases of gold and production and cost levels in major mineral-producing regions.  Moreover, mineral prices are also affected by macro-economic factors that are beyond our control, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the Canadian dollar relative to other currencies), interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods.  We cannot assure you that the price of gold, silver, copper or zinc will remain stable or that such prices will be at a level that will prove feasible to continue our exploration activities, or, if applicable, begin development of our properties.

The current demand for and supply of precious metals and base metals affects their prices, but not necessarily in the same manner as current demand and supply affect the prices of other commodities.  If metal prices should decline for a sustained period, we could determine that it is not economically feasible to continue our exploration activities and such decision will have a material adverse affect on our business and results of operations.  

The volatility of the prices for precious metals and base metals is illustrated by the following table which shows the market prices (US$) of silver, gold, copper and zinc for each quarter of the last five years and for the first quarter of 2004:

The loss of key management personnel may adversely affect our business and results of operations.

The success of our operations and activities is dependent to a significant extent on the efforts and abilities of our management: Jeffrey Dahl, President & Chief Executive Officer, Robert Kell, Vice President - Exploration and Larry McLean, Vice President - Operations & Chief Financial Officer .  Investors must be willing to rely to a significant extent on their discretion and judgment.  We do not maintain key employee insurance on any of our employees.

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There may be defects in the title to our properties.

In accordance with mining industry practice, we attempt to acquire satisfactory title to our properties but have not obtained title insurance with the attendant risk that some titles, particularly titles to undeveloped properties, may be defective.  In accordance with mining industry practice, we have not obtained title insurance on the Bolivian and Chilean concessions held by our partners or us.  However, we carry out all normal procedures to obtain title and make a conscientious search of mining records to confirm that the applicable joint venture party or the Company has acquired satisfactory title to the properties.  The possibility exists that title to one or more of the concessions held by our partners or us might be defective for various reasons.  Should any defect in title be disclosed to us, we would take all reasonable steps to perfect title to the particular concession(s) in question.

All of our properties are in the exploration stage and are highly speculative in nature, which means there can be no assurance that our programs will result in the discovery of any economically feasible mineral deposit.

At present, none of our properties have a known body of ore and all our proposed exploration programs are an exploratory search for ore .  We will only develop our mineral properties if we obtain satisfactory results from our exploration programs.

The development of gold, silver, copper, zinc and other mineral properties is affected by many factors, including the cost of operations, variations in the grade of ore mined, fluctuations in metal markets, costs of processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection.  We have relied and may continue to rely upon consultants and others for exploration expertise.  Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining.  We cannot assure you that any mineral deposits will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.  Depending on the price of gold, silver or other minerals produced, if any, we may determine that it is impractical to commence or, if commenced, continue commercial production.

The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the global marketing conditions for gold, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting minerals and environmental protection.  Our properties are located in Bolivia and Chile.  These countries impose certain requirements and obligations on the owners of exploratory properties which includes, among other things, certain application and permit requirements, certain limitations on mining and exploration activities, periodic reporting requirements, limited terms and certain fees and royalty payments.  

There are certain specific risks associated with mineral exploration activities and property ownership in Bolivia.

The process for acquiring an interest in mineral concessions in Bolivia is different from procedures for acquiring mining claims in Canada or the United States and involves certain risks not applicable in those jurisdictions.

The rights and obligations associated with mineral concessions in Bolivia is governed by legislation enacted under law no. 1777 on March 17, 1997 (the "Bolivian Mining Code").  Under the Bolivian Mining Code, property available for mining and exploration activities is divided into mining units consisting of 25 hectares each (the "Units").  A person seeking to acquire a mining concession must submit a request to the Superintendent of Mines specifying, among other things, the name of the concession and code numbers corresponding to the Units which are comprised in the concession applied for.  Each concession is limited

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to a maximum of 2,500 Units.  Upon receipt, the application is registered in the office of the Superintendent of Mines with date and time of filing and the application is reviewed by the Technical Mines Service to determine if the Units applied for are available.  Priority between applicants is determined in accordance with the time of filing of the application.  If the concession applied for is available, the Superintendent is then required to promptly publish the application in the National Mining Gazette.  Persons claiming a prior interest in the subject area will then be given an opportunity to assert their rights within 30 days of publication.  Following disposition of these claims or, if such persons fail to defend their interests within the prescribed time, the Superintendent of Mines will, subject to payment of the required patent fee, grant the concessions and instruct official registration thereof at the Mining Registry.

A foreign corporation may only hold rights in mineral properties in Bolivia if the corporation has been registered in Bolivia.  In addition, properties within 50 km of any international border of Bolivia or the "Frontier Zone" may only be held by a Bolivian national or a corporation owned by a Bolivian national(s).  Under provisions of the Bolivian Mining Code, it is permissible for a Bolivian holder of such concessions to enter into a joint venture agreement with a foreign party.  Certain aspects of the form of joint venture and rules respecting its operation are prescribed by Bolivian law and must be complied with if the joint venture is to be effective.

We hold our property interests outside of the Frontier Zone through our Bolivian subsidiaries.  Any interests in properties within the Frontier Zone (Santa Isabel Property, Eskapa Property, El Desierto Property) are held under joint venture agreements with a Bolivian national.  For example, our interest in the Goya 1/El Bonete concessions which comprise the Santa Isabel Property is held under a joint venture agreement with the Bolivian state mining company, Corporacion Minera de Bolivia ("COMIBOL"), which owns the property (see "Item 4 - Information on the Company - Santa Isabel Property"); the Eskapa Property and El Desierto Property mineral concessions are owned by Empresa Minera El Roble S.A. ("El Roble"), a company controlled by a Bolivian national, Patricio Kyllmann, a director of SAMEX.  Our Bolivian subsidiary, Empresa Minera Boliviana S.A. ("Emibol S.A."), earned a 99% interest in any mining operations which may be established on the concessions pursuant to an agreement (originally with Multimin S.A., a company also formerly controlled by Patricio Kyllmann) dated April 16, 1996 and as amended November 23, 1998 with El Roble.  Emibol S.A. paid all costs for the staking of these concessions and as part of the agreements, Emibol S.A. is required to cover all expenditures on the concessions in exchange for a 99% interest in any mining operations which may be established on the concessions while El Roble is required to continue to hold the concessions and is entitled to a 1% interest in such operations (see "Item 4 - Information on the Company - Eskapa Property" and El Desierto Property").

The Bolivian Mining Code stipulates that any transfer of rights in mineral properties is not valid unless done by a duly certified and registered public deed.  We follow the policy of complying with all applicable registration requirements for our mining agreements whenever appropriate and timely to do so.  However, in some cases, we do not so comply where immediate registration is thought to be detrimental to our operation or our attempts to acquire other properties on economically reasonable terms.  In such cases, our rights may not be enforceable in Bolivia unless such registration occurs.  

Regulatory matters could impact our ability to conduct our business in Bolivia.

As our operations are primarily related to the exploration of our mineral resource properties, many governmental regulations relating to mining activities are not yet applicable to us.

Our potential mining processing operations and exploration activities in Bolivia are subject to various laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, mine safety and other matters.  Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that we obtain permits from various governmental agencies.  We believe we are in substantial compliance with all material laws and regulations which currently apply to our activities.  There can be no assurance, however, that all permits which we may require for future operations will be obtainable on reasonable terms or that such laws and regulations would not have an adverse effect on any mining project which we might undertake.

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Failure to comply with laws and regulations may result in orders being issued thereunder which may cause operations to cease or be curtailed or may require installation of additional equipment.  Violators may be required to compensate those suffering loss or damage by reason of their mining activities and may be subject to fines or penal sanctions if convicted of an offense under such legislation.

Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a material adverse impact on us or prevent development of our mining properties.

Legislation is in place which requires approval of a plan of operation or similar authorization and provides for the preparation of environmental assessments, environmental impact statements or similar reports prior to the commencement of, during, and upon completion of any mining operation.  These reports entail a detailed technical and scientific assessment of the site and surrounding environment as well as a prediction of the impact of proposed development on the environment.  Such authorizations and reports can add to the cost and time frame associated with any potential project development.

Environmental legislation in Bolivia imposes potential liability on owners and/or operators of mining facilities which release hazardous substances into the environment and are required to carry out their operations using methods and techniques not liable to cause damage to the environment or the land-owner.  Such liability could include the cost of removal or remediation of the release and damages for injury to the natural resources or the affected party.  In addition, while the mining operation is permitted to use water flowing through or under the mining concessions, the concession grantee is required to return the water to its source with same quality as when taken.  Degradation in the quality of water used may result in liability for damages to the affected person or persons.  We are not aware of pending or threatened environmental litigation which names us as a defendant or any of our properties.  We cannot predict the potential for future environmental liability with respect to any of our properties nor can we predict the potential impact or future direction of environmental litigation.

The Bolivian Mining Code also contains certain restrictions or requirements which may result, in certain circumstances, in the loss of mineral concessions.  These include the requirement to pay an annual tax or patent on mineral concessions (currently about US$25.00 per Unit during the first 5 years and thereafter, about US$50.00 while the Units are held).

Bolivian law expressly provides for free foreign currency exchange and conversion, foreign ownership of property (except where expressly limited), repatriation of dividends and profits, and free importation of goods and services (other than those affecting public health and State security) subject to applicable duties and taxes.  Bolivian mining operations are subject to a maximum tax of 25% on net annual profits and an additional variable tax of from 1% to 7% on gross sales, depending upon the substance mined and the prevailing market price, which is 100% deductible from the foregoing income tax.  In addition, certain Bolivian mining operations may be subject to a windfall profits tax equal to 25% of profits earned in any particular year after deduction, successively, of income taxes, dividend remittance taxes, and the aggregate of 33% of total investment on the project made after 1991 and 45% of net sales to a maximum of US$50 million.  The foregoing taxes may affect the future profitability of any potential mining operations on our properties.

There are certain specific risks associated with mineral exploration activities and property ownership in Chile.

The process for acquiring an interest in mineral concessions in Chile is different from procedures for acquiring mining claims in Canada or the United States and involves certain risks not applicable in those jurisdictions.

The rights and obligations associated with mining concession in Chile are governed by legislation and protected by the Chilean Political Constitution enacted in 1980 (the "Constitution"). Article 19, N ^o 24 of the Constitution, which assures the right of property, in its different forms over corporal or intangible assets, includes mining concessions within this protection.  

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Law N ^o 18.097 of January 21, 1982, which has constitutional rank, regulates the granting of mining concessions and defines the mining concessions as a real and immovable right, distinctive and independent from property rights over the surface tenements, although owned by the same individual.  Such rights may be claimed against the State and any other person, may be transferred or transmitted, and may be mortgaged or subject to other real rights and, in general, to all acts and contracts.

A mining concession may be granted for exploring or exploiting mineral substances, the latter also being known as a mining claim.  All metallic and non-metallic substances and, in general, all fossil substances, regardless of their natural state, may be subject to concessions or claimed, including those in the subsoil of maritime waters under national jurisdiction, to which access may be had, through tunnels, from land.  Liquid or gaseous hydrocarbons, lithium or deposits of any kind in maritime waters under national jurisdiction or deposits of any kind entirely or partly embraced by areas which, under law have been classified as important, for mining reasons, to national security, are generally excluded from mining concessions, without prejudice to mining concessions validly granted prior to their exclusion or a resolution that classifies them as of importance to national security.

Any person is entitled to dig test holes and to take samples in search for mineral substances, regardless of ownership or property rights over the tenements, except in lands included within the limits of a mining concession granted to a third party.

The object of a mining concession is all substances over which a concession may be granted lying within its limits.  The territorial area of a mining concession comprises a solid whose upper surface is, along a horizontal plane, a parallelogram with right angles and of an indefinite depth within the vertical planes that limit it.  The area of an exploitation concession may not cover more than 10 hectares and an exploration concession may not exceed 5. 000 hectares.  The owner of the concession can hold any number of mining concession that comply with the maximum surface indicated above.

Mining concessions are established by a judicial decree given following a non adversarial proceeding, without the decisory participation of any other authority or third party.

In order keep a mining concession valid and in effect, it is necessary to pay an annual license fee (patent) .  In the case of an exploitation concession the annual patent fee is 2,950.2 Chilean Pesos per hectare (calculated as one tenth (1/10 ^th ) of a Monthly Tax Unit ("M.T.U.") which is 29,502 Chilean Pesos x 0.1 = 2,950.2 Chilean Pesos) which is about US$5 per hectare of exploitation concession.  In the case of an exploration concession the annual patent fee is 590.04 Chilean Pesos per hectare (calculated as one fiftieth (1/50 ^th ) of a Monthly Tax Unit ("M.T.U.") which is 29,502 Chilean Pesos x 0.02 = 590.04 Chilean Pesos) which is about US$1 per hectare of exploration concession.   The payment must be made in advance during the month of March of each year.  Should the holder of the concession fail to pay the fee within the designated period, judicial procedures to publicly auction the concession may be instituted.

A foreign corporation may hold mining rights over mining concessions in Chile without restrictions and without any discrimination regarding Chilean nationals.

Regulatory matters could impact our ability to conduct our business in Chile

As our operations are primarily related to the exploration of our properties, many governmental regulations relating to mining activities are not yet applicable to us.

Our potential mining processing operations and exploration activities in Chile are subject to various laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, mine safety and other matters.  Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that we obtain permits from various governmental agencies.  We believe we are in substantial compliance with all material laws and regulations which currently apply to our activities.  There can be no assurance, however, that all permits which we may require for future operations will be

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obtainable on reasonable terms or that such laws and regulations would not have an adverse effect on any mining project which we might undertake.

Failure to comply with laws and regulations may result in orders being issued thereunder which may cause operations to cease or be curtailed or may require installation of additional equipment.  Violators may be required to compensate those suffering loss or damage by reason of their mining activities and may be subject to fines or penal sanctions if convicted of an offense under such legislation.

Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a material adverse impact on us or prevent development of our mining properties.

Chilean environmental legislation requires that the mining concessionaire obtains the prior authorization from the applicable environmental authorities to initiate any exploration or exploitation activity and for this purpose the mining concessionaire shall need to present an environmental assessments or an environmental impact study. Chilean environmental legislation defines the requisites that these studies have to fulfill, and the general mechanisms for controlling and ensuring compliance with such legislation. These reports entail a detailed technical and scientific assessment of the site and surrounding environmental as well as a prediction of the impact of proposed development on the environment.  Such authorizations and reports can add to the cost and time frame associated with any potential project development.

Environmental legislation in Chile imposes potential liability on owners and/or operators of mining facilities which release hazardous substances into the environment and are required to carry out their operations using methods and techniques not liable to cause damage to the environment or the land-owner.

Foreign investments in Chile can be repatriated under the Foreign Investment Regulations contained in Decree Law 600, the Foreign Investment Statute, which is based on the principle of non discrimination between foreign and local investors.  Foreign investors may enter into a foreign investment contract with of the Republic of Chile where the terms of the investments, access to foreign currency, tax matters and other importation and exportation terms can be agreed upon for a term of 10 years or 20 years, if the investments is of an amount that exceeds US$ 50,000,000.  Chile and Canada has entered into a Free Trade Agreement ("FTA"), which has been in effect since July 5, 1997.  This FTA enables Canadian investors to export products of Canadian origin into Chile without paying any custom duties and obtain relief under the double taxation provision, pursuant to which taxes paid in Chile on income generated by operations in Chile, including mining, will be used as a tax credit for the taxes levied in Canada on such income.

At present the income of corporations, limited liability companies and mining companies is taxed in two stages; first, when income is accrued and in a yearly basis, the corporate income is taxed with an income tax at a rate of 16.5% in year 2003 and 17% in year 2004 and future years; and second, when profits are distributed and remitted abroad to shareholders or partners without domicile in Chile, these profits are subject to a 35% additional tax rate, with a credit for the income tax paid by the corporation in Chile equivalent to 16.5% or 17% as stated above.  The foregoing taxes may affect the future profitability of any potential mining operations on our properties.

Foreign currency exchange is regulated by the Central Bank of Chile under Chapter XIV of its Foreign Exchange Regulations.  Currently there is no restriction on bringing investments or credits into Chile, provided that such investments and credits are registered with the Central Bank of Chile in accordance with Chapter XIV of The Foreign Exchange Regulations.  Credits granted for periods of over 1 year are subject to a stamp tax of 1.608% of the amount of the loan and interest on loans granted by banks and financial institutions are subject to a 4% tax levied upon remittance of the interest payment to the lender.

At present there are no special taxes imposed on operations in the mining sector, other than the normal taxes paid by all productive sectors, in accordance with applicable income tax legislation.  If any special taxes or royalties were to be imposed in the future upon operations in the mining sector, this may affect the future profitability of any potential mining operations on our properties.

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Currency exchange rate fluctuations could adversely affect our operation.

Our functional currency is the Canadian dollar, and we have obligations and commitments in other currencies including United States dollars, Chilean Pesos and Bolivian Bolivianos.  Fluctuations in foreign currency exchange rates may affect our results of operations and the value of our foreign assets, which in turn may adversely affect reported financial figures and the comparability of period-to-period results of operations.  (See "Currency and Exchange Rates")

We are a foreign corporation and most of our directors and officers are outside of the United States, which may make enforcement of civil liabilities difficult.

We are incorporated under the laws of the Province of British Columbia, Canada.  All of our directors and officers are residents of Canada, with the exception of Patricio Kyllmann (who is resident in Bolivia) and Robert Kell (who resides in the United States and Bolivia), and all of our assets are located outside of the United States.  Consequently, it may be difficult for United States investors to effect service of process within the United States upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgements of United States courts predicated upon civil liabilities under the United States Securities Exchange Act of 1934, as amended.  A judgement of a US court predicated solely upon such civil liabilities would probably be enforceable in Canada by a Canadian court if the US court in which the judgement was obtained had jurisdiction, as determined by the Canadian court, in the matter.  There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or us predicated solely upon such civil liabilities.

We do not intend to pay cash dividends.

We have never, and we do not have any intention of paying cash dividends in the foreseeable future.  In particular, there can be no assurance that our Board of Director's will ever declare cash dividends, which action is completely within their discretion.

We have reserved 7,914,417 common shares for future issuance, which if issued may cause dilution in the value of currently issued and outstanding shares.

As of April 28, 2004, we reserved 4,555,000 common shares for issuance on the exercise of incentive stock options (at a weighted average exercise price of CDN$0.0.47).  In addition we reserved 3,359,417 common shares for issuance upon the exercise of outstanding warrants (at a weighted average exercise price of CDN$0.0.60).  If such options and warrants are fully exercised, such common shares would constitute 10.99% of our share capital.  The exercise of such options and the subsequent resale of such common share in the public market could adversely affect the prevailing market price and our ability to raise equity capital in the future at a time and price which it deems appropriate.  We may also enter into commitments in the future which would require the issuance of additional common shares and we may grant additional share purchase warrants and stock options.  See Item 6.  "Compensation - Incentive Stock Options"

We believe we were a passive foreign investment company during 2003 , which may have a material affect on U.S. holders.

We believe we were a "passive foreign investment company" ("PFIC") during 2003 , which may have a material affect on US Holders.  United States income tax legislation contains rules governing PFICs, which can have significant tax effects on US Holders of foreign corporations.  A US Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to United States federal income taxation under one of two alternative tax regimes at the election of each such US Holder.  See Item 10. "Taxation - United States Federal Income Tax Consequences."

Economic conditions and fluctuation and volatility of stock price may negatively impact shareholder value

Market price of our common shares is highly volatile.  If investors' interest in the sector in which we operate declines, the price for our common shares would remain low.  In addition, trading volumes in our

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common shares can be volatile and if the trading volume of our common shares experiences significant changes, the price of our common shares could be adversely affected.  The price of our common shares could also be significantly affected by factors, many of which are beyond our control.

Fluctuations in economic conditions, such as the continuing downturn in the global economy, may also significantly affect our ability to meet our objectives which could adversely affect our share price.

Broker-dealers may be discouraged from effecting transactions in our shares because they are considered a penny stock and are subject to the penny stock rules.

Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales practice and disclosure requirements on certain brokers-dealers who engage in certain transactions involving "a penny stock."   Subject to certain exceptions, a penny stock generally includes any non-NASDAQ equity security that has a market price of less than US$5.00 per share.  The market price of our shares over the four quarters ended November 30, 2003 ranged between CDN$0.16 and $1.63 and our shares are deemed penny stock for the purposes of the Exchange Act.  The additional sales practice and disclosure requirements imposed upon brokers-dealers may discourage broker-dealers from effecting transactions in our shares, which could severely limit the market liquidity of the shares and impede the sale of our shares in the secondary market.  

Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor," generally, an individual with net worth in excess of US$1,000,000 or an annual income exceeding US$200,000, or US$300,000 together with his or her spouse, must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.  In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the United States Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt.  A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities.  Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

This document contains forward looking statements which may differ from actual events.

The words "believes", "should be", "anticipates", "plans", "expects", "intends" and "estimates", and similar expressions, identify forward-looking statements.  These forward-looking statements are contained principally under the headings "Key Information", "Information on the Company" and "Operating and Financial Review and Prospects".  Although we believe these forward-looking statements are based on reasonable assumptions, these may not prove to be correct.  Because these forward-looking statements are also subject to risks and uncertainties, actual results may differ materially from the expectations expressed by such forward-looking statement.  Important factors that may cause actual results to differ materially from the expectations reflected in the forward-looking statements are set forth above. See "Special Note Regarding Forward Looking Statements".