WAR EAGLE MINING COMPANY INC.

ANNUAL GENERAL AND SPECIAL MEETING

TO BE HELD ON DECEMBER 8, 2011

MANAGEMENT INFORMATION CIRCULAR

IN RESPECT OF THE TRANSACTION INVOLVING WAR EAGLE MINING COMPANY INC. AND
ANDROMEDA RESOURCES INC. AND CERTAIN OTHER TRANSACTIONS

Information as at the record date of

November 3, 2011, unless otherwise disclosed

All information contained in this management information circular with respect to Andromeda
Resources Inc. (Andromeda) was supplied by Andromeda for inclusion in this circular.

These materials require your immediate attention. If you are in doubt as to how to deal with these
materials, or the matters referred to in this circular, please consult your investment dealer,
stockbroker, bank manager or other professional advisor.

Neither the TSX Venture Exchange Inc. nor any securities regulatory authority has in any way passed
upon the merits of the Reverse Takeover described in this information circular.

AC/1463772.11

TABLE OF CONTENTS
GLOSSARY OF TERMS...............................................................................................................................................i
SUMMARY ..................................................................................................................................................................9
GENERAL PROXY INFORMATION .......................................................................................................................14
MANAGEMENT SOLICITATION OF PROXIES......................................................................................14
APPOINTMENT OF PROXY HOLDER .....................................................................................................14
VOTING BY PROXY ..................................................................................................................................15
RETURN OF PROXY ..................................................................................................................................15
ADVICE TO NON-REGISTERED SHAREHOLDERS..............................................................................15
REVOCATION OF PROXY ........................................................................................................................16
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON ........................................................16
VOTING SHARES AND PRINCIPAL SHAREHOLDERS ......................................................................................16
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS ..........................................................17
CORPORATE GOVERNANCE .................................................................................................................................17
AUDIT COMMITTEE REQUIREMENTS ................................................................................................................19
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS...........................21
PARTICULARS OF MATTERS TO BE ACTED ON ...............................................................................................22
APPOINTMENT OF AUDITOR..................................................................................................................22
ELECTION OF DIRECTORS ......................................................................................................................22
APPROVAL OF THE AMALGAMATION.................................................................................................24
APPROVAL OF THE CONTINUANCE .....................................................................................................27
APPROVAL OF THE RESULTING ISSUER STOCK OPTION PLAN ....................................................35
DISSENT RIGHTS .....................................................................................................................................................38
RISK FACTORS .........................................................................................................................................................40
INFORMATION REGARDING WAR EAGLE.........................................................................................................45
Corporate Structure .......................................................................................................................................45
General Development of the Business ..........................................................................................................45
Selected Financial Information and MD&A .................................................................................................48
Description of Securities ...............................................................................................................................48
Stock Option Plan..........................................................................................................................................49
Prior Sales .....................................................................................................................................................49
Stock Exchange Price....................................................................................................................................49
Executive Compensation...............................................................................................................................50
Management Contracts..................................................................................................................................56
Non-Arms Length Party Transaction/Arms Length Transaction................................................................56
Legal Proceedings .........................................................................................................................................56
Auditor, Transfer Agent and Registrar ..........................................................................................................56
Material Contracts .........................................................................................................................................57
INFORMATION REGARDING ANDROMEDA ......................................................................................................57
Corporate Structure .......................................................................................................................................57
General Development of the Business ..........................................................................................................57
Narrative Description of the Business...........................................................................................................58
Property Description and Location................................................................................................................58
Accessibility, Climate, Local Resources, Infrastructure and Physiography....................................63
History ..........................................................................................................................................64
Geology Setting ..............................................................................................................................65
Mineralization .................................................................................................................................72
Exploration......................................................................................................................................73
Drilling ..........................................................................................................................................74
Sampling .........................................................................................................................................77
Sample Preparation, Analyses and Security....................................................................................79
Data Verification.............................................................................................................................81
Adjacent Properties .........................................................................................................................87

AC/1463772.11

Mineral Processing and Metallurgical Testing................................................................................87

Selected Consolidated Financial Information and MD&A for Andromeda ................................................114
Description of Securities .............................................................................................................................115
Consolidated Capitalization ........................................................................................................................115
Prior Sales ...................................................................................................................................................115
Executive Compensation.............................................................................................................................116
Non-Arms-Length Party Transactions .......................................................................................................118
Legal Proceedings .......................................................................................................................................119
Material Contracts .......................................................................................................................................119
INFORMATION REGARDING THE RESULTING ISSUER ................................................................................120
Corporate Structure .....................................................................................................................................120
Description of Business...............................................................................................................................121
Description of Securities .............................................................................................................................121
Pro Forma Consolidated Capitalization.......................................................................................................122
Available Funds and Principal Purposes .....................................................................................................123
Principal Securityholders ............................................................................................................................124
Directors, Officers and Promoters...............................................................................................................124
Executive Compensation.............................................................................................................................131
Indebtedness of Directors and Officers .......................................................................................................131
Investor Relations Arrangements ................................................................................................................131
Options to Purchase Securities ....................................................................................................................131
ESCROWED SECURITIES .......................................................................................................................131
Auditor, Transfer Agent and Registrar ........................................................................................................132
GENERAL MATTERS.............................................................................................................................................132
Sponsorship and agent relationship .............................................................................................................132
Experts ......................................................................................................................................................133
Other Material Facts....................................................................................................................................133
Board Approval ...........................................................................................................................................133
ADDITIONAL INFORMATION .............................................................................................................................133
CERTIFICATE OF WAR EAGLE MINING COMPANY INC...................................................................................1
CERTIFICATE OF ANDROMEDA RESOURCES INC. ............................................................................................1
ACKNOWLEDGEMENT PERSONAL INFORMATION........................................................................................1
SCHEDULE A DISSENT PROVISIONS (BCBCA) .........................................................................................A-1
SCHEDULE B Audited Consolidated Financial Statements for War Eagle Mining Company Inc. for the years
ended March 31, 2011, 2010 and 2009 .......................................................................................................B-1
SCHEDULE C Annual Management Discussion and Analysis of War Eagle Mining Company Inc. for the
Financial Years ended March 31, 2011, 2010 and 2009 .............................................................................C-1
SCHEDULE D Unaudited Consolidated Financial Statements for War Eagle Mining Company Inc. for the Three
Month Interim Period Ended June 30, 2011................................................................................................D-1
Schedule E Interim Management Discussion and Analysis of War Eagle Mining Company Inc. for the Three
Month Interim Period Ended June 30, 2011................................................................................................ E-1
Schedule F Audited Consolidated Financial Statements for Andromeda Resources Inc. for the Period from
Incorporation on January 11, 2010 to August 31, 2011 .............................................................................. F-1
SCHEDULE G Management Discussion and Analysis for Andromeda Resources Inc. for the Period from
Incorporation on January 11, 2010 to August 31, 2011 ..............................................................................G-1
SCHEDULE H Pro Forma Consolidated Financial Statements (Proforma balance sheet) for War Eagle, giving
effect to the Amalgamation as at June 30, 2011..........................................................................................H-1
SCHEDULE I Audit Committee Charter of War Eagle and the Resulting Issuer ................................................. I-1
SCHEDULE J Proposed By-Law of the Resulting Issuer...................................................................................... J-1

AC/1463772.11

War Eagle Mining Company Inc.

Suite 906 595 Howe Street
Vancouver, British Columbia
V6C 2T5
Telephone: 604-681-7010
Facsimile: 604-687-8678
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING OF SHAREHOLDERS OF
WAR EAGLE MINING COMPANY INC.
TO THE SHAREHOLDERS:
An Annual General and Special Meeting (the Meeting) of the shareholders of War Eagle Mining
Company Inc. (War Eagle) will be held at Suite 906 595 Howe Street, Vancouver, British Columbia
on Thursday, December 8, 2011 at 10:00 a.m. (Vancouver time) for the following purposes:
1.

to receive the audited financial statements of War Eagle for the financial year ended March 31,
2011, together with the auditors report thereon;

2.

to appoint auditors for War Eagle for the ensuing financial year and to authorize the directors to
fix the remuneration to be paid to the auditors;

3.

to fix the number of directors to be elected at the Meeting at four and to elect directors to hold
office until the next Annual General Meeting, as more particularly described in the accompanying
management information circular (the Circular);

4.

to consider and, if thought appropriate, to pass, with or without variation, an ordinary resolution
(the Acquisition Resolution), authorizing, confirming and approving the three-cornered
amalgamation of War Eagle, 2304315 Ontario Limited and Andromeda Resources Inc., as more
particularly described in the accompanying Circular;

5.

if the Acquisition Resolution is approved, to consider and, if thought appropriate, to pass, with or
without variation, a special resolution (the Continuance Resolution) to approve the
continuance (the Continuance) of War Eagles corporate jurisdiction to the Business
Corporations Act (Ontario) (OBCA) under the new name of Andromeda Resources Inc., as
more particularly described in the accompanying Circular and to adopt By-Law number 1, being
a by-law relating generally to the transaction of the business and affairs of War Eagle (as a
corporation under the OBCA following the Continuance), as more particularly described in the
accompanying Circular;

6.

to consider and, if thought appropriate, to pass, with or without variation, an ordinary resolution
to approve a new stock option plan (the Resulting Issuer Stock Option Plan), as more
particularly described in the accompanying Circular; and

7.

to transact such other business as may properly come before the Meeting.

The Circular and a form of Proxy accompany this Notice of Meeting. The Circular provides additional
information relating to the matters to be dealt with at the Meeting and forms part of this Notice of
Meeting.
A shareholder entitled to attend and vote at the Meeting is entitled to appoint a proxy holder to attend and
vote in his or her place. If you are unable to attend the Meeting or any adjournment in person, please read
the notes accompanying the enclosed form of Proxy and then complete, sign, and date the Proxy and
return it within the time and to the location set out in the notes. War Eagles management is soliciting the

AC/1463772.11

enclosed form of Proxy but, as set out in the notes, you may amend the Proxy if you wish by striking out
the names listed and inserting in the space provided the name of the person you want to represent you at
the Meeting.
AND TAKE NOTICE that dissenting shareholders in respect of the proposed Continuance
contemplated in paragraph 5 above are entitled to be paid the fair value of their War Eagle Shares
in accordance with sections 237 to 247 of the Business Corporations Act (British Columbia) (the
BCBCA).
Under the BCBCA, you as a registered Shareholder may, until 10:00 a.m. (Vancouver time) on
December 6, 2011, give War Eagle a notice of dissent by registered mail addressed to the Chief
Executive Officer of War Eagle at Suite 906 595 Howe Street, Vancouver, British Columbia,
Canada, V6C 2T5, with respect to the proposed Continuance Resolution. As a result of giving a
notice of dissent, a shareholder may, on receiving a notice of intention to proceed under section 243
of the BCBCA, require War Eagle to purchase all of the War Eagle Shares held by such
shareholder in respect of which the notice of dissent was given.
These dissent rights are further described in the accompanying Circular in respect of the Meeting
and the text of sections 237 to 247 of the BCBCA are included as Schedule A, to this Circular.
Failure to comply strictly with the requirements may result in the loss of any right to dissent.
A non-registered Shareholder who wishes to exercise dissent rights should immediately contact the
intermediary or broker with whom the non-registered Shareholder deals in respect of its War
Eagle Shares and instruct the intermediary or broker in respect of its War Eagle Shares.
If you are a non-registered Shareholder and have received this notice and accompanying Circular
from your broker or another intermediary, please complete and return the voting instruction or
other authorization form provided to you by your broker or other intermediary in accordance with
the instructions provided to you.
Please advise War Eagle of any change in your address.
DATED at Vancouver, British Columbia, this 9th day of November, 2011.
BY ORDER OF THE BOARD OF DIRECTORS
Simon Anderson
Simon Anderson
President and Chief Executive Officer

GLOSSARY OF TERMS
Acquisition
Resolution

Means an Ordinary Resolution of Shareholders approving the Amalgamation,

to the extent the Amalgamation results in an RTO of War Eagle under the
RTO Policy requiring War Eagle shareholder approval

Affiliate

Means a Company that is affiliated with another Company as described

below:
A Company is an Affiliate of another Company if:
(a)

one of them is the subsidiary of the other, or

(b)

each of them is controlled by the same Person.

A Company is controlled by a Person if:

(a)

voting securities of the Company are held, other than by way of

security only, by or for the benefit of that Person, and

(b)

the voting securities, if voted, entitle the Person to elect a majority of

the directors of the Company

A Person beneficially owns securities that are beneficially owned by:

(a)

a Company controlled by that Person, or

(b)

an Affiliate of that Person or an Affiliate of any Company controlled

by that Person

Amalco

Means the company resulting from the amalgamation of War Eagle Subco and
Andromeda which will carry on the business of Andromeda

Amalgamation

Means the amalgamation of War Eagle Subco and Andromeda to form

Amalco, subject to the terms and conditions of the Amalgamation Agreement

Amalgamation
Agreement

Means the amalgamation agreement among War Eagle, War Eagle Subco and
Andromeda dated November 9, 2011, under which War Eagle Subco and
Andromeda will amalgamate, resulting in each Andromeda Share being
exchanged for 6.67 Resulting Issuer Shares (except for the 500,000
Andromeda Shares held by War Eagle which will be cancelled without the
repayment of capital in respect thereof) and each Andromeda Warrant being
exchanged for 6.67 Replacement Warrants, each Broker Option being
exchanged for 6.67 Replacement Broker Options and each Work Fee Warrant
being exchanged for 6.67 Replacement Work Fee Warrants

Andromeda

Means Andromeda Resources Inc., a private company incorporated under the

OBCA

Andromeda
Shareholder

Means a holder of Andromeda Shares, and Andromeda Shareholders means

all such holders

Andromeda Shares

Means common shares in the capital of Andromeda

i AC/1463772.11

Andromeda Units

Means the equity units of Andromeda to be issued pursuant to the Equity

Financing, with each Andromeda Unit comprised of one Andromeda Share
and one-half of one Andromeda Warrant at an issue price of $3.00 per
Andromeda Unit

Andromeda
Warrants

Means the transferable warrants of Andromeda comprising part of the

Andromeda Units, with each whole Andromeda Warrant being exercisable
into one Andromeda Share at an exercise price of $4.00 per Andromeda Share
for a period of 24 months from the Closing Date

Arms Length
Transaction

Means a transaction which is not a Related Party Transaction

Associate

When used to indicate a relationship with a Person, means:

(a)

an Issuer of which the Person beneficially owns or controls, directly or

indirectly, voting securities entitling him to more than 10% of the
voting rights attached to outstanding securities of the Issuer,

(b)

any partner of the Person,

(c)

any trust or estate in which the Person has a substantial beneficial

interest or in respect of which a Person serves as trustee or in a similar
capacity,

(d)

in the case of a Person, who is an individual:

(i)

that Persons spouse or child, or

(ii)

any relative of the Person or of his spouse who has the same
residence as that Person;

But
where the TSXV determines that two Persons will , or will not, be deemed to
be Associates with respect to a member firm of the TSXV , member
corporation of the TSXV or holding company of a member corporation, then
such determination will be determinative of their relationships in the
application of Rule D with respect to that member firm, member corporation
or holding company
Auditors Resolution

Means an Ordinary Resolution of Shareholders, as part of War Eagles annual

general meeting, to appoint auditors for War Eagle for the ensuing financial
year and to authorize the directors to fix the remuneration to be paid to the
auditors

BCBCA

Means the Business Corporations Act (British Columbia), as amended from

time to time and including any regulations promulgated under the BCBCA

Board or Board of
Directors

Means the Board of Directors of War Eagle

ii AC/1463772.11

Broker
Compensation

Means the cash compensation payable in relation to the Equity Financing,

comprised of a commission equal to 8% of the gross proceeds from the sale of
the Andromeda Units, payable to the Brokers, and a work fee of $25,000 (plus
taxes) payable to Union Securities Ltd.

Broker Options

Means the non-transferable broker options of Andromeda in a number equal

to 8% of the Andromeda Units sold, which units are to be issued to the
Brokers in relation to the Equity Financing with each Broker Option to be
exchanged for a Replacement Broker Option on the Closing Date

Brokers

Means Union Securities Ltd. and Canaccord Genuity Corp., the agents for the
Equity Financing

By-Law

Means By-Law number 1, being a by-law relating generally to the transaction

of the business and affairs of the Resulting Issuer (following the Continuance)

By-Law Resolution

Means an Ordinary Resolution of Shareholders confirming the enactment of

the By-Law

CEO

Means Chief Executive Officer

CFO

Means Chief Financial Officer

Change of Control

Includes situations where after giving effect to the contemplated transaction

and as a result of such transaction:
(a)

any one Person holds a sufficient number of the voting shares of an

Issuer or Resulting Issuer to affect materially the control of the Issuer
or Resulting Issuer, or

(b)

any combination of Persons, acting in concert by virtue of an

agreement, arrangement, commitment or understanding hold in total a
sufficient number of the voting shares of the Issuer or Resulting Issuer
to affect materially the control of the Issuer or Resulting Issuer;

where such Person or combination of Persons did not previously hold a

sufficient number of voting shares to affect materially the control of the Issuer
or Resulting Issuer. In the absence of evidence to the contrary, any Person or
combination of Persons acting in concert by virtue of an agreement,
arrangement, commitment or understanding, hold more than 20% of the
voting shares of the Issuer or Resulting Issuer is deemed to materially affect
the control of the Issuer or Resulting Issuer
Circular

Means this information circular of War Eagle, together with the attached
schedules

iii AC/1463772.11

Closing

Means the completion of the transactions contemplated by the Amalgamation

Agreement under which each Andromeda Share will be exchanged for 6.67
Resulting Issuer Shares (except for the 500,000 Andromeda Shares held by
War Eagle which will be cancelled without the repayment of capital in respect
thereof) and each Andromeda Warrant will be exchanged for 6.67
Replacement Warrants, each Broker Option being exchanged for 6.67
Replacement Broker Options and each Work Fee Warrant being exchanged
for 6.67 Replacement Work Fee Warrants.

Closing Date

Means the date of giving effect to the Continuance Resolution, and the date
the Amalgamation and the Equity Financing close

Company

Unless specifically indicated otherwise, means a corporation, incorporated

association or organization, body corporate, partnership, trust, association or
other entity other than an individual

Computershare

Computershare Investor Services Inc., the registrar and transfer agent and
escrow agent for War Eagle

Continuance

Means the continuance of War Eagle to the provincial jurisdiction of Ontario

under the OBCA under the new name of Andromeda Resources Inc. or such
other name as may be acceptable to applicable regulatory authorities

Continuance
Resolution

Means a Special Resolution of Shareholders approving the Continuance

Control Person

Means any Person that holds or is one of a combination of Persons that holds
a sufficient number of any of the securities of an Issuer so as to affect
materially the control of that Issuer, or that holds more than 20% of the
outstanding voting securities of an Issuer except where there is evidence
showing that the holder of those securities does not materially affect the
control of the Issuer

Director

Means the Director under the OBCA

Directors Resolution Means an Ordinary Resolution of Shareholders, as part of War Eagles annual
general meeting, to fix the number of directors of War Eagle at four and to
elect to the board of directors of War Eagle the current directors of War
Eagle, being: Simon Anderson, Anthony Dutton, Terence Schorn and Donald
Padgett, with the expectation that when the Amalgamation closes, all of the
directors except Anthony Dutton will resign, and such vacancies will be filled
by Chris Davie, Brian Murray and Rene Mladosich, and David Winfield will
be additionally appointed as a director
Equity Financing

Means the brokered private placement financing of Andromeda by which a

minimum of $7,000,000 in Andromeda Units and a maximum of $10,000,000
in Andromeda Units will be placed, which will be completed immediately
before the Closing. Additionally, Andromeda will grant the Broker Options
and the Work Fee Units and pay the Broker Compensation in relation to the
Equity Financing

iv AC/1463772.11

Final Exchange
Bulletin

Means the bulletin which is issued by the TSXV following the Closing of the
Amalgamation and the submission of all required documents which evidences
the final acceptance by the TSXV of the RTO

IMC

Means Independent Mining Consultants, Inc. (Michael G. Hester, FAusIMM),

author of the Terrazas Technical Report

Insider

includes:
(a)

a director or senior officer of an Issuer;

(b)

a director or senior officer of a Company that is an Insider or

subsidiary of an Issuer; and

(c)

a Person that beneficially owns or controls, directly or indirectly,

securities carrying more than 10% of the voting rights attached to all
outstanding securities of the Issuer

Issuer

Means a Company and its subsidiaries which have any of its securities listed
for trading on the TSXV and, as the context requires, any applicant Company
seeking a listing of its securities on the TSXV

Letter of Intent

Means the letter of intent between War Eagle and Andromeda dated
September 26, 2011 (and signed by War Eagle on September 27, 2011) which
agreement was superseded by the Amalgamation Agreement

MD&A

Means managements discussion and analysis

Meeting

Means the annual general and special meeting of War Eagle

MRT

Means Minera Rio Tinto S.A. de C.V., a corporation existing under the laws
of Mexico

NI 43-101

Means National Instrument 43-101 Standards of Disclosure for Mineral

Projects

NI 52-110

Means National Instrument 52-110 Audit Committees

NI 58-101

Means National Instrument 58-101 Disclosure of Corporate Governance

Practices

NP 58-201

Means National Policy 58-201 Corporate Governance Guidelines

OBCA

Means the Business Corporations Act [SBC 2002] Chapter 57, as amended
from time to time and including any legislation enacted in substitution
therefore

Ordinary Resolution

Has the meaning ascribed to it in subsection 1(1) of the BCBCA

v AC/1463772.11

Person

Includes an individual, partnership, association, unincorporated organization,

trust and corporation and a natural person acting in such persons individual
capacity or in such persons capacity as trustee, executor, administrator, agent
or other legal representative

Promoter

Has the definition prescribed by applicable Securities Laws

RDM

Means RD Minerals S.A. de C.V., a corporation existing under the laws of

Mexico, which is a subsidiary of Andromeda

RegCo

BC Registrar of Companies

Related Party
Transaction

Has the meaning ascribed to that term in TSXV Policy 5.9, and includes a
related party transaction that is determined by the TSXV, to be a Related
Party Transaction. The TSXV may deem a transaction to be a Related Party
Transaction where the transaction involves Non Arms Length Parties, or other
circumstances exist which may compromise the independence of the Issuer
with respect to the transaction

Related Transaction
Resolutions

Means the Continuance Resolution, the By-Law Resolution and the Stock
Option Plan Resolution

Replacement Broker
Options

Means the non-transferable options of the Resulting Issuer to be issued in

exchange for the outstanding Broker Options on the basis of 6.67
Replacement Broker Options for each Broker Option, with each Replacement
Broker Warrant being exercisable into one Replacement Broker Unit at an
adjusted exercise price of $0.45 per Replacement Broker Unit for a period of
24 months from the Closing Date

Replacement Broker
Units

Means the equity units of the Resulting Issuer to be issued upon exercise of
Replacement Broker Options, with each Replacement Broker Unit comprised
of one Resulting Issuer Share and one-half of one Replacement Broker
Warrant

Replacement Broker
Warrants

Means the non-transferable warrants of the Resulting Issuer comprising part

of the Replacement Broker Units, with each whole Replacement Broker
Warrant being exercisable into one Resulting Issuer Share at an adjusted
exercise price of $0.60 per Resulting Issuer Share for a period of 24 months
from the Closing Date

Replacement
Warrants

Means the transferable warrants of the Resulting Issuer which will be issued
in exchange for the outstanding Andromeda Warrants on the basis of 6.67
Replacement Warrants for each Andromeda Warrant, with each Replacement
Warrant being exercisable into one Resulting Issuer Share at an adjusted
exercise price of $0.60 per Resulting Issuer Share for a period of 24 months
from the Closing Date

vi AC/1463772.11

Replacement Work
Fee Warrants

Means the non-transferable warrants of the Resulting Issuer which will be

issued in exchange for the outstanding Work Fee Warrants on the basis of
6.67 Replacement Work Fee Warrants for each Work Fee Warrant, with each
Replacement Work Fee Warrant being exercisable into one Resulting Issuer
Share at an adjusted exercise price of $0.60 per Resulting Issuer Share for a
period of 24 months from the Closing Date

Resulting Issuer

Means War Eagle with Amalco as its wholly-owned subsidiary

Resulting Issuer
Shares

Means common shares in the capital stock of the Resulting Issuer

Resulting Issuer Stock

Option Plan

Means the proposed stock option plan which will conform with the
requirements of the TSXV, and will be presented to Shareholders for approval
at the Meeting

Resulting Issuer Stock

Option Plan
Resolution

Means an Ordinary Resolution of the Shareholders approving the Resulting

Issuer Stock Option Plan

Reverse Takeover or
RTO

Means a series of transactions, involving an acquisition by the Issuer or of the

Issuer, and a securities issuance by an Issuer that results in:
(a)

new shareholders holding more than 50% of the outstanding voting

securities of the Issuer, and

(b)

a Change of Control of the Issuer. The TSXV may deem a transaction

to have resulted in a Change of Control by aggregating the shares of a
vendor group and/or incoming management group

and in this Circular, refers to the Amalgamation

Royalty

Means the NSR royalty Andromeda granted to MRT on the Terrazas Property

RTO Policy

Means Policy 5.2 Changes of Business and Reverse Takeovers of the TSXV

Securities Laws

means securities legislation, securities regulation and securities rules, as

amended, and the policies, notices, instruments and blanket orders in force
from time to time that are applicable to a Person

Shareholders

Means a holder of War Eagle Shares, from time to time, and Shareholders
means all such holders

Special Resolution

Has the meaning ascribed to such term in subsection 1(1) of the BCBCA

Stock Option Plan

Means War Eagles current stock option plan dated September 30, 2008

Terrazas Agreement

Means the purchase agreement dated May 12, 2010, as amended May 31,
2010 and June 6, 2011, among Andromeda, RDM and MRT, under which
Andromeda and RDM have agreed to purchase the Terrazas Property from
MRT

vii AC/1463772.11

Terrazas Property

Means the mining claims and licenses located in Chihuahua, Mexico as more
particularly identified in the Terrazas Agreement

Terrazas Technical
Report

Means the NI 43-101 compliant technical report entitled Terrazas ZincCopper Project Chihuahua Mexico dated October 14, 2011 and prepared by
Independent Mining Consultants, Inc., with Michael G. Hester, FAusIMM, as
the responsible independent qualified person in accordance with NI 43-101

TSXV

Means the TSX Venture Exchange

War Eagle

Means War Eagle Mining Company Inc., a company incorporated under the
BCBCA, having its common shares listed on the TSXV under the trading
symbol WAR

War Eagle Shares

Means common shares in the capital of War Eagle

War Eagle Subco

Means 2304315 Ontario Limited, a wholly-owned subsidiary of War Eagle,

formed for the purposes of completing the Amalgamation

War Eagle
Subsidiaries

Means War Eagle Resources Corporation (US Idaho 100%), Tombstone

Mining Inc. (BVI - 100%) and Tombstone Exploration de Mexico S.A. de
C.V. (Mexico 99%)

Work Fee Units

Means the 25,000 equity units of Andromeda to be issued to Union Securities

Ltd. in relation to the Equity Financing, with each Work Fee Unit comprised
of one Andromeda Share and one-half of one Work Fee Warrant

Work Fee Warrants

Means the non-transferable warrants of Andromeda comprising part of the

Work Fee Units, each of which is to be exchanged for a Replacement Work
Fee Warrant on the Closing Date

Currency
All references to dollar or the use of the symbol $ are to Canadian dollars and use of the symbol
US$ refers to United States dollars, unless otherwise indicated.
Share Consolidation
War Eagle consolidated its common shares on the basis of 20 old common shares for one new common
share effective July 22, 2011 which consolidated 69,645,394 outstanding (old) common shares into
3,482,272 (new) common shares. Unless otherwise noted, all references to the War Eagle Shares in this
circular have been adjusted to reflect the share consolidation. The number and pricing of War Eagle
convertible securities outstanding as of the date of the share consolidation have also been adjusted
accordingly.

viii AC/1463772.11

SUMMARY
The following is a summary of information related to the Amalgamation, War Eagle, Andromeda
and the Resulting Issuer (assuming completion of the Amalgamation) and should be read together
with the more detailed information and financial data and statements contained elsewhere in this
Circular, including the Schedules, which are incorporated into and form part of this Circular.
Certain capitalized words and terms used in this Summary are defined in the Glossary of Terms.
General
This Circular is prepared in accordance with applicable corporate and securities law, the RTO Policy of
the TSXV and Form 3D1 Information Required in an Information Circular for a Reverse Takeover
prescribed under the RTO Policy in connection with the Meeting being held to approve, among other
things, the Amalgamation. The information contained in this Circular is at November 3, 2011 or the
record date of November 3, 2011, unless otherwise indicated.
The Meeting
The Meeting will be held on Thursday, December 8, 2011 at 10:00 a.m. (Vancouver time) for the
purposes set forth in the Notice of Meeting for War Eagle to consider and, if deemed advisable, to
approve the items of business identified in its Notice of Meeting.
Principal Terms of the Proposed Amalgamation
At the Meeting, Shareholders will be asked to consider and, if thought fit, pass with or without variation,
the Acquisition Resolution authorizing, confirming and approving the Amalgamation between War Eagle
Subco and Andromeda, to form Amalco, pursuant to the terms and conditions of the Amalgamation
Agreement. The Resulting Issuer will be War Eagle with Amalco as its wholly-owned subsidiary, and the
business of the Resulting Issuer will primarily be Andromedas business.
Andromeda is a private company incorporated under the laws of Ontario. Andromeda has entered into the
Terrazas Agreement to purchase the Terrazas Property in Chihuahua, Mexico for cash consideration of
US$5 million payable in instalments over two years. As of the date of this Circular, Andromeda has paid
US$1.2 million. A further US$1.8 million is due by December 15, 2011 and a further US$2 million is due
by the second anniversary of the Terrazas Agreement (May 12, 2012). For more information about the
Terrazas Property see Information Regarding Andromeda Narrative Description of the Business The
Terrazas Property.
Concurrently with the execution of the Letter of Intent, War Eagle advanced to Andromeda $250,000
pursuant to a one year promissory note with an interest rate of 6% per year. Upon completion of the
Amalgamation, any accrued interest will be waived and the loan will be treated as an intercompany loan.
On November 9, 2011 War Eagle and War Eagle Subco entered into the Amalgamation Agreement with
Andromeda. The Amalgamation Agreement provides that, among other things, each Andromeda Share
will be exchanged for 6.67 Resulting Issuer Shares (except for the 500,000 Andromeda Shares held by
War Eagle which will be cancelled without the repayment of capital in respect thereof) and each
Andromeda Warrant will be exchanged for 6.67 Replacement Warrants, each Broker Option will be
exchanged for 6.67 Replacement Broker Options and each Work Fee Warrant will be exchanged for 6.67
Replacement Work Fee Warrants.
The current Shareholders are expected to own approximately 31.7% of the outstanding shares of the
Resulting Issuer, and Andromeda Shareholders (other than War Eagle) will own the remaining 68.3% of

9 AC/1463772.11

the Resulting Issuer, before giving effect to the Equity Financing described below. The Amalgamation is
based on a deemed valuation of the Resulting Issuer of approximately $8.7 million at an estimated price
of $0.45 per Resulting Issuer Share post-Amalgamation.
Completion of the Amalgamation is conditional upon, among other things, receipt of all required
regulatory and Shareholder approval of the Acquisition Resolution, Continuance Resolution and Related
Transaction Resolutions and the completion of the Equity Financing.
At the Meeting, Shareholders will be asked to:
(a)

consider and, if thought fit, pass with or without variation, the Acquisition Resolution,
authorizing, confirming and approving the Amalgamation and Amalgamation Agreement;

(b)

consider and, if thought fit, pass with or without variation, the Auditors Resolution, Directors
Resolution and the Related Transaction Resolutions; and

(c)

to transact such other business as may properly be brought before the Meeting or any
adjournment thereof.

If the Acquisition Resolution is not approved, the Related Transaction Resolutions (except for the Stock
Option Plan Resolution) will not be brought forward for consideration at the Meeting.
Under TSXV policies, completion of the transactions under the Amalgamation Agreement will constitute
a Reverse Takeover of War Eagle as the former Andromeda Shareholders (including Andromeda
Shareholders who subscribed for Andromeda Units under the Equity Financing) will own approximately
83.5% of the Resulting Issuer Shares on a non-diluted basis on the Closing Date, assuming a maximum
Equity Financing. Under TSXV policies, the Acquisition Resolution requires approval by an Ordinary
Resolution.
Equity Financing
Immediately before the Closing, Andromeda proposes to close the Equity Financing for aggregate gross
proceeds of a minimum of $7,000,000 and a maximum of $10,000,000, consisting of Andromeda Units at
a price of $3.00 per Andromeda Unit, which at the proposed ratio under the Amalgamation Agreement
equates to $0.45 per War Eagle Share. Each Unit is comprised of one Andromeda Share and one-half of
one Andromeda Warrant exercisable into one Andromeda Share at an exercise price of $4.00 per
Andromeda Share for a period of 24 months. The Equity Financing is a brokered private placement.
Andromeda will also pay the Broker Compensation and issue the Work Fee Units and the Broker Options
in relation to the Equity Financing. See Information Concerning the Resulting Issuer Available Funds
and Principal Purposes for a description of the proposed use of the proceeds of the Equity Financing by
the Resulting Issuer.
Interests of Insiders, Promoters or Control Persons of the Resulting Issuer
The following chart sets out Insiders, Promoters and Control Persons of the Resulting Issuer and their
respective shareholdings (on a non-diluted basis):

10 AC/1463772.11

War Eagle Shares Owned Before

the Amalgamation

Insider, Promoter or
Control Person of Resulting
Issuer

Resulting Issuer Shares Owned After

Giving Effect to the Amalgamation(2)
Percentage on
completion of the
Equity Financing (3)

Number

Percentage (1)

Number

Minimum

Maximum

Chris Davie

Nil

N/A

3,168,250

8.09%

6.91%

Andres Tinajero

Nil

N/A

Nil

N/A

N/A

Rene Mladosich

Nil

N/A

3,335,000

8.51%

7.27%

Anthony Dutton

100,000

1.34%

100,000

0.26%

0.22%

Brian Murray

Nil

N/A

Nil

N/A

N/A

David Winfield

Nil

N/A

Nil

N/A

N/A

100,000

1.34%

6,603,250

16.85%

14.40%

Total
(1)

Based on 7,442,272 War Eagle Shares currently issued and outstanding.

(2)

Assuming that no Insider, Promoter or Control Person subscribes for Andromeda Units under the Equity Financing.

(3)

Assuming 7,442,272 War Eagle Shares are issued and outstanding immediately before closing the Amalgamation and
2,400,000 Andromeda Shares are issued and outstanding immediately before closing the Amalgamation (which
assumes the 500,000 Andromeda Shares held by War Eagle have been cancelled). These figures also assume
2,358,333 Andromeda Shares will be issued on completion of a minimum Equity Financing and 3,583,333 Andromeda
Shares be issued on completion of a maximum Equity Financing (which numbers include the Andromeda Shares
comprising the Work Fee Units). On completion of the Amalgamation each Andromeda Share will be exchanged for
6.67 Resulting Issuer Shares (except for the 500,000 Andromeda Shares held by War Eagle).

See Information Concerning the Resulting Issuer Fully Diluted Share Capital, Information
Concerning the Resulting Issuer Principal Securityholders and Information Concerning the Resulting
Issuer Directors, Officers and Promoters.
Arms Length Transaction
The Amalgamation is an Arms Length Transaction.
Available Funds and Principal Purposes
Available Funds
As at October 31, 2011, the pro forma consolidated working capital of War Eagle and Andromeda was
$7,482,400, assuming gross proceeds of a minimum Equity Financing of $7,000,000. It is anticipated that
the available funds will be sufficient to meet the Resulting Issuers administrative costs for the following
12 months and to achieve the Resulting Issuers principal purposes as described in this Circular. The
following table sets forth the estimated working capital of War Eagle and Andromeda before and after
giving effect to the Amalgamation, as at October 31, 2011:
War Eagle

Andromeda

Combined

$700,000

$(217,600)

$482,400

Proposed Equity Financing

N/A

$7,000,000

$7,000,000

Working capital after Amalgamation

N/A

N/A

$7,482,400

Working capital (deficiency)

11 AC/1463772.11

Principal Purposes
The Resulting Issuer will use the funds available to it upon the completion of the Amalgamation for the
following purposes during the 12 months from Closing:
Use of Working Capital

Amount
($)(1)

Phase 1 Preliminary Economic Assessment as set out in the

Terrazas Technical Report US$220,000

220,000

Phase 2 Drilling for Metallurgical Samples/Metallurgical

Testing US$535,000

535,000

Phase 2 Investigation of Alternative Process US$100,000

100,000

Phase 2 Mine Planning and Scheduling/Process Engineering

US$150,000

150,000

Property Payments - US$3,800,000

Costs of Equity Financing

3,800,000

(2)

588,000
(3)

Administrative and Consulting Fees

913,000

Unallocated Funds

1,176,400

Total

$7,482,400

(1) US dollar amounts have been translated on the basis of US$1.00 = $1.00
(2) Includes the Broker Compensation but excludes the legal fees and expenses of the Brokers, which Andromeda has
agreed to pay, and the legal fees of Andromeda incurred in connection with the Equity Financing.
(3) Includes legal fees and other expenses incurred in connection with the Amalgamation and Equity Financing

There may be circumstances where, for sound business reasons, the reallocation of funds may be
necessary in order for the Resulting Issuer to achieve its stated business objectives. See Information
Concerning the Resulting Issuer Available Funds and Principal Purposes.
Selected Pro Forma Financial Information
The following table sets out certain financial information for each of War Eagle as at June 30, 2011, and
Andromeda as at August 31, 2011, as well as pro forma consolidated financial information for the
Resulting Issuer, after giving effect to the Amalgamation as at June 30, 2011. The following information
should be read in conjunction with the pro forma balance sheet of the Resulting Issuer. See Schedule H
Pro Forma Financial Statements of the Resulting Issuer.
War Eagle (1)
($)
Cash

Andromeda (2)
($)

Adjustments
($)

Pro Forma
Consolidated ($)

29,485

67,092

7,105,200

7,201,777

Total assets

119,925

137,149

6,975,712

7,232,786

Total liabilities

305,730

104,583

410,313

(Shareholders
equity) capital
deficit

(185,805)

32,566

6,975,712

6,822,473

(1)

The financial information presented in this column is a consolidated figure based on the financial condition of both War
Eagle and the War Eagle Subsidiaries.

12 AC/1463772.11

(2)

The financial information presented in this column is a consolidated figure based on the financial condition of both
Andromeda and its wholly owned subsidiary RDM.

Exchange Listing
War Eagles Shares are listed on the TSXV under the symbol WAR. The War Eagle Shares are
currently halted from trading in accordance with TSXV policies related to an RTO. It is expected that on
completion of the Amalgamation, the Resulting Issuer will be listed on the TSXV as a Mining Issuer.
The Andromeda Shares are not listed on any stock exchange and there is currently no public market for
the Andromeda Shares, nor is one expected to develop.
Market Price of War Eagles Shares
The closing price of the War Eagle Shares on the TSXV on September 28, 2011, the last trading day
before the announcement of the Amalgamation, was $0.445. See Information Concerning War Eagle
Stock Exchange Price. As of the date of this Circular, the War Eagle Shares are currently halted.
Sponsorship and Agent Relationships
War Eagle has applied for and expects to receive a waiver of the requirement to obtain a sponsor in
connection with the Amalgamation because of the Equity Financing.
It is expected that the Brokers will act as agents for the Equity Financing. Andromeda has entered into an
engagement letter (the Engagement Letter) with Union Securities Ltd. dated November 7, 2011, under
which Andromeda agreed to pay a cash fee equal to 8% of the gross proceeds raised under the Equity
Financing and to issue to that number of Broker Options as is equal to 8% of the Andromeda Units sold
under the Equity Financing. Each Broker Option will be exchanged for 6.67 Replacement Broker
Options, each of which will, in turn, be exercisable into one Replacement Broker Unit at an adjusted
exercise price of $0.45 per Replacement Broker Unit for a period of 24 months from the Closing Date.
Each Replacement Broker Unit will be comprised of one Resulting Issuer Share and one-half of one
Replacement Broker Warrant. Each Replacement Broker Warrant will be exercisable into one additional
Resulting Issuer Share at an adjusted exercise price of $0.60 per Resulting Issuer Share for a period of 24
months from the Closing Date.
Andromeda has also agreed to pay Union Securities Ltd. a work fee of $25,000 (plus taxes) in cash and to
issue 25,000 Work Fee Units. Andromeda and War Eagle will enter into an agency agreement with the
Brokers, which agreement will supercede the Engagement Letter, prior to the Closing Date.
Each Work Fee Warrant issued as part of the Work Fee Units will be exchanged for 6.67 Work Fee
Warrants, each of which will, in turn, be exercisable into one Resulting Issuer Share at an adjusted
exercise price of $0.60 per Resulting Issuer Share for a period of 24 months from the Closing Date.
See Sponsorship and Agent Relationship for more information.
Conflicts of Interest
Conflicts of interest may arise as a result of the proposed directors, officers and Promoters of the
Resulting Issuer also holding positions as directors or officers of other Companies. Some of these
individuals have been and will continue to be engaged in the identification and evaluation of assets,
businesses and Companies on their own behalf and on behalf of other Companies, and situations may
arise where the directors and officers of the Resulting Issuer will be in direct competition with the

13 AC/1463772.11

Resulting Issuer. See Information Concerning the Resulting Issuer Directors, Officers and Promoters
Conflicts of Interest.
Interest of Experts
Except as disclosed in this Circular, no Insider, Promoter or Control Person of War Eagle and no
Associate or Affiliate of the same, has any interest in the proposed Amalgamation other than that which
arises from their holding of War Eagle Shares.
Summary of Risk Factors
Following completion of the Amalgamation, the business of the Resulting Issuer will be to explore,
develop and operate the Terrazas Property. The Resulting Issuer Shares are a risky and speculative
investment. The Resulting Issuer is subject to certain risks including but not limited to the following: (i)
exploration, development and production risks; (ii) risks relating to the price of zinc, copper and other
minerals/metals; (iii) risks relating to the Resulting Issuers substantial capital requirements; (iv)
competitive risks; (v) environmental risks; (vi) currency exchange risks; (vii) political, economic and
social risks of operating in Mexico; and (viii) directors and officers conflicts of interest risks. See the
heading Risk Factors for a more detailed description of the risk factors.
Exchange Listing
War Eagle and Andromeda have applied to the TSXV for the listing of the Resulting Issuer on the TSXV.
Accompanying Documents
This Circular is accompanied by several Schedules which are incorporated by reference into, form an
integral part of, and should be read in conjunction with this Circular. It is recommended that Shareholders
read this Circular and the attached Schedules in their entirety.
GENERAL PROXY INFORMATION
MANAGEMENT SOLICITATION OF PROXIES
This Circular is furnished to you in connection with the solicitation of proxies by management of
War Eagle for use at the Meeting of Shareholders to be held on Thursday, December 8, 2011, and
at any adjournment of the Meeting. War Eagle will conduct its solicitation by mail and its officers,
directors and employees may, without receiving special compensation, contact Shareholders by telephone,
electronic means or other personal contact. War Eagle will not specifically engage employees or soliciting
agents to solicit proxies. War Eagle does not reimburse Shareholders, nominees or agents (including
brokers holding shares on behalf of clients) for their costs of obtaining authorization from their principals
to sign forms of proxy. War Eagle will pay the expenses of this solicitation.
APPOINTMENT OF PROXY HOLDER
The persons named as proxy holders in the enclosed form of proxy are War Eagles directors or officers.
As a Shareholder, you have the right to appoint a person (who need not be a Shareholder) in place
of the persons named in the form of proxy to attend and act on your behalf at the Meeting. To
exercise this right, you must either insert the name of your representative in the blank space
provided in the form of proxy and strike out the other names or complete and deliver another
appropriate form of proxy.

14 AC/1463772.11

A proxy will not be valid unless it is dated and signed by you or your attorney duly authorized in writing
or, if you are a corporation, by an authorized director, officer, or attorney of the corporation.
VOTING BY PROXY
The persons named in the accompanying form of proxy will vote or withhold from voting the War
Eagle Shares represented by the proxy in accordance with your instructions, provided your
instructions are clear. If you have specified a choice on any matter to be acted on at the Meeting,
your War Eagle Shares will be voted or withheld from voting accordingly. If you do not specify a
choice or where you specify both choices for any matter to be acted on, your War Eagle Shares will
be voted in favour of all matters.
The enclosed form of proxy gives the persons named as proxy holders discretionary authority
regarding amendments or variations to matters identified in the respective Notice of Meeting and
any other matter that may properly come before the Meeting. As of the date of this Circular, War
Eagles management is not aware of any such amendment, variation or other matter proposed or
likely to come before the Meeting. However, if any amendment, variation or other matter properly
comes before the Meeting, the persons named in the form of proxy intend to vote on such other
business in accordance with their judgement.
You may indicate the manner in which the persons named in the enclosed proxy are to vote on any matter
by marking an X in the appropriate space. If you wish to give the persons named in the proxy a
discretionary authority on any matter described in the proxy, then you should leave the space blank. In
that case, the management nominated proxy holders will vote the War Eagle Shares represented by
your proxy in accordance with their judgment.
RETURN OF PROXY
Shareholders are invited to complete the attached form of proxy and to send it to Computershare, 9th
Floor, 100 University Avenue, Toronto, Ontario M5J 2Y1 or to War Eagles head office at the address
listed on the Notice of Meeting, not less than 48 hours, excluding Saturdays, Sundays and holidays,
preceding the Meeting or any adjournment of the Meeting.
ADVICE TO NON-REGISTERED SHAREHOLDERS
Only Shareholders whose names appear on the records of our registrar and transfer agent, Computershare,
or validly appointed proxy holders are permitted to vote at the Meeting. Most of our Shareholders are
non-registered Shareholders because their War Eagle Shares are registered in the name of a nominee,
such as a brokerage firm, bank, trust company, trustee or administrator of a self-administered RRSP,
RRIF, RESP or similar plan or a clearing agency such as CDS Clearing and Depository Services Inc. (a
Nominee). If you purchased your War Eagle Shares through a broker, you are likely a non-registered
Shareholder.
Non-registered Shareholders who have not objected to their Nominee disclosing certain ownership
information about themselves to us are referred to as NOBOs. Those non-registered Shareholders who
have objected to their Nominee disclosing ownership information about themselves to us are referred to
as OBOs.
In accordance with the securities regulatory requirements, we will have distributed copies of the Meeting
Materials, being the Notice of Meeting, this Circular, and the form of proxy directly to NOBOs and to the
Nominees for onward distribution to OBOs.

15 AC/1463772.11

Nominees are required to forward the Meeting Materials to each OBO unless the OBO has waived the
right to receive them. War Eagle Shares held by Nominees can only be voted in accordance with the
instructions of the non-registered Shareholder. Meeting Materials sent to non-registered Shareholders who
have not waived the right to receive Meeting Materials are accompanied by a request for voting
instructions (a VIF). This form is instead of a proxy. By returning the VIF in accordance with the
instructions noted on it, a non-registered Shareholder is able to instruct the registered Shareholder (or
Nominee) how to vote on behalf of the non-registered Shareholder. VIFs, whether provided by War Eagle
or by a Nominee, should be completed and returned in accordance with the specific instructions noted on
the VIF.
In either case, the purpose of this procedure is to permit non-registered Shareholders to direct the voting
of the War Eagle Shares which they beneficially own. Should a non-registered Shareholder who receives
a VIF wish to attend the Meeting or have someone else attend on his/her behalf, the non-registered
Shareholder may request a legal proxy as set forth in the VIF, which will grant the non-registered
Shareholder or his/her nominee the right to attend and vote at the Meeting. Non-registered Shareholders
should carefully follow the instructions set out in the VIF including those regarding when and where the
VIF is to be delivered.
REVOCATION OF PROXY
If you are a registered Shareholder who has returned a proxy, you may revoke your proxy at any time
before it is exercised. In addition to revocation in any other manner permitted by law, a registered
Shareholder who has given a proxy may revoke it by either:
(a)

signing a proxy bearing a later date; or

(b)

signing a written notice of revocation in the same manner as the form of proxy is required to be
signed as set out in the notes to the proxy.

The later proxy or the notice of revocation must be delivered to the office of War Eagles registrar and
transfer agent, Computershare, or to War Eagles head office at any time up to and including the last
business day before the scheduled time of the Meeting or any adjournment, or to the Chairman of the
Meeting on the day of the Meeting or any adjournment.
If you are a non-registered Shareholder who wishes to revoke a VIF or to revoke a waiver of your right to
receive Meeting Materials and to give voting instructions, you must give written instructions to your
Nominee at least seven days before the Meeting.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of War Eagles directors or executive officers, nor any person who has held such a position since
the beginning of the last completed financial year of War Eagle, nor any Associate or Affiliate of the
foregoing persons, has any substantial or material interest, direct or indirect, by way of beneficial
ownership of securities or otherwise, in any matter to be acted on at the Meeting other than the adoption
of the Resulting Issuer Stock Option Plan, approval of which will be sought at the Meeting. Directors and
executive officers of War Eagle may participate in the Resulting Issuer Stock Option Plan, and
accordingly have an interest in its approval. See Particulars of Matters to be Acted On.
VOTING SHARES AND PRINCIPAL SHAREHOLDERS
War Eagle is authorized to issue an unlimited number of common shares without par value, of which
7,442,272 War Eagle Shares are issued and outstanding as of November 3, 2011. There is one class of
shares only.

16 AC/1463772.11

Persons who are registered Shareholders at the close of business on November 3, 2011 will be entitled to
receive notice of, attend, and vote at the Meeting. On a show of hands, every Shareholder and proxy
holder will have one vote and, on a poll, every Shareholder present in person or represented by proxy will
have one vote for each share. In order to approve a motion proposed at the Meeting, a majority of at least
50% plus one vote of the votes cast will be required to pass an Ordinary Resolution, and a majority of at
least two-thirds of the votes cast will be required to pass a Special Resolution.
To the knowledge of War Eagles directors and executive officers, no person or company beneficially
owns, directly or indirectly, or exercises control or direction over, War Eagle Shares carrying more than
10% of all voting rights, other than as set forth below:
Name

Number of War Eagle Shares

Percentage of Outstanding War

Eagle Shares(1)

FG2 Advisors, LLC

1,195,150(2)

16.06%

FGS Advisors, LLC

416,667(3)

5.60%

(1)

Based on 7,442,272 War Eagle Shares issued and outstanding as of November 3, 2011. War Eagle believes that all
persons hold legal title and it has no knowledge of actual common share ownership.

(2)

The registered holder of these War Eagle Shares is Firebird Global Master Fund II Ltd.

(3)

The registered holder of these War Eagle Shares is Firebird Global Master Fund Ltd.

(4)

Firebird Global Master Fund II Ltd. and Firebird Global Master Fund Ltd. are funds under common management.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

An informed person means:
(a)

a director or executive officer of War Eagle;

(b)

a director or executive officer of a Person or Company that is itself an informed person or

subsidiary of War Eagle;

(c)

any Person or Company who beneficially owns, directly or indirectly, voting securities of War
Eagle or who exercises control or direction over voting securities of War Eagle carrying more
than 10% of the voting rights attached to all outstanding voting securities of War Eagle other than
voting securities held by the Person or Company as underwriter in the course of a distribution;
and

(d)

War Eagle if it has purchased, redeemed or otherwise acquired any of its securities, so long as it
holds any of its securities.

No informed person of War Eagle, no proposed nominee for election as a director of War Eagle, and no
Associate or Affiliate of any of these persons, has any material interest, direct or indirect, in any
transaction since the commencement of the last financial year or in any proposed transaction, which in
either case has materially affected or will materially affect War Eagle or the War Eagle Subsidiaries.
CORPORATE GOVERNANCE
National Policy 58-201 Corporate Governance Guidelines provides non-prescriptive guidelines on
corporate governance practices for reporting issuers. National Instrument 58-101 Disclosure of Corporate
Governance Practices prescribes certain disclosure by a reporting issuer of its corporate governance

17 AC/1463772.11

practices. The following sets out War Eagles approach to corporate governance and includes the
disclosure required Form 58-101F2 of NI 58-101.
Board of Directors
The Board of Directors facilitates its exercise of independent supervision over management through
frequent communication with the Board.
As of the date of this Circular, the following persons are directors of War Eagle:
Simon Anderson

Not Independent (1)

Anthony Dutton

Independent

Donald Padgett

Independent

Terence Schorn

Not Independent (1)

(1)

War Eagle considers a member of the Board as Not Independent if he has a direct or indirect material relationship
with the issuer as set out in NI 52-110. Simon Anderson is the President and CEO of War Eagle and Terence Schorn is
the Corporate Secretary and former President.

Directorships
Certain directors of War Eagle, or persons who are expected to become directors on closing of the
Amalgamation, are also directors of other reporting issuers (or equivalent in a foreign jurisdiction) as
follows:
Name of Director or Nominee

Name of Reporting Issuer

Simon Anderson

Simba Gold Corp.

Sinovac Biotech Ltd.

Anthony Dutton

Josephine Mining Corp.

IBC Advanced Alloys Corp.

Donald Padgett

Josephine Mining Corp.

Vangold Resources Ltd.
Vanoil Energy Ltd.

Terence Schorn

Yankee Hat Minerals Ltd.

Chris Davie (proposed director on Closing)

Quia Resources Inc.

Brian Murray (proposed director on Closing)

Antioquia Gold Inc.

Sea Green Capital Corp.
Nebu Resources Inc.
Shoal Point Energy Ltd.
Rainbow Resources Inc.
Process Capital Corp.

18 AC/1463772.11

Orientation and Continuous Education

War Eagle does not currently have a formal orientation program for new board members nor does it
provide continuing education for its directors. The Board is currently composed of four directors, two of
whom are officers of War Eagle, all whom are experienced business persons. All directors have previous
experience with public companies. As a result, War Eagle does not intend to provide orientation or
continuing education programs at this time.
Ethical Business Conduct
The Board has not, to date, adopted a formal written Code of Ethical Business Conduct. To date, the
Board has found that the fiduciary duties placed on individual directors by War Eagles governing
corporate legislation and the common law and the restrictions placed by applicable corporate legislation
on an individual directors participation in decisions of the Board in which the director has an interest
have been sufficient to ensure that the Board operates independently of management and in the best
interests of War Eagle. Additionally, the Board expects that such persons will treat each other, security
holders and all other persons with goodwill, fairness and respect. The Board strives to create a culture in
the company that values honesty, high ethical standards and compliance with laws rules and regulations.
The Board is aware of the recommendation in NP 58-201 to adopt a written code of business conduct and
ethics and is reviewing different standards that may be appropriate for War Eagle to adopt.
Nomination of Directors
War Eagle does not have a nominating committee and does not currently have any formalized processes
for identifying new candidates for Board nomination. New candidates are proposed by the Board as a
whole.
Compensation
The Board periodically reviews the compensation paid to directors, management and other employees
based on such factors as time commitment and level of responsibility, comparative fees paid by other
companies in the industry in North America and War Eagles current position as an exploration company
with no operating revenue.
The Board does not have a compensation committee, and these functions are currently performed by the
Board as a whole. However, this policy may be reviewed in the future depending on the circumstances of
War Eagle.
Other Board Committees
The Board has no other committees other than the Audit Committee. The Board as a whole addresses
executive compensation, corporate governance and Board nominations.
Assessments
The Board collectively conducts informal annual assessments of the Boards effectiveness, its individual
directors and its Audit Committee.
AUDIT COMMITTEE REQUIREMENTS
War Eagle is including the disclosure required by Form 52-110F2 of National Instrument 52-110 Audit
Committees under this heading. As at its most recently completed financial year end of March 31, 2011,

19 AC/1463772.11

War Eagle was a venture issuer under NI 52-110 and is relying on the exemption in section 6.1 of NI
52-110.
Audit Committee Charter
The Audit Committee Charter of War Eagle is attached to this Circular as Schedule I.
Composition of the Audit Committee

Name of Member

Independent under NI 52-110

Financially Literate under NI 52-110

Terence Schorn

No Corporate Secretary of War

Eagle and former President

Yes

Donald Padgett

Yes

Yes

Anthony Dutton

Yes

Yes

Relevant Education and Experience

Terence P. Schorn, P. Geo
Mr. Schorn is a graduate of Haileybury School of Mines and brings over 50 years experience in mineral
exploration, development and production to War Eagle. Mr. Schorn currently serves on the audit
committee of Yankee Hat Minerals Ltd. His work experience provides relevant experience in accounting,
understanding of financial statements and significant appreciation for internal controls and procedures.
Donald Padgett
Mr. Padgett holds a law degree (Dalhousie University), an MBA (McMaster) and a BSc (University of
Toronto). He has served as Chairman, President and director of several public and private companies. He
currently serves on the audit committees of Vangold Resources Ltd. and Vanoil Energy Ltd.
Anthony Dutton
Mr. Dutton is a seasoned business executive and entrepreneur with a successful track record as an early
stage investor and business founder. His areas of expertise are corporate finance, business development
and strategic management. He is regularly engaged in developing strategic and financial plans for early
stage and high growth companies. Mr. Dutton holds a BA in Economics from the University of British
Columbia and an MBA from the Cranfield School of Management in the United Kingdom. He is a
principal at Delu Corp. and is also a director of other private and public companies.
Audit Committee Oversight
At no time since the commencement of War Eagles most recently completed financial year was a
recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by
the War Eagles Board of Directors.
Reliance on Certain Exemptions
At no time since the commencement of War Eagles most recently completed financial year has War
Eagle relied on the exemption in section 2.4 of NI 52-110 (De Minimis Non-Audit Services) or an
exemption from NI 52-110, in whole or in part, granted under Part 8 of NI 52-110.

20 AC/1463772.11

Pre-Approval Policies and Procedures

The Audit Committee has adopted specific policies and procedures for the engagement of non-audit
services as described under the heading Relationship with External Auditor of the Audit Committee
Charter.
External Auditor Service Fees (By Category)
Financial Year
Ended

Audit Fees(1)

Audit Related
Fees(2)

Tax Fees(3)

All Other Fees(4)

March 31, 2011

$19,890

7,000

$1,020

Nil

March 31, 2010

$28,000

Nil

$1,000

Nil

(1)

The aggregate fees billed by War Eagles auditor for audit fees.

(2)

The aggregate fees billed for assurance and related services by War Eagles auditor that are reasonably related to the
performance of the audit or review of financial statements and are not disclosed in the Audit Fees column.

(3)

The aggregate fees billed for profession services rendered by War Eagles auditor for tax compliance, tax advice, tax
planning. These services include War Eagles annual tax returns.

(4)

The aggregate fees billed for professional services other than those listed in the other three columns.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

War Eagles only equity compensation plan is its Stock Option Plan, which was approved by
Shareholders on September 30, 2008. It is a fixed number plan in accordance with the requirements of
the TSXV, and reserves a maximum of 8,086,559 (404,327 on a post-consolidated basis) War Eagle
Shares for issuance on the exercise of outstanding stock options. The Stock Option Plan otherwise
conforms to the requirements of the TSXV and TSXV Policy 4.4 Incentive Stock Options.
The following table sets forth information regarding the Stock Option Plan as at the year ended March 31,
2011.

Plan Category

Number of securities to
be issued upon exercise
of outstanding options
under the Stock Option
Plan

Weighted average
exercise price of
outstanding options
(b)

(a)

Number of securities
remaining available for
future issuance under the
Stock Option Plan
(excluding securities
reflected in column (a))(1)

Equity compensation plans

approved by Shareholders

213,250

$3.00

191,077

Equity compensation plans

not approved by
Shareholders

213,250

$3.00

191,077

Total
(1)

This figure is based on the total number of War Eagle Shares authorized for issuance under the Stock Option Plan, less
the number of stock options outstanding as at War Eagles fiscal year end of March 31, 2011.

21 AC/1463772.11

PARTICULARS OF MATTERS TO BE ACTED ON

APPOINTMENT OF AUDITOR
At the Meeting, Shareholders will be asked to pass the Auditors Resolution appointing MacKay LLP, as
War Eagles auditor for the next ensuing year, to hold office until the close of the next annual general
meeting of Shareholders or until the firm of MacKay LLP is removed from office or resigns as provided
by War Eagles constating documents, and authorizing War Eagles Board of Directors to fix the
compensation of the auditor.
The complete text of the Auditors Resolution which War Eagle intends to place before the Meeting for
approval, with or without modification, is as follows:
IT IS RESOLVED, AS AN ORDINARY RESOLUTION THAT:
1.

MacKay LLP, be appointed as War Eagle Mining Company Inc.s (War Eagle) auditor for the
ensuing year, to hold office until the close of the next annual general meeting of shareholders or
until the firm of MacKay LLP is removed from office or resigns as provided by War Eagles
constating documents, and authorizing War Eagles board of directors to fix the compensation of
the auditor; and

2.

Any one or more directors and officers of War Eagle be authorized to perform all such acts, deeds
and things and execute, under seal of War Eagle or otherwise, all such documents and other
writings, as may be required to give effect to the true intent of these resolutions.

Recommendation of Directors
War Eagles Board of Directors unanimously recommends that Shareholders vote in favour of the
Auditors Resolution.
In order to pass the Auditors Resolution, a simple majority of the votes cast by Shareholders,
present in person or by proxy at the Meeting, is required.
Unless the Shareholder has specified in the enclosed form of proxy that the War Eagle Shares
represented by such proxy are to be withheld from voting on the Auditors Resolution, the persons
named in the enclosed form of proxy will vote FOR the Auditors Resolution.
ELECTION OF DIRECTORS
Directors of War Eagle are elected at each annual general meeting and hold office until the next annual
general meeting or until that person sooner ceases to be a director. At the Meeting, Shareholders will be
asked to pass the Directors Resolution, being an Ordinary Resolution setting the number of directors at
four, subject to increases permitted by War Eagles constating documents, and to elect directors for the
ensuing year, as more particularly described below.
If the Amalgamation completes, Simon Anderson, Donald Padgett and Terence Schorn will resign as
directors of War Eagle and the directors of the Resulting Issuer will be as set out under the heading
Information Regarding the Resulting Issuer Directors, Officers and Promoters.
The information concerning the proposed nominees has been furnished by each of them.

22 AC/1463772.11

War Eagle
Shares Owned
Before the
Amalgamation

Resulting Issuer
Shares After
Completion of
the
Amalgamation(1)

Name, Position &

Jurisdiction of
Residence

Principal Occupation
for Past Five Years

Simon Anderson
President, CEO and
Director
BC, Canada

President of S2
management Inc; VicePresident of MCSI
Consulting Services Inc.

March 18, 2009

120,000

120,000

Anthony Dutton
Director
BC, Canada

President of IBC
Advanced Alloys Inc.;
Principal of Delu Corp.

March 20, 2009

100,000

100,000

Donald Padgett
Director
BC, Canada

CEO of Wedge Energy

International Inc.
President of Tsar
Emerald Corp.; President
of 1091096 Ontario Inc.

July 13, 2005

Nil

Nil

Terence Schorn
Director, Secretary
BC, Canada

Geoscientist and
businessman

February 1, 2001

34,948(2)

34,948(2)

Director Since

(1)

Assuming no proposed director acquires any Andromeda Shares under the Equity Financing.

(2)

32,965 War Eagle Shares are owned by Tarbo Resources, Ltd., a company of which Terence Schorn is the principal.
Mr. Schorn directly holds the balance of 1,983 War Eagle Shares.

Cease Trade Orders and Bankruptcy

Other than as described below, no individual who will be a director, officer or Promoter of War Eagle is,
or has been within the past ten years, a director, officer or Promoter of any other Issuer that, while such
Person was acting in that capacity, was:
(a)

the subject of a cease trade or similar order or an order that denied the Issuer access to
any statutory exemptions for a period of more than 30 consecutive days;

(b)

was subject to an event that resulted, after the director or proposed management nominee
ceased to be a director or officer of the relevant company in the relevant company being
the subject of a cease trade order or similar order that denied the relevant company access
to any exemption under securities legislation, for a period of more than 30 consecutive
days; or

(c)

within a year of the director or proposed management nominee ceasing to be a director or

officer of the relevant company, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any proceedings,
arrangement, or compromise with creditors, or had a receiver, receiver manager, or
trustee appointed to hold its assets.

Simon Anderson was formerly a director of Wex Pharmaceuticals Inc. (Wex), which failed to file its
interim financial statements and MD&A for the interim financial period ended June 30, 2007. Wex filed a
notice of default dated August 17, 2007 and applied to the British Columbia Securities Commission
(BCSC) for an order precluding management and other insiders from trading in its securities pending
the filing of the foregoing documents. The BCSC issued a cease trade order on August 17, 2007. On

23 AC/1463772.11

September 17, 2007, the cease trade order was revoked following the filing of Wexs financial statements
and MD&A.
The complete text of the Directors Resolution which War Eagle intends to place before the Meeting for
approval, with or without modification, is as follows:
IT IS RESOLVED, AS AN ORDINARY RESOLUTION THAT:
1.

The number of directors of the War Eagle Mining Company Inc. (the Company) be fixed
at four; and

2.

The four management nominees for directors, being Simon Anderson, Anthony Dutton,
Terence Schorn and Donald Padgett, be elected as directors of the Company to hold office
until the earlier of the election of directors at the next annual general meeting or until their
successors are elected or appointed.

War Eagles Board of Directors unanimously recommends that Shareholders vote in favour of the
Directors Resolution.
In order to pass the Directors Resolution, a simple majority of the votes cast by Shareholders,
present in person or by proxy at the Meeting, is required.
Unless the Shareholder has specified in the enclosed form of proxy that the War Eagle Shares
represented by such proxy are to be withheld from voting on the Directors Resolution, the persons
named in the enclosed form of proxy will vote FOR the Directors Resolution.
APPROVAL OF THE AMALGAMATION
At the Meeting, in accordance with the requirements of the RTO Policy of the TSXV, Shareholders will
be asked to consider, and if thought fit, to pass with or without variation, as an Ordinary Resolution, the
Acquisition Resolution, authorizing, confirming and approving the Amalgamation.
Background to the Amalgamation
On August 16, 2010, War Eagle entered into a letter of intent with Andromeda, a private company
incorporated under the OBCA, pursuant to which War Eagle would acquire all of the issued and
outstanding Andromeda Shares. Andromeda is engaged in mineral exploration and development in
Mexico, and is involved in the development of the Terrazas Property. The parties attempted to reach an
agreement on definitive business terms, but were unable to and Andromeda terminated the letter of intent
on December 23, 2010.
The parties revisited a combined transaction and on September 27, 2011, War Eagle entered into the
Letter of Intent with Andromeda. See Information Regarding Andromeda General Development of the
Business for more information about Andromedas business and the Terrazas Property.
Reasons for the Amalgamation
War Eagle is a mineral exploration company listed on the TSXV and assuming completion of the
Amalgamation, the Resulting Issuer is expected to be listed on the TSXV. War Eagle believes that
synergies exist between Andromedas Terrazas Property and War Eagles Tres Marias project located in
Chihuahua, Mexico, though compatibility of other ores with the proposed process at the Terrazas Property
have not yet been examined.

24 AC/1463772.11

The Amalgamation Agreement

On November 9, 2011, War Eagle and War Eagle Subco entered into the Amalgamation Agreement with
Andromeda under which War Eagle Subco and Andromeda will amalgamate to form Amalco, which will
become a wholly owned subsidiary of the Resulting Issuer. The Amalgamation Agreement provides that,
among other things, each Andromeda Share will be exchanged for 6.67 Resulting Issuer Shares (except
for the 500,000 Andromeda Shares held by War Eagle which will be cancelled without the repayment of
capital in respect thereof) and each Andromeda Warrant will be exchanged for 6.67 Replacement
Warrants, each Broker Option will be exchanged for 6.67 Replacement Broker Options and each Work
Fee Warrant will be exchanged for 6.67 Replacement Work Fee Warrants.
The current Shareholders are expected to own approximately 31.7% of the outstanding shares of the
Resulting Issuer, and Andromeda Shareholders (other than War Eagle) will own the remaining 68.3% of
the Resulting Issuer, before giving effect to the Equity Financing described in this Circular. The
Amalgamation is based on a deemed valuation of the Resulting Issuer of approximately $8.7 million at an
estimated price of $0.45 per Resulting Issuer Share post-RTO. The holders of convertible securities of
War Eagle will receive equivalent securities in the Resulting Issuer.
Andromeda is expected to complete the Equity Financing immediately before the Closing of the
Amalgamation. As a result of the Equity Financing, in addition to the issuance of Andromeda Units,
Andromeda will issue Broker Options and Work Fee Units. See Information Concerning War Eagle
General Development of the Business - Financing for more information about the Equity Financing.
Under the Amalgamation Agreement, the Resulting Issuer will issue 6.67 Replacement Broker Options
for each Broker Option and 6.67 Replacement Work Fee Warrants will be exchanged for each Work Fee
Warrant and the exercise price of the Replacement Broker Options and Replacement Work Fee Warrants
will be adjusted accordingly.
The Resulting Issuer Shares issued to the Andromeda Shareholders, the Replacement Broker Warrants to
be issued to former holders of the Broker Warrants and the Replacement Work Fee Warrants issued to the
former holders of the Work Fee Warrants pursuant to the Amalgamation Agreement will be issued in
reliance on exemptions from the prospectus requirement of applicable securities laws.
Conditions to the Amalgamation
The respective obligations of War Eagle and Andromeda to complete the Amalgamation are subject to a
number of conditions which must be satisfied or waived in order for the Amalgamation to become
effective. These conditions are described in the Amalgamation Agreement and include:
(a)

approval of the Amalgamation by the boards of directors of War Eagle and Andromeda;

(b)

approval of the Amalgamation by the Shareholders;

(c)

approval of the Amalgamation by the Andromeda Shareholders;

(d)

the Shareholders having passed the Related Transaction Resolutions;

(e)

Andromeda obtaining a technical report on the Terrazas Property as required by the

TSXV, regulatory authorities or securities law to complete the Amalgamation;

(f)

Andromeda having raised at least $7 million prior to or on the effective date of the
Amalgamation;

25 AC/1463772.11

(g)

the TSXV having approved the Amalgamation and the listing of the Resulting Issuer
Shares, and the shares issuable on exercise of the Replacement Warrants and
Replacement Broker Options, subject only to compliance with the usual requirements of
the TSXV;

(h)

all regulatory approvals and all third party consents as may be required to complete the
Amalgamation, if any, having been obtained, in form and terms satisfactory to War Eagle
and Andromeda, unless otherwise provided for between the parties, or if a failure to
obtain such approvals or consents would not have a Material Adverse Effect on War
Eagle or Andromeda or materially impede the completion of the Amalgamation; and

(i)

no action having been taken by any court or governmental body prohibiting or making
illegal the execution and delivery of the Amalgamation Agreement or any transaction
contemplated by the Amalgamation Agreement.

Consequences if the Amalgamation does not Complete

If the conditions to the Amalgamation are not satisfied, War Eagle will not complete the Amalgamation
with Andromeda and will continue to be a company listed on the TSXV with its current assets and
liabilities as more particularly set out in its continuous disclosure documents filed on SEDAR at
www.sedar.com.
The Resulting Issuer
The Amalgamation will constitute a Reverse Takeover as Andromeda Shareholders (assuming a
maximum Equity Financing is completed) will hold approximately 83.5% of the Resulting Issuer Shares.
Andromeda has one wholly owned subsidiary, RDM, which will become a subsidiary of the Resulting
Issuer. Under the Terrazas Agreement, RDM and Andromeda have agreed to purchase the Terrazas
Property from MRT.
Subject to the approval of the Continuance Resolution, War Eagle will continue its existence as the
Resulting Issuer under the OBCA under the name Andromeda Resources Inc. or such other name as
may be accepted by the relevant regulatory authorities. See Approval of the Continuance below. The
Resulting Issuers primary business, through its ownership of RDM and under the Terrazas Agreement,
will be the exploration, development and operation of the Terrazas Property. For a complete description
of the Amalgamation, Andromeda, the Terrazas Property and the Resulting Issuer, please refer to
the heading Information Regarding Andromeda and Information Regarding the Resulting
Issuer and the Terrazas Technical Report filed on SEDAR in connection with the Amalgamation.
The complete text of the Acquisition Resolution which War Eagle intends to place before the Meeting for
approval, with or without modification, is as follows:
IT IS RESOLVED, AS AN ORDINARY RESOLUTION THAT:
1.

The amalgamation (the Amalgamation) between Andromeda Resources Inc. (Andromeda)

and 2304315 Ontario Limited (War Eagle Subco), pursuant to the terms of an amalgamation
agreement dated November 9, 2011 among War Eagle Mining Company Inc. (War Eagle),
War Eagle Subco and Andromeda (the Amalgamation Agreement), as more particularly
described in War Eagles information circular dated November 3, 2011, be made effective and all
matters relating to the Amalgamation, all as contemplated in the Amalgamation Agreement, be
authorized and approved, and the Board of Directors of War Eagle is authorized to amend or
revise the terms and conditions of the Amalgamation in its discretion to the extent permitted by

26 AC/1463772.11

the Amalgamation Agreement without further notice to or approval of the shareholders of War
Eagle;
2.

The Amalgamation Agreement, and the execution and delivery of the Amalgamation Agreement
is ratified, confirmed and approved and the Board of Directors of War Eagle are authorized and
empowered to amend or revise the Amalgamation Agreement in its discretion to the extent
permitted therein without further notice or approval of the shareholders of War Eagle;

3.

Notwithstanding that the Amalgamation has received the approval of the shareholders of War
Eagle, the Board may, subject to the terms of the Amalgamation, decide not to proceed with the
Amalgamation or revoke this resolution at any time before the Closing Date (as defined in the
Amalgamation Agreement) without further notice to or approval of the shareholders of War
Eagle; and

4.

Any one director or officer of War Eagle is authorized and empowered, acting for, in the name of
and on behalf of War Eagle, to do all such acts and things and execute, deliver and file, as the
case may be, or cause to be delivered and filed all other documents and instruments necessary or
desirable to carry out and give effect to the provisions of this resolution.

Recommendation of Directors
War Eagles Board of Directors believes that the Amalgamation is in War Eagles best interests and
unanimously recommends that Shareholders vote in favour of the Acquisition Resolution.
In order to pass the above Acquisition Resolution, a simple majority of the votes cast by
Shareholders, present in person or by proxy at the Meeting, is required.
Unless the Shareholder has specified in the enclosed form of proxy that War Eagle Shares
represented by such proxy are to be voted against the Acquisition Resolution, the persons named in
the enclosed form of proxy will vote FOR the Acquisition Resolution.
APPROVAL OF THE CONTINUANCE
General
At the Meeting, conditional upon approval of the Acquisition Resolution, Shareholders will be asked to
consider and, if thought appropriate, to pass a Special Resolution (the Continuance Resolution)
authorizing the Board of Directors of War Eagle, in their sole discretion, to apply for the Continuance of
War Eagle under the OBCA under the new name of Andromeda Resources Inc. or such other name as
may be approved by the board of directors of War Eagle and applicable regulatory authorities, and to
approve, with or without amendment, the form of Articles of Continuance of War Eagle to be filed under
the OBCA as required in connection with the Continuance.
War Eagle will also seek Shareholder approval for a form of By-Laws for War Eagle which will comply
with the provisions of the OBCA. The full text of the proposed Articles of Continuance and the By-Law
for War Eagle will be available for review at War Eagles head office located at Suite 906 595 Howe
Street, Vancouver, British Columbia V6C 2T5 during regular business hours before the Meeting and at
the Meeting. The proposed By-Law of Resulting Issuer, attached as Schedule J to this Circular, contain
the form of By-Law for War Eagle under the OBCA.
The Continuance will affect certain of the rights of Shareholders as they currently exist under the
BCBCA. Shareholders should consult their legal advisors regarding implications of the Continuance
which may be of particular importance to them.

27 AC/1463772.11

War Eagles Board may, despite receiving Shareholder approval, abandon the application for the War
Eagle Continuance without further approval of the Shareholders. In making such determination, War
Eagles Board, at its sole discretion, will determine whether it is in War Eagles best interests to proceed
with the Continuance, including, among other things, the consummation of the Amalgamation Agreement
and after considering all relevant factors at the particular time, whether or not foreseen at this date. As
mentioned elsewhere in this Circular, the Continuance is a condition to the proposed Amalgamation, so if,
for any reason the proposed Amalgamation is not completed, War Eagle does not intend to implement the
Continuance.
Procedure in British Columbia for the Continuance
In order for the Continuance to become effective:
(a)

Shareholders must authorize by special resolution an application by War Eagle (the War
Eagle Continuance Application) to the Director, requesting that War Eagle be
continued as if it had been incorporated under the OBCA;

(b)

Regco under the BCBCA must authorize the proposed Continuance under the OBCA,
upon being satisfied that War Eagle has filed with Regco all of the records that War
Eagle is required to file with Regco under the BCBCA;

(c)

War Eagle must file the War Eagle Continuance Application with the Director; and

(d)

on the date shown on its Certificate of Continuance, War Eagle becomes a corporation
governed by the OBCA, as if it had been incorporated under the OBCA and War Eagle
will cease to be a corporation within the meaning of the BCBCA.

Effect of Continuance
Assuming the Continuance Resolution is approved by Shareholders at the Meeting, it is expected that
only if War Eagles Board determines that the Amalgamation is proceeding, will War Eagle file the War
Eagle Continuance Application with the Director and commence the procedures outlined above.
On the effective date of the Continuance, the holder of one War Eagle Share will continue to hold one
War Eagle Share domiciled in the new jurisdiction for each War Eagle Share held. The existing share
certificates representing War Eagle Shares will not be cancelled. Holders of convertible securities of War
Eagle, if any, on the effective date of the Continuance will continue to hold convertible securities to
purchase an identical number of War Eagle Shares on substantially the same terms.
The principal attributes of the War Eagle Shares under the OBCA will be identical to those of the
corresponding War Eagle Shares under the BCBCA, other than differences in Shareholders rights under
the BCBCA and the OBCA, which are discussed below.
The Continuance, if approved, will effect a change in the legal domicile of War Eagle on the effective
date thereof under the OBCA, but War Eagles business and operations will not change as a result of the
Continuance.
As of the effective date of the Continuance, the election, duties, resignations and removal of War Eagles
directors and officers will be governed by the OBCA and War Eagle will no longer be subject to the
BCBCA.
By operation of the OBCA, as of the effective date of the Continuance, all of the assets, property, rights,
liabilities and obligations of War Eagle immediately before the Continuance will continue to be the assets,

28 AC/1463772.11

property, rights, liabilities and obligations of War Eagle continued under the OBCA. On the effective date
of the Continuance, War Eagles property will continue to be the property of War Eagle continued under
the OBCA; War Eagle continued under the OBCA will continue to be liable for the obligations of War
Eagle; an existing cause of action, claim or liability to prosecution of War Eagle will be unaffected; a
civil, criminal or administrative action or proceeding pending by or against War Eagle may be continued
to be prosecuted by or against War Eagle; and a conviction against War Eagle may be continued against
continued War Eagle or ruling, order or judgment in favour of or against War Eagle may be enforced by
or against War Eagle continued under the OBCA.
Reason for Continuance
War Eagles Board believes that it is in War Eagles best interest to proceed with the Continuance in
order to facilitate the Amalgamation and to complete the proposed transactions related thereto.
Comparison between BCBCA and OBCA
The following is a summary only of certain differences between the OBCA, the statute that will govern
War Eagles corporate affairs upon the Continuance, and the BCBCA, the statute that currently governs
War Eagles corporate affairs.
In approving the Continuance, Shareholders will be approving the adoption of new constating documents,
and will be agreeing to hold securities in a corporation governed by the OBCA. This Circular summarizes
some of the differences that could materially affect the rights and obligations of Shareholders after giving
effect to the Continuance. In exercising their vote, Shareholders should consider the distinctions between
the OBCA and the BCBCA, only some of which are outlined below.
Despite the alteration of Shareholders rights and obligations under the OBCA and the proposed
Continuance, War Eagle (and the Resulting Issuer following the Amalgamation) will continue to be
bound by the rules and policies of the exchange on which its shares may be listed for trading, the
applicable securities regulatory authorities and any other applicable securities legislation and rules.
Nothing that follows should be construed as legal advice to any particular Shareholder, all of whom
are advised to consult their own legal advisors respecting all of the implications of the Continuance.
Charter Documents
Under the BCBCA, the charter documents of a company consist of a Notice of Articles, which sets
forth the name of the company, registered and records office information, director information and the
authorized share structure of the company, and Articles which govern the management of the company.
The Notice of Articles is filed with the British Columbia Registrar of Companies and the Articles are filed
only with the companys registered and records office.
Under the OBCA, the constating documents are the articles (of incorporation) which set forth the name
of the corporation and the amount and type of authorized capital and by-laws which govern the
management of the corporation (the articles and by-laws collectively referred to as the Charter
Documents). The articles are filed with the Director and the by-laws are filed only with the
corporations registered and records office.
If Shareholders approve the Continuance, War Eagle will have unlimited authorized capital consisting of
common shares, which is the same as it has under the BCBCA. The Continuance will not result in any
substantive changes to the constitution, powers or management of War Eagle except as previously
described.

29 AC/1463772.11

Amendments to the Charter Documents of a Company

The OBCA requires a two-thirds majority vote to make substantive changes to a corporations Charter
Documents. Any substantive change to the corporate charter of a company under the BCBCA, such as an
increase or reduction of the authorized capital of a company requires the type of resolution specified in
the Articles or if the Articles do not specify the type of resolution, a special resolution passed by at least
two-thirds of the votes cast on the resolution.
Other fundamental changes under both the OBCA and the BCBCA, such as an alteration of the special
rights and restrictions attached to issued shares or a proposed amalgamation or continuation of a
corporation out of the jurisdiction, require a similar special resolution passed by the holders of shares of
each class entitled to vote at a general meeting of the company and the holders of all classes of shares
adversely affected by an alteration of special rights and restrictions.
Sale of Companys Undertaking
Under the BCBCA, a company may sell, lease or otherwise dispose of all or substantially all of the
undertaking of the company only if it does so in the ordinary course of its business or if it has been
authorized to do so by a Special Resolution passed by the majority of votes that the articles of the
company specify is required for the company to pass a special resolution of the holders of the shares of
each class or series entitled to vote thereon.
The BCBCA defines a special resolution as:
(a)

(b)

a resolution passed at a general meeting under the following circumstances:

(i)

notice of the meeting specifying the intention to propose the resolution as a

special resolution is sent to all shareholders holding shares that carry the right to
vote at general meetings at least the prescribed number of days before the
meeting;

(ii)

the majority of the votes cast by shareholders voting shares that carry the right to
vote at general meetings is cast in favour of the resolution;

(iii)

the majority of votes cast in favour of the resolution constitutes at least a special
majority, or

a resolution passed by being consented to in writing by all of the shareholders holding

shares that carry the right to vote at general meetings.

Under the OBCA, any sale, lease or exchange of all or substantially all of the property of the corporation
and must be approved by a special resolution.
The OBCA defines a special resolution as a resolution that is:
(a)

submitted to a special meeting of the shareholders of a corporation duly called for the
purpose of considering the resolution and passed, with or without amendment, at the
meeting by at least two-thirds of the votes cast; or

(b)

consented to in writing by each shareholder of the corporation entitled to vote at such a

meeting or the shareholders attorney authorized in writing.

30 AC/1463772.11

Rights of Dissent and Appraisal

The BCBCA provides that Shareholders who dissent to certain actions being taken by a company may
exercise a right of dissent and require the company to purchase the shares held by such Shareholder at the
fair value of such shares. The dissent right is applicable where the company proposes to:
(a)

pass a resolution to alter the articles to alter restrictions on the powers of the company or
on the business it is permitted to carry on;

(b)

pass a resolution to adopt an amalgamation agreement;

(c)

pass a resolution to approve an amalgamation into a foreign jurisdiction;

(d)

pass a resolution to approve an arrangement, the terms of which arrangement permit

dissent;

(e)

pass a resolution to authorize or ratify the sale, lease or other disposition of all or
substantially all of the companys undertaking;

(f)

pass a resolution to authorize the continuation of the company into a jurisdiction other
than British Columbia; and

(g)

pass any other resolution, if dissent is authorized by the resolution.

Shareholders are also entitled to dissent under any court order that permits dissent.
The OBCA provides that Shareholders who dissent to certain actions being taken by a corporation may
exercise a right of dissent and require the corporation to purchase the shares held by Shareholders at the
fair value of such shares. The dissent right is applicable where the corporation proposes to:
(a)

amend its articles to add, remove or change the restrictions of issue, transfer of ownership
or shares of a class or series of the shares of the corporation;

(b)

amend its articles to add, remove or change any restriction upon the business or
businesses that the corporation may carry on or upon the powers that the corporation may
exercise;

(c)

amalgamate with another corporation;

(d)

be continued under the laws of another jurisdiction; or

(e)

sell, lease or exchange all or substantially all of its property.

Oppression Remedies
Under the BCBCA, a Shareholder of a company, and any other person whom the court considers to be an
appropriate person to make an application, has the right to apply to court on the grounds that:
(a)

the affairs of the company are being or have been conducted, or that the powers of the
directors are being or have been exercised, in a manner oppressive to one or more of the
Shareholders, including the applicant, or

31 AC/1463772.11

(b)

some act of the company has been done or is threatened, or some resolution of the
Shareholders or of the Shareholders holding shares of a class or series of shares has been
passed or is proposed, that is unfairly prejudicial to one or more of the Shareholders,
including the applicant.

On such an application, the court may make such order as it sees fit including an order to prohibit any act
proposed by the company.
Under the OBCA a complainant, and, in the case of an offering corporation, the Ontario Securities
Commission (OSC) may apply to the court and the court may make an order to rectify the matters
complained of, if it is satisfied, that in respect of a corporation of any of its Affiliates:
(a)

any act or omission of the corporation any of its Affiliates effects or threatens to effect a
result;

(b)

the business or affairs of the corporation or any of its Affiliates are, have been or are
threatened to be carried on or conducted in a manner; or

(c)

the powers of the directors of the corporation or any of its Affiliates are, have been or are
threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder,
creditor, director or officer of the corporation.
Shareholder Derivative Action
Under the BCBCA and OBCA a Shareholder or director of a company, and any other person whom the
Court considers to be an appropriate person to make an application, may, with leave of the Court, bring an
action in the name and on behalf of the company to enforce a right, duty or obligation owed to the
company that could be enforced by the company itself or to obtain damages for any breach of such a
right, duty or obligation, whether the right, duty or obligations arises under the BCBCA or OBCA or
otherwise.
Requisition of Meetings
The BCBCA provides that Shareholders of a company holding at least 5% of the issued voting shares of a
company may give notice to the directors requiring them to call and hold a general meeting. The OBCA
also provides this right.
Indemnification
The BCBCA allows a corporation to indemnify a director or former director or officer or former officer of
a corporation or its Affiliates against all liability and expenses reasonably incurred by him or her in a
proceeding to which he or she is made party by reason of being or having been a director or officer if he
or she acted honestly and in good faith with a view to the best interests of the corporation and in cases
where an action is or was substantially successful on the merits of his defence of the action or proceeding
against him or her in his or her capacity as a director or officer. The OBCA provides similar rights.
Giving Financial Assistance
Under the BCBCA, subject to certain exceptions, a company must disclose in its corporate records and
make available to it Shareholders, upon request, a brief description of any material financial assistance,
including the nature and extent of the financial assistance given, the terms on which the financial

32 AC/1463772.11

assistance was given and the amount of the financial assistance given, to: (i) a person known to the
company to be a Shareholder of, a beneficial owner of a share of, a director of, an officer of or an
employee of the company or an Affiliate of the company, (ii) a person known to the company to be an
Associate of any such persons, or (iii) any person for the purpose of a purchase by that person of a share
issued or to be issued by the company or an Affiliate of the company. The OBCA does not provide
similar rights.
Place of Meetings
Under the BCBCA, general meetings of Shareholders are to be held in British Columbia or may be held at
a location outside of British Columbia if:
(a)

the location is provided for in the articles; or

(b)

the articles do not restrict a company from approving a location outside of British
Columbia, the location is approved by the resolution required by the articles for that
purpose, or if no resolution is specified then the location approved by ordinary resolution;
or

(c)

the location is approved in writing by the RegCo before the meeting is held.

The OBCA provides that general meetings of Shareholders may be held at the place such place in or
outside of Ontario as the directors determine or, in the absence of such a determination, at the place where
the registered office of the corporation is located.
Directors
The BCBCA provides that a public company must have a minimum of three directors but does not impose
any residency requirements on the directors.
The OBCA provides that an offering corporation must have at least three directors, at least one of whom
is not to be an officer or employee of the company or its Affiliates. In addition, under the OBCA, at least
25% of the directors must be resident Canadians, unless the corporation has less than four directors in
which case one director must be a resident Canadian.
Continuance Resolution
The complete text of the Continuance Resolution which War Eagle intends to place before the Meeting
for approval, with or without modification, is as follows:
IT IS RESOLVED, AS A SPECIAL RESOLUTION THAT:
1.

The continuance of War Eagle under the Business Corporations Act (Ontario) (OBCA) with
the new name of Andromeda Resources Inc. or such other name as may be approved by the
board of directors of War Eagle and applicable regulatory authorities is authorized and approved;

2.

The Board of Directors of War Eagle is authorized to

(a)

apply to the Director under the OBCA (the Director) for the continuance of War Eagle
and to the registrar under the Business Corporations Act (British Columbia)(Regco) for
the appropriate consents and documentation;

(b)

continue War Eagle under the OBCA; and

33 AC/1463772.11

(c)

3.

file Articles of Continuance with the new name of Andromeda Resources Inc. or such
other name as may be approved by the board of directors of War Eagle and applicable
regulatory authorities, and all such other certificates and writings with the Director as
required in connection with such continuance resulting in War Eagle being subject to, the
OBCA;

Subject to the authorization of Regco and without affecting the validity of War Eagle and the
existence of War Eagle by or under its constating documents, and of any act completed as
permitted by its constating documents, War Eagle approves and adopts:
(a)

in substitution for its existing Certificate of Incorporation and Notice of Articles, the
Certificate of Continuance and Articles of Continuance under the OBCA, in the form to
be approved by any director or officer of War Eagle, and as may be accepted by Director.

(b)

in substitution of the existing Articles of War Eagle, the By-Law, being a By-Law
complying with the OBCA and relating generally to the affairs of War Eagle, such ByLaw to be substantially in the form approved by the directors of War Eagle and made
available to War Eagle Shareholders for review at War Eagles head office before the
Meeting and at the Meeting;

4.

Any director or officer of War Eagle is individually authorized and directed for and on behalf of
War Eagle to do all acts and things and to deliver all such documents, instruments and writings as
may be necessary or desirable in connection with the continuance of War Eagle under the OBCA,
without further resolution;

5.

Despite the approval of Shareholders as provided for in this special resolution, the Board of
Directors of War Eagle may, in its sole discretion, revoke this special resolution before it is acted
upon, without further approval of the War Eagle shareholders; and

6.

Any one or more directors or officers are authorized to take all necessary steps and proceedings,
and to execute and deliver and file any and all applications, declarations, documents and other
instruments and do all such other acts and thing as may be necessary or desirable to give effect to
the provisions of this resolution.

Recommendation of Directors
War Eagles Board of Directors unanimously recommends that Shareholders vote for the
Continuance Resolution.
In order to be effective, the Continuance Resolution must be approved by not less than two-thirds
of the votes cast by Shareholders who vote in respect of such Special Resolution.
Unless the Shareholder has specified in the enclosed form of proxy that the War Eagle Shares
represented by such proxy are to be voted against the Continuance Resolution, the persons named
in the enclosed form of proxy will vote FOR the Continuance Resolution.
Shareholders who wish to dissent should take note that the procedures for dissenting to the
Continuance require strict compliance with the applicable dissent procedures. Please refer to the
heading Dissent Rights following Particulars of Matters to be Acted Upon for additional
information.

34 AC/1463772.11

APPROVAL OF THE RESULTING ISSUER STOCK OPTION PLAN

War Eagles current Stock Option Plan is the stock option plan dated September 30, 2008. At the
Meeting, Shareholders will be asked to consider and, if thought appropriate, to pass an Ordinary
Resolution authorizing the Board to replace the Stock Option Plan with the Resulting Issuer Stock Option
Plan which conforms with to the rules and requirements of the TSXV (the Resulting Issuer Stock
Option Plan). The Resulting Issuer Stock Option Plan will be a rolling stock option plan within the
meaning of TSXV policies.
A full copy of the Resulting Issuer Stock Option Plan will be available at the Meeting for review by
Shareholders. Shareholders may also obtain copies of the Resulting Issuer Stock Option Plan from War
Eagle before the Meeting on written request. The following is a summary of the material terms of the
Resulting Issuer Stock Option Plan:
Summary of the Resulting Issuer Stock Option Plan
The purpose of the Resulting Issuer Stock Option Plan is to provide an incentive to the Optionees (as
defined below) and thereby advance the Resulting Issuers interests by providing them an opportunity to
acquire an equity interest in the Resulting Issuer through the exercise of stock options granted to them
under the Resulting Issuer Stock Option Plan.
Under the Resulting Issuer Stock Option Plan, the Board of Directors of the Resulting Issuer (or a board
committee, if any, appointed in accordance with the Resulting Issuer Stock Option Plan) may grant stock
options to Optionees in consideration of them providing their services to the Resulting Issuer or a
subsidiary. The number of Resulting Issuer Shares subject to each option is determined by the Board
within the guidelines established by the Resulting Issuer Stock Option Plan. The options enable such
persons to purchase Resulting Issuer Shares at a price fixed under such guidelines. The options are
exercisable by the Optionee giving the Resulting Issuer notice and payment of the exercise price for the
number of the Resulting Issuer Shares to be acquired.
The Resulting Issuer Stock Option Plan has the following features:
1.

Eligible participants under the Resulting Issuer Stock Option Plan include employees, officers
and directors of the Resulting Issuer and its subsidiaries and other service providers of the
Resulting Issuer and its subsidiaries (collectively, the Optionees).

2.

The number of Resulting Issuer Shares subject to each stock option is determined by the Board of
Directors provided that the Resulting Issuer Stock Option Plan, together with all other previously
established or proposed share compensation arrangements, within a one-year period:

3.

(a)

restricts the grant to any one Optionee to no more than 5% of the issued shares;

(b)

restricts the grant to any one consultant (as defined in TSXV policies) to no more than
2% of the issued shares; and

(c)

restricts the grant to all persons conducting investor relations activities (as defined in
TSXV policies) to no more than an aggregate of 2% of the issued shares.

A maximum of 10% of the outstanding Resulting Issuer Shares are available for issuance under
the Resulting Issuer Stock Option Plan.

35 AC/1463772.11

4.

The price at which options will be granted will be determined in accordance with the rules and
policies of the TSXV, or such other stock exchange where the Resulting Issuer Shares may then
be traded.

5.

The vesting of options is determined by the Board of Directors at the time of grant and the board
of directors may, in its discretion, subsequent to the time of grant, advance the date on which an
option may be exercised. Except for options granted to persons conducting investor relations
activities and unless otherwise determined, all options vest in full on the date of grant.

6.

The term of an option shall not exceed 10 years from the date of grant.

7.

If an Optionee ceases to be a service provider of the Resulting Issuer for any reason (whether or
not for cause), the Optionee may, but only within a period of ninety days following such
cessation, or the expiry date, whichever is earlier, to exercise the Optionees options. In the case
of death, options may be exercised for one year from the date of death but in no event after the
expiry date of the Optionees options.

8.

Options are non-assignable except by will or by laws of descent and distribution.

9.

Shareholder approval is not required for certain amendments permitted by the Resulting Issuer
Stock Option Plan to be made without such shareholder approval. The Resulting Issuers Board
of Directors may at any time, subject to the provisions below, amend, suspend or terminate the
Resulting Issuer Stock Option Plan, or any portion thereof, or grants made thereunder provided
that no change in any grant previously made may be made which would impair the rights of the
Optionee thereunder without the consent of the affected Optionee. Without limiting the generality
of the foregoing, The Resulting Issuers Board of directors may make the following types of
amendments to the Resulting Issuer Stock Option Plan or grants made thereunder without
shareholder approval, subject to all necessary regulatory approval:
(a)

amendments of an administrative nature including, without limiting the generality of the

foregoing, any amendment for the purpose of curing any ambiguity, error or omission in
the Resulting Issuer Stock Option Plan or to correct or supplement any provision of the
Resulting Issuer Stock Option Plan that is inconsistent with any other provision of the
Resulting Issuer Stock Option Plan;

(b)

amendments necessary to comply with the provisions of applicable law (including,

without limitation, the rules, regulations and policies of the stock exchange on which the
shares of War Eagle or the Resulting Issuer, as applicable, may then be listed);

(c)

amendments respecting administration of the Resulting Issuer Stock Option Plan;

(d)

any amendment to the vesting provisions of the Resulting Issuer Stock Option Plan or
any option;

(e)

any amendment to the early termination provisions of the Resulting Issuer Stock Option
Plan or any option, whether or not such option is held by an Insider, provided such
amendment does not entail an extension beyond the original expiry date;

(f)

any amendment to the termination provisions of the Resulting Issuer Stock Option Plan
or any option, other than an amendment extending the term of an option, provided any
such amendment does not entail an extension of the expiry date of such option beyond its
original expiry date;

36 AC/1463772.11

10.

(g)

the addition or modification of any form of financial assistance by the Resulting Issuer;

(h)

the addition or modification of a cashless exercise feature, payable in cash or shares,

whether or not there is a full deduction of the number of underlying shares from the
Resulting Issuer Stock Option Plan reserve; and

(i)

any other amendments, whether fundamental or otherwise, not requiring shareholder

approval under applicable law (including without limitation, the rules, regulations and
policies of the stock exchange on which the shares may then be listed).

Shareholder approval will be required for the following types of amendments to the Resulting
Issuer Stock Option Plan or options granted thereunder:
(a)

increases to the number of shares issuable under the Resulting Issuer Stock Option Plan,
including an increase to a fixed maximum number of shares or a change from a fixed
maximum number of shares to a fixed maximum percentage;

(b)

any amendment to an option held by an Insider which reduces the exercise price of an
option or a cancellation and re-grant at a lower price less than 12 months after the related
cancellation;

(c)

any amendment extending the term of an option beyond its original expiry date;

(d)

any amendment broadening any limits imposed on non-employee director participation

under the Resulting Issuer Stock Option Plan;

(e)

any amendment respecting transferability or assignability of options under the Resulting

Issuer Stock Option Plan, other than for normal estate settlement purposes; and

(f)

amendments required to be approved by shareholders under applicable law (including,

without limitation, the rules, regulations and polices of the stock exchange on which the
shares may then be listed).

11.

The Resulting Issuer Stock Option Plan does not provide for any financial assistance to
participants to facilitate the purchase of options under the Resulting Issuer Stock Option Plan.

12.

The Resulting Issuer Stock Option Plan provides that in the event that the Resulting Issuer seeks
approval from its shareholders for a significant transaction such as an amalgamation or merger
with another corporation or the sale of all or substantially all of the assets of the Resulting Issuer
or an offer to purchase being made to the Resulting Issuers shareholders, the Resulting Issuer has
the right to permit the exercise of unvested options and to accelerate the exercise period of
options.

13.

Where the expiry date for an option occurs during a Blackout Period being an interval of time
during which the Resulting Issuer has determined that one or more participants may not trade any
securities of the Resulting Issuer because they may be in possession of confidential information
pertaining to the Resulting Issuer, the expiry date of such option will be extended to the date that
is 10 business days following the end of such Blackout Period.

The Resulting Issuer Stock Option Plan Resolution

In accordance with the requirements of the TSXV, the Resulting Issuer Stock Option Plan must be
approved by Ordinary Resolution in order to become effective.

37 AC/1463772.11

The complete text of the Resulting Issuer Stock Option Plan Resolution which War Eagle intends to place
before the Meeting for approval, confirmation and adoption, with or without modification, is as follows:
IT IS RESOLVED, AS AN ORDINARY RESOLUTION THAT:
1.

The current stock option plan of War Eagle Mining Company Inc. (War Eagle) be replaced by
a new stock option plan (the Resulting Issuer Stock Option Plan) which conforms with the
rules of the TSXV, as applicable;

2.

The number of common shares of the Resulting Issuer issuable pursuant to the Resulting Issuer
Stock Option Plan be set at 10% of the outstanding Resulting Issuer Shares, subject to any
limitations imposed by applicable regulations, laws, rules and policies;

3.

The Board of Directors of War Eagle is authorized on behalf of War Eagle to make any further
amendments to the Resulting Issuer Stock Option Plan as may be required by applicable
regulatory authorities, without requiring further approval of War Eagle shareholders, in order to
ensure adoption of the Resulting Issuer Stock Option Plan;

4.

War Eagle is authorized to file the Resulting Issuer Stock Option Plan with the TSXV for
acceptance and the implementation of the Resulting Issuer Stock Option Plan is subject to TSXV
approval; and

5.

Any one or more directors or officers of War Eagle, for and on behalf of War Eagle, is authorized
and directed, to take all necessary steps and proceedings, and to execute, deliver and file any and
all applications, declarations, documents and other instruments and do all such other acts or
things that may be necessary or desirable to give effect to the provisions of this resolution.

Recommendation of Directors
War Eagles Board of Directors believe that approval of the Resulting Issuer Stock Option Plan is
in best interests of the Resulting Issuer and unanimously recommends that Shareholders vote in
favour of the Resulting Issuer Stock Option Plan Resolution.
In order to pass the above Stock Option Plan Resolution, a simple majority of the votes cast by
Shareholders, present in person or by proxy at the Meeting, is required.
Unless the Shareholder has specified in the enclosed form of proxy that the War Eagle Shares
represented by such proxy are to be voted against the Resulting Issuer Stock Option Plan
Resolution, the persons named in the enclosed form of proxy will vote FOR the Resulting Issuer
Stock Option Plan Resolution.
DISSENT RIGHTS
Registered Shareholders may dissent to the Continuance. Shareholders who dissent to the Continuance
must do so in accordance with sections 237-247 of the BCBCA.
Non-registered Shareholders
Only registered Shareholders may dissent. Beneficial owners of War Eagle Shares registered in the
name of a broker, custodian, nominee or other intermediary who wish to dissent should be aware that they
may only do so through the registered owner of such War Eagle Shares. A registered Shareholder such as
a broker who holds War Eagle Shares as nominee for beneficial owners, some of whom may desire to
demand appraisal, must exercise dissent rights on behalf of such beneficial owners with respect to the

38 AC/1463772.11

War Eagle Shares held for such beneficial owners. In such case, the demand for appraisal should set forth
the number of War Eagle Shares covered by it.
Rights of Shareholders who dissent to the Continuance
As indicated in the Notice of the Meeting, any Shareholder is entitled to be paid the fair value of such
Shareholders War Eagle Shares in accordance with section 245 of the BCBCA if such Shareholder
dissents to the Continuance and the Continuance becomes effective.
A Shareholder is not entitled to dissent with respect to such Shareholders War Eagle Shares if such
Shareholder votes any of those War Eagle Shares in favour of the Special Resolution authorizing the
Continuance.
Notice of Dissent
Under the provisions of sections 237 to 247 of the BCBCA, a Shareholder is entitled to send to War Eagle
a written objection to the Continuance Resolution. In addition to any other right a Shareholder may have,
when the Continuance becomes effective, a Shareholder who complies with the dissent procedure under
sections 237 to 247 of the BCBCA is entitled to be paid the fair value of the War Eagle Shares held by
that Shareholder in respect of which that Shareholder dissents, determined as at the close of business on
the day before the Continuance Resolution is adopted.
In the event that a Shareholder fails to perfect or effectively withdraws that Shareholders claim forfeits
that Shareholders right to make a claim under the dissent procedure set out in the BCBCA or such
Shareholders rights as a Shareholder are otherwise reinstated, each War Eagle Share will then be deemed
to be a War Eagle Share under the OBCA.
The dissent procedure provided in the BCBCA and the text of sections 237 to 247 of the BCBCA are set
out in Schedule A to this Circular. Shareholders who may wish to dissent should seek legal advice, as
failure to comply with the strict requirements set out in sections 237 to 247 of the BCBCA may result in
the loss or unavailability of any right to dissent. A Shareholder may only exercise the right to dissent
under sections 237 to 247 of the BCBCA in respect of War Eagle Shares which are registered in that
Shareholders name.
Procedure for Shareholders Who Dissent to the Continuance
A dissenting Shareholder has until 10:00 a.m. (Vancouver time) on December 6, 2011 to send to War
Eagle, at the address indicated on the Notice of Meeting of War Eagle, with respect to the Special
Resolution authorizing the Continuance, a written notice of dissent under section 242 of the BCBCA by
registered mail. After the Special Resolution is approved by the Shareholders and if War Eagle notifies
the dissenting Shareholder of its intention to act upon the Special Resolution under section 243 of the
BCBCA, the dissenting Shareholder is then required within one month after such notice is given, to send
to War Eagle a written notice under section 244 of the BCBCA that such Shareholder requires it to
purchase all of the War Eagle Shares in respect of which such Shareholder has given notice of dissent,
together with the share certificate or certificates representing those War Eagle Shares, whereupon the
dissenting Shareholder is bound to sell and War Eagle is bound to purchase those War Eagle Shares. War
Eagle and a dissenting Shareholder who has complied with the above noted provisions of section 244 may
agree on the fair value to be paid in respect of the dissenting Shareholders War Eagle Shares, or War
Eagle or the dissenting Shareholder may apply to the Supreme Court of British Columbia (the Court)
for an order determining the fair value of such War Eagle Shares, or ordering that the fair value be
established by arbitration, and the Court may make such order and such consequential orders or directions
as the Court considers appropriate. There is no obligation on War Eagle to make application to the Court.
The dissenting Shareholder will be entitled to receive the fair value of the War Eagle Shares held by such
39 AC/1463772.11

Shareholder as of the day before the Meeting or such later date on which the Special Resolution to
authorize the Continuance is passed, provided that War Eagle is not permitted to make any payment to a
dissenter if there are reasonable grounds for believing War Eagle is insolvent or the payment would
render War Eagle insolvent.
Strict Compliance with Dissent Provisions Required
The foregoing summary does not purport to provide a comprehensive statement of the procedures to be
followed by a dissenting Shareholder who seeks payment of the fair value of such Shareholders shares.
Sections 237 to 247 of the BCBCA require strict adherence to the procedures established under the
BCBCA and failure to do so may result in the loss of all dissenters rights. Accordingly, each
Shareholder who might desire to exercise the dissenters rights should carefully consider and
comply with the applicable provisions of sections 237 to 247 of the BCBCA the full text of which is
set out in Schedule A this Circular, and consult such Shareholders legal advisor.
RISK FACTORS
Following completion of the Amalgamation, the Resulting Issuers primary business will be to explore,
develop and operate the Terrazas Property in Chihuahua, Mexico. The Resulting Issuer will also continue
to own the assets and properties of War Eagle more particularly set out in its continuous disclosure
documents filed on SEDAR at www.sedar.com. Due to the nature of the business, legal and economic
climate in which the Resulting Issuer operates and the present state of development of its business, the
Resulting Issuer may be subject to significant risks that could have a material adverse affect on the
Resulting Issuers business, operating results or financial condition. The Resulting Issuers actual
operating results may be very different from those expected as at the date of this Circular. Investors
should carefully consider all such risks. The following summarizes some of the risk factors which the
Resulting Issuer faces:
Exploration and Development
Mineral resource exploration and development is a speculative business, characterized by a number of
significant risks including, among other things, unprofitable efforts resulting not only from the failure to
discover mineral deposits but also from finding mineral deposits that, though present, are insufficient in
quantity and quality to return a profit from production. The marketability of minerals acquired or
discovered by the Resulting Issuer may be affected by numerous factors which are beyond the Resulting
Issuers control and which cannot be accurately predicted, such as market fluctuations, 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 of minerals, and environmental protection, the combination of which factors may result in the
Resulting Issuer not receiving an adequate return of investment capital.
Exploration and development of natural resources involve a high degree of risk and few properties which
are explored are ultimately developed into producing properties. There is no assurance that the Resulting
Issuers exploration and development activities will result in any discoveries of commercial bodies of ore.
The long-term profitability of the Resulting Issuers operations will be in part directly related to the cost
and success of its exploration programs, which may be affected by a number of factors. Substantial
expenditures are required to establish reserves through drilling, to develop processes to extract the
resources and, in the case of new properties, to develop the extraction and processing facilities and
infrastructure at any site chosen for extraction. Although substantial benefits may be derived from the
discovery of a major deposit, no assurance can be given that resources will be discovered in sufficient
quantities to justify commercial operations or that the funds required for development can be obtained on
a timely basis.

40 AC/1463772.11

The Resulting Issuer Does Not Have an Operating Mine

The Resulting Issuer does not have an operating mine facility. It is expected that production will not
commence for several years, if at all. Although the property was successfully mined in the past, there can
be no assurance that a mine can operate profitably in the present. The Resulting Issuer must complete a
full feasibility study, economic analysis and a mining plan among other things before mining operations
can commence.
The Resulting Issuer Does Not Have Reserves
The Resulting Issuer must complete the recommended work program proposed in the Terrazas Technical
Report, and complete additional laboratory testing to collect additional data on the proposed metallurgical
processes in order to evaluate the quantity and quality of resources on the Terrazas Property. There can be
no assurance that reserves will be assigned to the properties or if assigned they will be sufficient to justify
mining operations.
The Resulting Issuer Does Not Have Formal Sales Contracts
The Resulting Issuer has not entered into any legal contracts for delivery of copper, zinc or other
resources. Economic conditions, availability of competing products or other factors may prevent the
Resulting Issuer from entering into any contracts for the sale of copper or other minerals/metals.
Mining Operations are Subject to a High Degree of Risk
Mining operations involve high degrees of risk. The Resulting Issuers operations are subject to hazards
and risks normally associated with the development and production of mineral deposits including, without
limitation, unusual and unexpected geological conditions, pit-wall failures, flooding and other conditions.
These conditions may lead to damage to or destruction of the mine and other production facilities,
damage to life or property, environmental damage and legal liability and other adverse impacts.
Processing plant operations are exposed to the same issues as above and in addition are subject to various
hazards, including, without limitation, equipment failure, labour disputes and industrial accidents. If any
of these occur, the results may include increased costs of production, delays, write-down of property,
work stoppages, legal liability or injury or death to personnel, all of which may have an adverse effect on
the Resulting Issuers operations and financial condition.
Resource Quantities are Estimates Only
No certainty exists with regard to the quantity of zinc or copper or any other resources estimated to lie
within the Resulting Issuers properties. Likewise it is not certain that such resources can be economically
mined and produced. Until actually mined and processed, the quantities of mineral available to be mined,
the tenor of the mineral and the product yield must be considered estimates only. The actual quantity of
material that is mined, its mineral content or undesirable or deleterious materials in the product, and the
actual yield of product may differ materially from the resource estimates discussed herein. Any material
change in quantity, quality or yield of the resources may affect the economic viability of the Resulting
Issuers properties. Any material reduction in these estimates or the Resulting Issuers ability to extract
and process copper, zinc or other mineral/metals could have a material adverse impact on the Resulting
Issuers results, operations or financial condition.
Competition
The resource industry is intensely competitive in all of its phases, and the Resulting Issuer will compete
with many companies possessing greater financial resources and technical facilities than itself.

41 AC/1463772.11

Competition could adversely affect the Resulting Issuers ability to acquire suitable properties for
exploration in the future.
Environmental Factors
All phases of the Resulting Issuers operations on the Terrazas Property are subject to the environmental
laws and regulations pursuant to a variety of Mexican laws, international conventions and state and
municipal laws and regulations. These laws and regulations set various standards regulating certain
aspects of health and environmental quality. They provide for penalties and other liabilities for the
violation of such standards and establish, in certain circumstances, obligations to rehabilitate current and
former facilities and locations where operations are or were conducted. Furthermore the permission to
operate could be withdrawn temporarily where there is evidence of serious breaches of health and safety,
or even permanently in the case of extreme breaches.
Significant liabilities could be imposed on the Resulting Issuer for damages, clean-up costs or penalties in
the event of certain discharges into the environment, environmental damage caused by previous owners of
acquired properties or noncompliance with environmental laws or regulations. The Resulting Issuer
intends to minimize these risks by taking steps to ensure compliance with environmental, health and
safety laws and regulations and operating to international environmental standards.
Environmental legislation is evolving in a manner which will require stricter standards and enforcement,
increased fines and penalties for non-compliance, more stringent environmental assessments of proposed
projects and a heightened degree of responsibility for companies and their officers, directors and
employees. There is no assurance that future changes in environmental regulation, if any, will not
adversely affect the Resulting Issuers operations.
Although the proposed work project set out in this Circular regarding the Terrazas Property does not
require permitting from SEMARNAT, the Resulting Issuer may become subject to regulation by
SEMARNAT, the environmental protection agency of Mexico. These regulations require that an
environmental impact statement, known in Mexico as a Manifesto Impacto Ambiental, be prepared by a
third-party contractor for submittal to SEMARNAT.
Studies required to support the Manifesto Impacto Ambiental include a detailed analysis of the following
areas: soil, water, vegetation, wildlife, cultural resources and socio-economic impacts. If the Resulting
Issuers activities related to the Terrazas Property become subject to regulation by SEMARNAT, the
Resulting Issuer must also provide proof of local community support for a project to gain final Manifesto
Impacto Ambiental approval.
Permits & Licenses
The operations of the Resulting Issuer may require licenses and permits from various governmental
authorities. There can be no assurance that the Resulting Issuer will be able to obtain all necessary
licenses and permits that may be required to carry out development of its projects.
Fluctuating Prices
The Resulting Issuers revenues, if any, are expected to be in large part derived from the extraction and
sale of metals such as zinc and copper. The price of these metals has fluctuated widely, particularly in
recent years, and is affected by numerous factors beyond the Resulting Issuers control including
international, economic and political trends, expectations of inflation, currency exchange fluctuations,
interest rates, global or regional consumptive patterns, speculative activities and increased production due
to new extraction developments and improved extraction and production methods. The effect of these

42 AC/1463772.11

factors on the price of base metals, and therefore the economic viability of any of the Resulting Issuers
exploration and development projects, cannot accurately be predicted.
Title to Assets
While the Resulting Issuer intends to follow standard industry accepted due diligence procedures with
respect to title for any mineral claims in which it has or will acquire a material interest, there is no
guarantee that title to such concessions will be not be challenged or impugned. The properties may be
subject to prior unregistered agreements or transfers and title may be affected by undetected defects.
No History of Earnings or Dividends
War Eagle has no history of earnings, and there is no assurance that any of the properties it now or may
hereafter acquire or obtain an interest in will generate earnings, operate profitably or provide a return on
investment in the future.
War Eagle has not paid dividends on its War Eagle Shares since incorporation and does not anticipate
doing so in the foreseeable future. Payment of any future dividends will be at the discretion of Resulting
Issuers Board after taking into account many factors, including operating results, financial condition and
anticipated cash needs. It is expected that the Resulting Issuer will retain its earnings, if any, to finance
further growth and, when appropriate, retire debt.
Political, Economic and Social Risks and Uncertainties
The Resulting Issuers operations through the Terrazas Property will be located in Mexico. Risks and
uncertainties of operating in Mexico vary from time to time, but are not limited to terrorism, hostage
taking, extreme fluctuations in currency exchange rates, high rates of inflation, labour unrest, the risk of
civil unrest, expropriation and nationalization, renegotiation or nullification of existing concessions,
licenses, permits and contracts, illegal mining, changes in taxation policies, restrictions on foreign
exchange and repatriation and changing political conditions and governmental regulations that favour or
require the awarding of contracts to local contractors or require foreign contractors to employ citizens of,
or purchase supplies from a particular jurisdiction.
Changes, if any, in mining investment or investment policies or shifts in political attitude in Mexico or
any other relevant jurisdiction in which the Resulting Issuer operates may adversely affect the Resulting
Issuers operations or profitability. Operations may be affected in varying degrees by government
regulations with respect to, but not limited to, restrictions on production, price controls, export controls,
currency remittance, income and other taxes, expropriation of property, foreign investment, maintenance
of claims, environmental legislation, land use, water use and mine safety. Failure to comply strictly with
applicable laws, regulations and local practices relating to mineral rights applications and tenure, could
result in a loss, reduction or expropriation of entitlements. The occurrence of these various factors and
uncertainties cannot be accurately predicted and could have an adverse effect on the Resulting Issuers
operations or profitability.
Exchange Rate Fluctuation
The profitability of the Resulting Issuer may be adversely affected by fluctuations in the rate of exchange
of Canadian dollars and other currencies the Resulting Issuer may operate in. The Terrazas Property is
located in Mexico and therefore, the Resulting Issuer may operate in Mexican pesos and US dollars. War
Eagle does not currently, and it is not expected the Resulting Issuer will, take any steps to hedge against
currency fluctuations.

43 AC/1463772.11

Requirement of New Capital

As a resource exploration company without revenues, the Resulting Issuer will typically need more
capital than it has available to it. In the past, War Eagle has had to raise, by way of equity financing,
considerable funds to meet its capital needs. There is no guarantee that the Resulting Issuer will be able to
continue to raise the funds needed for its business. Failure to raise the necessary funds in a timely fashion
will limit the Resulting Issuers growth.
Dilution
Future equity financings to fund the Resulting Issuers operations will cause additional dilution to a
Shareholders holdings in the Resulting Issuer. If prevailing capital market conditions are such that the
Equity Financing is re-priced downward prior to Closing, Shareholders may suffer additional dilution
than what is currently contemplated in this Circular.
Value of Company
The Resulting Issuers assets are of indeterminate value. For further particulars see the financial
statements attached as Schedules to this Circular.
The Resulting Issuer is a holding company that conducts operations on the Terrazas Property through a
subsidiary.
Any limitation on the transfer of cash or other assets between the parent corporation and such entity,
could restrict the Resulting Issuers ability to fund its operations efficiently. Any such limitations, or the
perception that such limitations may exist now or in the future, could have an adverse effect on the
Resulting Issuers valuation and stock price.
Management
The Resulting Issuer will be largely dependent on the performance of its management and its key
employees. In assessing the risk of an investment in the Resulting Issuer Shares, potential investors
should realize that they are relying on the experience, judgment, discretion, integrity and good faith of the
proposed management of the Resulting Issuer. The Resulting Issuer does not intend to maintain life
insurance policies on its key personnel. The Resulting Issuer could be adversely affected if such
individuals do not remain with the Resulting Issuer.
Conflicts of Interest
Conflicts of interest may arise as a result of the proposed directors, officers and Promoters of the
Resulting Issuer also holding positions as directors or officers of other Companies. Some of those
individuals have been and will continue to be engaged in the identification and evaluation of assets,
businesses and Companies on their own behalf and on behalf of other Companies, and situations may
arise where the directors and officers of the Resulting Issuer will be in direct competition with the
Resulting Issuer. See Information Concerning the Resulting Issuer Directors, Officers and Promoters
Conflicts of Interest.
Surface Access
The Resulting Issuer has the right to acquire surface rights for the Efren Gonzalez Land (as defined
herein) by making all the required payments. The Resulting Issuer will need to secure additional surface
rights to develop the Terrazas Property (i.e. for project infrastructure). Mexican mining law sets forth
pre-emptive rights for mine concession holders including rights to obtain the expropriation, temporary

44 AC/1463772.11

occupation or establishment of an easement of the essential land required to carry out exploration,
exploitation and benefit, as well as for the deposit of dumps, tailings, dross and slags and to establish
underground right of way easement.
In Mexico, the severing of surface and mineral rights allows the potential for others to retain mineral
rights on land that the Terrazas Property requires for surface facilities.
In order to develop the Terrazas Property, agreements will have to be entered into with individual
property owners to secure surface rights. Agreements of this nature have been signed in the past and
while these agreements are no longer of force and effect, it is reasonable to expect the Resulting Issuer
will be able to enter into similar agreements to secure surface rights.
INFORMATION REGARDING WAR EAGLE
CORPORATE STRUCTURE
Name and Incorporation
War Eagle was incorporated under the British Columbia Company Act (predecessor legislation to the
BCBCA) on March 6, 1984, as 275210 B.C. Ltd.. On April 10, 1984, the company changed its name to
War Eagle Resources Ltd. and on May 25, 1987 changed its name to its present name War Eagle
Mining Company Inc. On November 22, 2004, War Eagle transitioned from the Company Act to the
BCBCA.
War Eagles registered and records offices are located at PO Box 49290, 1000-595 Burrard Street,
Vancouver, British Columbia, V7X 1S8. War Eagles head office is located at Suite 906 595 Howe
Street, Vancouver, British Columbia, V6C 2T5.
War Eagle has four subsidiaries: War Eagle Resources Corporation, a wholly owned Idaho corporation;
Tombstone Mining Inc., a company incorporated in the British Virgin Islands; Tombstone Exploration de
Mexico S.A. de C.V., a 99% owned Mexican corporation and War Eagle Subco, a corporation under the
OBCA which was recently incorporated for the purposes of completing the Amalgamation.
War Eagle is listed on the TSXV under the symbol WAR.
GENERAL DEVELOPMENT OF THE BUSINESS
History
War Eagle is involved in the acquisition, exploration and, if warranted, development of mineral resource
properties. War Eagles primary focus has been its 100% interest in the Tres Marias zinc/lead/germanium
property (the Tres Marias Property) located in Chihuahua, Mexico, which it acquired in March 2001
from High Tech Metals Corp. (HTMC), under a letter agreement whereby War Eagle had acquired a
100% interest in HTMCs option to acquire a 100% interest in the Tres Marias Property. The Tres Marias
Property remains War Eagles principal exploration focus, but War Eagle has suspended exploration
activities pending development of a work program that is in accordance with War Eagles resources and
ability to raise money. War Eagle believes that the Tres Marias Property will be complementary to the
Terrazas Property.
War Eagle has other mineral property interests but is not devoting significant funds or management effort
on these other initiatives. War Eagle is working to secure a return on investments previously made by
partnering with third parties.

45 AC/1463772.11

In August 2009, War Eagle entered into a definitive option agreement (the Option Agreement) with
VM Exploration Ltd. (VM Exploration), a company that had the option to earn up to an 80% interest
in War Eagles MAC property located in the Northwest Territories. War Eagle and VM Exploration
subsequently terminated the Option Agreement.
In February 2010, War Eagle completed an analysis of assay results on drill core from its 2008/2009 drill
program on its Tres Marias Property.
In February 2010, War Eagle signed an agreement with Bullion Fund Inc. (Bullion) to acquire the
remaining 10% interest of the Georges Lake property, located in Saskatchewan, for a cash payment of
$75,000 and completed the acquisition in June 2010. War Eagle now owns an undivided 100% working
interest in the Georges Lake property.
In June 2010, War Eagle announced a private placement (the June 2010 Private Placement) of up to
$1,200,000 to be raised through the issuance of units. Each unit was priced at $1.20, comprised of one
War Eagle Share and one half of one common share purchase warrant exercisable at $3.00. Each full
warrant entitles the holder to purchase one War Eagle Share for a period of 18 months following the date
of closing of the June 2010 Private Placement. The Warrants are subject to an acceleration provision such
that if the War Eagle Shares trade on the TSXV at a price over $6.00 for 20 consecutive trading days at
any time then the Warrants will expire on the earlier of the expiry date and 4:30 p.m. (Vancouver time) on
the date which is 30 calendar days after War Eagle provides notice to the holders of the warrants that the
acceleration event has occurred.
In June 2010, War Eagle closed the first tranche of the June 2010 Private Placement and issued 9,576,668
(old), 478,833 (new) units for gross proceeds of $574,600 and received a further $67,000 in subscriptions.
War Eagle incurred cash issue costs of $3,103 and issued 27,466 (old), 1,373 (new) finders warrants with
a fair value of $1,200. The finders warrants are exercisable on the same terms as the warrants; however,
they are not transferable.
With the proceeds of the June 2010 Private Placement, War Eagle acquired a 17% minority interest in
Andromeda by purchasing 500,000 Andromeda Shares in June 2010 and July 2010 for total cash
consideration of $1,000,000.
Subsequent to June 30, 2010, War Eagle closed the second and third tranches of the June 2010 Private
Placement and issued a further 6,158,334 (old), 307,917 (new) units for gross proceeds of $369,500. In
connection with the June 2010 Private Placement, War Eagle paid aggregate cash finders fees of $31,208
and issued 520,133 (old), 24,633 (new) finders warrants with a fair value of approximately $22,000. The
finders warrants are non-transferable and exercisable on the same terms as the warrants.
In August 2010, War Eagle announced a letter of intent with Andromeda to complete a business
combination transaction and the War Eagle Shares were halted in accordance with the policies of the
TSXV. The parties worked toward definitive business terms, but were unable to reach agreeable terms.
On December 23, 2010, War Eagle announced that that its proposed transaction with Andromeda was
terminated. The War Eagle Shares came back to trade on December 29, 2010.
War Eagle completed a consolidation of its share capital on a 20 for 1 basis, consolidating 69,645,394 of
its outstanding common shares to 3,482,272 common shares, and outstanding convertible securities were
adjusted accordingly. The War Eagle Shares commenced trading on the TSXV on a post-consolidation
basis on market open July 22, 2011.
On September 7, 2011, War Eagle announced a non-brokered private placement to raise up to $1,000,000
(the Offering). The Offering was priced at $0.25 per unit with each unit consisting of one War Eagle
Share and one common share purchase warrant exercisable at $0.34. Each warrant entitles the holder to
46 AC/1463772.11

purchase one common share of War Eagle for a period of two years following the date of closing of the
Offering. War Eagle closed the Offering on September 26, 2011 for gross proceeds of $990,000. In
connection with the Offering, War Eagle paid aggregate cash finders fees of $49,800 and issued 199,200
finders warrants. The finders warrants are non-transferable and exercisable on the same terms as the
warrants under the Offering.
On September 27, 2011, War Eagle entered into the Letter of Intent with Andromeda, a private company
incorporated under the OBCA, pursuant to which War Eagle agreed to acquire all of the issued and
outstanding Andromeda Shares. Andromeda is engaged in mineral exploration and development in
Mexico, and is involved in the development of the Terrazas Property. See Information Regarding
Andromeda General Development of the Business for more information about Andromedas business
and the Terrazas Property.
Financing
To finance the Resulting Issuers exploration and development of the Terrazas Property, administrative
expenses and general working capital, Andromeda will complete the Equity Financing immediately
before Closing. The Andromeda Shares comprising the Andromeda Units issued under the Equity
Financing will be exchanged for Resulting Issuer Shares on the Closing. Under the Equity Financing,
Andromeda will issue a minimum of 2,333,333 Andromeda Units at a price of $3.00 per Andromeda Unit
to raise gross proceeds of $7,000,000 and a maximum of 3,333,333 Andromeda Units at a price of $3.00
per Andromeda Unit to raise gross proceeds of $10,000,000. Each Unit will be comprised of one
Andromeda Share and one-half of one Andromeda Warrant. Each Andromeda Warrant will be exercisable
into one Andromeda Share at an exercise price of $4.00 per Andromeda Share for a period of 24 months.
Under the Equity Financing, Andromeda will pay a cash commission of 8% of the gross proceeds of the
Equity Financing and issue such number of Broker Options equal to 8% of the number of Andromeda
Units issued pursuant to the Equity Financing. Andromeda has also agreed to pay Union Securities Ltd. a
work fee of $25,000 (plus taxes) in cash and issue to Union Securities Ltd. 25,000 Work Fee Units.
Each Broker Option will be exchanged for 6.67 Replacement Broker Options, each of which will, in turn,
be exercisable into one Replacement Broker Unit at an adjusted exercise price of $0.45 per Replacement
Broker Unit for a period of 24 months from the Closing Date. Each Replacement Broker Unit will be
comprised of one Resulting Issuer Share and one-half of one Replacement Broker Warrant. Each
Replacement Broker Warrant will be exercisable into one additional Resulting Issuer Share at an adjusted
exercise price of $0.60 per Resulting Issuer Share for a period of 24 months from the Closing Date.
Each Andromeda Share and Work Fee Warrant issued as part of the Work Fee Units will be exchanged
for 6.67 Resulting Issuer Shares and 6.67 Replacement Work Fee Warrants, respectively. Each
Replacement Work Fee Warrants will be exercisable into one additional Resulting Issuer Share at an
adjusted exercise price of $0.60 per Resulting Issuer Share for a period of 24 months from the Closing
Date.
Andromeda and War Eagle will enter into an agency agreement with the Brokers prior to the Closing
Date. Under the agency agreement, War Eagle will grant a right of first refusal to Union Securities Ltd.,
allowing Union Securities Ltd. the right to act as agent for the Resulting Issuer for any financing
undertaken by the Resulting Issuer for a period of twelve months from the Closing Date.

47 AC/1463772.11

SELECTED FINANCIAL INFORMATION AND MD&A

Selected Financial Information
The following table sets out selected historical financial information for War Eagle for the years ended
March 31, 2011, 2010 and 2009 and for the three months ended June 30, 2011 and should be read in
conjunction with those financial statements. See Audited Consolidated Financial Statements of War Eagle
for the years ended March 31, 2011, March 31, 2010 and March 31, 2009 and Unaudited Consolidated
Interim Financial Statements of War Eagle for the three months ended June 30, 2011, available on
SEDAR at www.sedar.com and attached as Schedule B and Schedule D, respectively, to this
Circular. War Eagles unaudited consolidated interim financial statements and related notes for the three
months ended June 30, 2011, were prepared in compliance with International Financial Reporting
Standards (IFRS) and in accordance with IAS 34 Interim Financial Reporting, with the opening
balances transitioned to IFRS standards, and War Eagles audited financial statements for the years ended
March 31, 2011, 2010 and 2009, and related notes were prepared in accordance with Canadian Generally
Accepted Accounting Principles (GAAP).
Three months
ended June 30,
2011
(unaudited) ($)

Financial year
ended March 31,
2011
($)

Financial year
ended March 31,
2010
($)

Financial year
ended March 31,
2009
($)

Reporting
Standards Used

IFRS

GAAP

GAAP

GAAP

Total Operating
Expenses

108,558

579,184

770,472

1,598,045

Nil

Nil

Nil

Nil

Amounts deferred
in connection with
the Amalgamation

MD&A
War Eagles MD&A for the years ended March 31, 2011, 2010 and 2009 are attached as Schedule C to
this Circular, and should be read in conjunction with War Eagles audited consolidated financial
statements for the years ended March 31, 2011, March 31, 2010 and March 31, 2009 and notes thereto
also attached to this Circular, as Schedule B.
War Eagles MD&A for the three months ended June 30, 2011 is attached as Schedule D to this
Circular, and should be read in conjunction with War Eagles unaudited consolidated interim financial
statements and notes thereto also attached to this Circular, as Schedule E.
DESCRIPTION OF SECURITIES
War Eagles authorized capital consists of an unlimited number of common shares without par value. As
of the date of this Circular, there are 7,442,272 War Eagle Shares outstanding, 213,250 options
outstanding, finders warrants to purchase 225,207 War Eagle Shares outstanding and 4,353,375
outstanding share purchase warrants.
The holders of War Eagle Shares are entitled to vote at all meetings of Shareholders, to receive dividends
if, as and when declared by the directors and to participate rateably in any distribution of property or
assets upon the liquidation, winding-up or other dissolution of War Eagle. The War Eagle Shares carry no
pre-emptive rights, conversion or exchange rights, or redemption, retraction, repurchase, sinking fund or

48 AC/1463772.11

purchase fund provisions. There are no provisions requiring the Shareholder to contribute additional
capital and no restrictions on the issuance of additional securities by War Eagle. There are no restrictions
on the repurchase or redemption of War Eagle Shares by War Eagle except to the extent that any such
repurchase or redemption would render War Eagle insolvent.
STOCK OPTION PLAN
For more information about the Stock Option Plan see Securities Authorized Under Equity
Compensation Plans and War Eagle Executive Compensation disclosure elsewhere in the Circular.
War Eagle proposes to replace the Stock Option Plan with the Resulting Issuer Stock Option Plan. For
more information about the Resulting Issuers Stock Option Plan see Particulars of Matters to Be Acted
On Approval of Resulting Issuer Stock Option Plan.
PRIOR SALES
During the 12 months before the date of the Circular, War Eagle issued securities as follows:
Date

Number of Securities
3,960,000 War Eagle Shares(1)

September 26,
2011

(1)

3,960,000 warrants

Issue Price Per

War Eagle Share

Aggregate Issue
Price

Consideration
Received

$0.25

$990,000

$990,000

$0.34
(2)

199,200 finders warrants

(1)

600,000 War Eagle Shares and 600,000 warrants were sold to Insiders of War Eagle. The warrants are exercisable for a
period of two years at a price of $0.34.

(2)

The finders warrants have the same terms as the warrants except they are non-transferrable.

STOCK EXCHANGE PRICE

The following table sets out the high and low closing prices and volume of trading of the War Eagle
Shares on the TSXV for the periods indicated. Please refer to the notes to the table for additional
information.
Period
November 2011

High

(1)

October 2011
September 2011

(2)

August 2011
July 22-31, 2011
(3)

July 1-21, 2011

(3)

April 2011 June 2011

January 2011 March 2011

(3)

October 2010 December 2010

(3)(4)(5)

(3)(5)(6)

July 2010 September 2010

(3)

April 2010 June 2010

January 2010 - March 2010

(3)

Low

Volume

N/A

N/A

Halted

N/A

N/A

Halted

$0.45

$0.34

36,972

$0.85

$0.35

61,974

$0.90

$0.65

2,500

$0.06

$0.04

910,384

$0.08

$0.04

2,572,643

$0.11

$0.05

2,484,936

$0.06

$0.05

2,242,766

$0.07

$0.05

2,258,964

$0.09

$0.06

2,552,145

$0.13

$0.07

9,027,595

49 AC/1463772.11

Period
October 2009 December 2009(3)

High
$0.15

Low
$0.07

Volume
2,131,243

(1)

This is for the period from November 1, 2011 to November 3, 2011, the date of this Circular. As of the date of this
Circular, the trading of the War Eagle Shares on the TSXV remains halted.

(2)

The War Eagle Shares were halted on September 27, 2011, pending announcement of the Amalgamation, so this is for
the period September 1, 2011 to September 27, 2011.

(3)

These figures are presented on a pre-consolidation basis. War Eagle consolidated its shares on a 20 old common shares
for 1 new common share basis effective July 22, 2011.

(4)

Represents the period December 29, 2010 to December 31, 2010 as the War Eagle Shares resumed trading on
December 29, 2010.

(5)

The War Eagle Shares were halted on August 16, 2010 pending announcement of a proposed transaction with
Andromeda and resumed trading on December 29, 2010.

(6)

Represents the period July 1, 2010 to August 16, 2010 as the War Eagle Shares were halted on August 16, 2010 and
remained halted until December 29, 2010.

EXECUTIVE COMPENSATION
Under this heading, War Eagle is including the disclosure required by Form 51-102F6 Statement of
Executive Compensation under National Instrument 51-102 Continuous Disclosure Obligations.
Compensation Discussion and Analysis
Philosophy and Objectives
The compensation program for the senior management of War Eagle is designed to ensure that the level
and form of compensation achieves certain objectives, including:

to align executive compensation with Shareholders interests;

to attract and retain highly qualified management;

to focus performance by linking incentive compensation to the achievement of business

objectives and financial results; and

to encourage retention of key executives for leadership succession.

War Eagles executive compensation program comprises three elements: base salary, bonus incentives
and equity participation. The compensation program is designed to pay for performance. Employees,
including senior executives, are rewarded for the achievement of annual operating and financial goals,
progress in executing War Eagles long-term growth strategy and delivering strong total Shareholder
return performance.
War Eagle reviews industry compensation information and compares its level of overall compensation
with those of comparable sized mineral exploration companies. Generally, War Eagle targets base
management fees at levels approximating those holding similar positions in comparably sized companies
in the industry and hopes to achieve competitive compensation levels through the fixed and variable
components.
War Eagles total compensation mix places a significant portion of the executives compensation at risk
and relies heavily on the award of stock options. The design takes into account individual and corporate
performance. Compensation practices, including the mix of base management fees, short-term incentives

50 AC/1463772.11

and long-term incentives, are regularly assessed to ensure they are competitive, take account of the
external market trends and support War Eagles long-term growth strategies. Due to the early stage of
War Eagles development programs, the flexibility to quickly increase or decrease appropriate human
resources is critical. Accordingly, War Eagle does not enter into long- term commitments with its officers.
Base Compensation
In the Boards view, paying base salaries or management fees which are competitive in the markets in
which War Eagle operates is a first step to attracting and retaining talented, qualified and effective
executives. Base compensation is compensation for discharging job responsibilities and reflects the level
of skills and capabilities demonstrated by the executive. Annual adjustments take into account the market
value of the role and the executives demonstration of capability during the year.
Bonus Incentive Compensation
War Eagles objective is to achieve certain strategic objectives and milestones. The Board will consider
executive bonus compensation dependent upon the executive meeting those strategic objectives and
milestones, the executives individual performance and sufficient cash resources being available for the
granting of bonuses. The Board approves executive bonus compensation dependent upon comparable
compensation levels based on recommendations of the Board as a whole, and such recommendations are
generally based on survey data provided by independent consultants.
Equity Participation
War Eagle believes that encouraging its executives and employees to become Shareholders is the best
way of aligning their interests with those of its Shareholders. Equity participation is accomplished
through the Stock Option Plan. Stock options are granted to executives and employees taking into account
a number of factors, including the amount and term of options previously granted, base salary and
bonuses and competitive factors. The amounts and terms of options granted are determined by the Board.
Option-Based Awards
Stock options are granted to provide an incentive to the directors, officers, employees and consultants of
War Eagle to achieve the long-term objectives of War Eagle; to give suitable recognition to the ability
and industry of such persons who contribute materially to the success of War Eagle; and to attract and
retain persons of experience and ability, by providing them with the opportunity to acquire and increase
proprietary interest in War Eagle. War Eagle awards stock options to its executive officers based upon the
recommendation of the Board, which recommendation is based upon the Boards review of a proposal
from the CEO. Previous grants of incentive stock options are taken into account when considering new
grants.
Implementation and amendments to the existing Stock Option Plan are the responsibility of the Board,
subject to compliance with applicable TSXV and regulatory requirements.
Summary Compensation Table
The table below sets out particulars of compensation paid to the following executive officers for services
to War Eagle during the stated time:
(a)

the individual who served as our CEO or acted in a similar capacity during the most
recently completed financial year;

51 AC/1463772.11

(b)

the individual who served as our CFO or acted in a similar capacity during the most
recently completed financial year;

(c)

each of our three most highly compensated executive officers, or the three most highly
compensated individuals acting in a similar capacity, other than the CEO and CFO, at the
end of the most recently completed financial year whose total compensation was,
individually, more than $150,000, as determined by 1.3(6) of Form 51-102F6 and

(d)

each individual who would be an Named Executive Officer or NEO under paragraph (c)
but for the fact that the individual was neither an executive officer of the company, nor
acting in a similar capacity, at the end of that financial year,

(each of whom is a NEO).

During the financial year ended March 31, 2011 and as at June 30, 2011, War Eagle had two NEOs,
Simon Anderson, the President, CEO, interim CFO and a director of War Eagle and Salil Dhaumya, the
current CFO.
The following table sets forth all direct and indirect compensation for, or in connection with, services
provided to War Eagle and for the financial years ended March 31, 2011, March 31, 2010 and the three
months ended June 30, 2011, in respect of each NEO. For the information concerning compensation
related to previous years, please refer to War Eagles previous information circulars available under War
Eagles profile on www.sedar.com.

Name and
Principal
Position

Simon
Anderson,
President,
CEO,
President &
Director(1)

Salil
Dhaumya,
CFO(4)
(1)

Year
Ending

Salary ($)

Share
based
awards
($)

Option
based
awards(3)
($)

Non-equity
incentive plan
compensation ($)

Annual
incentiv
e plans

Long
term
incentiv
e plans

Pensio
n
Value
($)

All Other
Compensation
($)

Total
Compen
-sation
($)(2)

March
31, 2010

Nil

Nil

9,500

Nil

Nil

Nil

76,702

86,202

March
31, 2011

Nil

Nil

Nil

Nil

Nil

Nil

83,550

83,550

June 30,
2011(2)

Nil

Nil

Nil

Nil

Nil

Nil

17,380

17,380

March
31, 2011

Nil

Nil

Nil

Nil

Nil

Nil

15,194

15,194

June 30,
2011

Nil

Nil

Nil

Nil

Nil

Nil

4,500

4,500

Simon Anderson was appointed as interim President and interim CFO on March 20, 2009. Mr. Anderson held the CFO
position until August 10, 2010, when Salil Dhaumya was appointed War Eagles CFO. Mr. Anderson was also
appointed CEO effective August 10, 2010. Mr. Anderson provided his services to War Eagle through S2 Management
Inc. (S2 Management). Compensation to Mr. Anderson includes $23,550 for the year ended March 31, 2011
($16,702 for the year ended March 31, 2010) and $2,380 for the three months ended June 30, 2011 in respect of
secretarial and administrative services provided by S2 Management. S2 Management subsequently agreed to forgo
$28,000 of the compensation accrued in the year ended March 31, 2011 and all of the compensation accrued in the
three months ended June 30, 2011. Subject to TSXV approval, War Eagle plans to issue compensatory warrants in lieu
of compensation accrued. S2 Management estimates that it paid Mr. Anderson $31,500 for the year ended March 31,

52 AC/1463772.11

2011 (54,000 for the year ended March 31, 2010) and $NIL for the three months ended June 30, 2011 that is
attributable to services he provided to War Eagle. Mr. Anderson is not an employee of War Eagle.
(2)

This figure is not for a full financial year but for the three months ended June 30, 2011 and is disclosure required by
Form 3D1.

(3)

War Eagle uses the Black-Scholes option pricing model to calculate the grant-date fair value of option awards.

(4)

Salil Dhaumya was appointed War Eagles CFO on August 10, 2010 so he was not CFO for the entire year ended
March 31, 2011.

Incentive Plan Awards

War Eagle has no long term incentive plans other than the Stock Option Plan.
Outstanding Share Based Compensation and Option Based Awards
The following table sets forth information concerning all awards outstanding at the end of the most
recently completed financial year end March 31, 2011, for each NEO. No options were granted during
the financial year ended March 31, 2011 or since the financial year then ended.

Name

Simon
Anderson
Salil Dhaumya

Share-based Awards (3)

Option-based Awards

Value of
unexercised
in-the-money
options
($)(1)(2)

Number of
share or
units of
shares that
have not
vested (#)

Market of
payout value
of sharebased
awards that
have not
vested ($)

Number of
securities
underlying
unexercised
options (#)

Option
exercise
price

Option
expiration
date

25,000

$3.00

April 28,
2014

Nil

N/A

N/A

Nil

N/A

N/A

Nil

N/A

N/A

(1)

In-the-money options is calculated on the difference between the market value of the War Eagle Shares underlying
the options at the end of the most recently completed financial year and the exercise price of the options. The last
trading price of the War Eagle Shares on the TSXV as of March 31, 2011 was $0.055 ($1.10 post-consolidated) per
War Eagle Share.

(2)

All of the options vested on the date they were granted.

(3)

War Eagle has not granted any share-based awards.

Incentive Plan Awards Value Vested or Earned During the Year

During the financial year ended March 31, 2011, none of the NEOs exercised their stock options. The
following table summarizes, for each of the NEOs, the value of options vested during the year ended
March 31, 2011.

Simon Anderson
Salil Dhaumya

Option-Based Awards
Value Vested During the
Year ($)

Share-Based Awards
Value Vested During the
Year ($) (2)

Non-Equity Incentive
Plan Compensation
Value Earned During the
Year ($)

N/A(1)

N/A

N/A

N/A

N/A

N/A

53 AC/1463772.11

(1)

All of the options vested on the date they were granted. The options were granted on April 28, 2009. The trading price
of the War Eagle Shares on the most recent trading day before the options were granted was $0.05 ($1.00 postconsolidated) per War Eagle Share.

(2)

War Eagle has not granted any share-based awards.

Plan-based Awards
The significant terms of War Eagles Stock Option Plan and the number of options granted thereunder is
set out under the heading Securities Authorized for Issuance Under Equity Compensation Plans.
Pension Plan Benefits
No pension or retirement benefit plans have been instituted by War Eagle and none are proposed at this
time.
Termination and Change of Control Benefits
War Eagle does not have any plan or arrangement to pay or otherwise compensate any NEO if his
employment is terminated as a result of resignation, retirement, Change of Control, etc. or if his
responsibilities change following a Change of Control.
Compensation of Directors
War Eagle has four directors, one of which is also a NEO: Simon Anderson. For a description of the
compensation paid to the NEO who also acts as director, see the Summary Compensation Table above.
During War Eagles most recently completed financial year, independent directors of War Eagle were
paid $3,500 per month for services in their capacity as directors (including any additional amounts
payable for committee participation or special assignments), or for services as consultants or experts.
Director Compensation Table
The following table sets forth the value of all compensation provided to directors of War Eagles most
recently completed financial year ended March 31, 2011:

Name
and
Principal
Position

Year
Ending

Anthony
Dutton(3)

Donald
Padgett(4)

Option
based
awards
($)(2)

Nonequity
incentive
plan
compensation
($)

Pension
Value
($)

All
Other
Compensation
($)

Total
Compensation
($)

Fees
earned
($)

Salary
($)

Sharebased
award
($)

March
31, 2011

42,000

N/A

N/A

N/A

N/A

N/A

N/A

42,000

June 30,
2011(1)

10,500

N/A

N/A

N/A

N/A

N/A

N/A

10,500

March
31, 2011

42,000

N/A

N/A

N/A

N/A

N/A

N/A

42,000

June 30,
2011(1)

10,500

N/A

N/A

N/A

N/A

N/A

N/A

10,500

54 AC/1463772.11

Name
and
Principal
Position

Year
Ending

Terence
Schorn(5)

Option
based
awards
($)(2)

Nonequity
incentive
plan
compensation
($)

Pension
Value
($)

All
Other
Compensation
($)

Total
Compensation
($)

Fees
earned
($)

Salary
($)

Sharebased
award
($)

March
31, 2011

60,000

N/A

N/A

N/A

N/A

N/A

N/A

60,000

June 30,
2011(1)

15,000

N/A

N/A

N/A

N/A

N/A

N/A

15,000

(1)

This figure is not for a full financial year but for the three months ended June 30, 2011.

(2)

War Eagle uses the Black-Scholes option pricing model to calculate the grant-date fair value of option awards.

(3)

Mr. Dutton subsequently agreed to forgo $17,500 of the compensation accrued in the year ended March 31, 2011 and
all of the compensation accrued in the three months ended June 30, 2011. Subject to TSXV approval, War Eagle plans
to issue compensatory warrants in lieu of compensation accrued.

(4)

Mr. Padgett subsequently agreed to forgo $17,500 of the compensation accrued in the year ended March 31, 2011 and
all of the compensation accrued in the three months ended June 30, 2011. Subject to TSXV approval, War Eagle plans
to issue compensatory warrants in lieu of compensation accrued.

(5)

Mr. Schorn subsequently agreed to forgo $25,000 of the compensation accrued in the year ended March 31, 2011 and
all of the compensation accrued in the three months ended June 30, 2011. Subject to TSXV approval, War Eagle plans
to issue compensatory warrants in lieu of compensation accrued.

Incentive Plan Awards

War Eagle has no long-term incentive plans other than the Stock Option Plan.
Outstanding Share Based Compensation and Option Based Awards
The following table sets forth information concerning all awards outstanding at the end of the most
recently completed financial year end, March 31, 2011. No options were granted during the financial
year ended March 31, 2011 or since the financial year then ended.
Name

Share-based Awards (3)

Option-based Awards

Option
expiration
date

Value of
unexercised
in-themoney
options
($)(1)(2)

Number of
share or
units of
shares that
have not
vested (#)

Market of
payout value
of sharebased
awards that
have not
vested
($)

$3.00

April 28, 2014

Nil

Nil

Nil

25,000

$3.00

April 28, 2014

Nil

Nil

Nil

22,500

$3.00

March 31, 2012

Nil

Nil

Nil

Number of
securities
underlying
unexercised
options (#)

Option
exercise
price

Anthony Dutton

25,000

Donald Padgett
Terence Schorn
(1)

In-the-money options is calculated on the difference between the market value of the War Eagle Shares underlying
the options at the end of the most recently completed financial year and the exercise price of the options. The last
trading price of the War Eagle Shares on the TSXV as of March 31, 2011 was $0.055 per share ($1.10 postconsolidated).

(2)

All of the options vested on the date they were granted.

55 AC/1463772.11

(3)

War Eagle has not granted any share-based awards.

Incentive Plan Awards Value Vested or Earned During the Year

During the financial year ended March 31, 2011, none of the directors exercised their stock options. The
following table summarizes, for each of the directors, the value of options vested during the year ended
March 31, 2011.
Option-Based
Awards Value
Vested During the
Year
($)

Share-Based Awards
Value Vested During
the Year
($) (2)

Non-Equity Incentive
Plan Compensation
Value Earned During the
Year
($)

Nil (1)

N/A

N/A

Donald Padgett

(1)

Nil

N/A

N/A

Terence Schorn

Nil(1)

N/A

N/A

Anthony Dutton

(1)

All of the options vested on the date they were granted. The options were granted on April 28, 2009. The trading price
of the War Eagle Shares on the most recent trading day before the options were granted was $0.05 ($1.00 postconsolidated) per War Eagle Share.

(2)

War Eagle has not granted any share-based awards.

MANAGEMENT CONTRACTS
Management functions of War Eagle are generally performed by directors and senior officers of War
Eagle and not, to any substantial degree, by any other person.
NON-ARMS LENGTH PARTY TRANSACTION/ARMS LENGTH TRANSACTION
War Eagle has entered into certain Related Party Transactions in the normal course of operations. Such
transactions are measured at the exchange amount, which is the amount of consideration established and
agreed to by the related parties. Please refer to Note 9 of War Eagles audited consolidated financial
statements for the year ended March 31, 2011, are attached as Schedule B to this Circular.
The proposed Amalgamation is an Arms Length Transaction.
LEGAL PROCEEDINGS
There are no actual or pending material legal proceedings to which War Eagle is, or is likely to be, a party
or of which any of its assets is, or is likely to be, subject which is known to War Eagle.
AUDITOR, TRANSFER AGENT AND REGISTRAR
Auditor
War Eagles auditors are MacKay LLP, Chartered Accountants, of 1100-1177 West Hastings Street,
Vancouver, British Columbia V6E 4T5.
Transfer Agent and Registrar
War Eagles transfer agent and registrar is Computershare, 510 Burrard Street, 3rd Floor, Vancouver,
British Columbia, V6C 3B9.

56 AC/1463772.11

MATERIAL CONTRACTS
War Eagle has entered into the following material contracts, other than contracts entered into in the
ordinary course of business:
1.

Letter of Intent

2.

Amalgamation Agreement

Copies of the material contracts described above may be inspected at War Eagles head office at any time
during ordinary business hours and until 30 days after the completion of the Amalgamation.
INFORMATION REGARDING ANDROMEDA
CORPORATE STRUCTURE
Name and Incorporation
Andromeda was incorporated under the OBCA on January 11, 2010.
Andromedas registered and records offices as well as the head office are located at 95 Wellington Street
West, Suite 1200, Toronto, Ontario M5J 2Z9, Ontario.
Intercorporate Relationships
Andromeda has one wholly owned subsidiary, RDM. Under the Terrazas Agreement, RDM and
Andromeda have agreed to purchase the Terrazas Property from MRT.
GENERAL DEVELOPMENT OF THE BUSINESS
History
Andromeda was formed on January 11, 2010 to carry on the business of identifying and acquiring mineral
prospects.
RDM is a Mexican company duly incorporated pursuant to the public instrument number 6,388 dated
February 17, 2010. RDMs business address is Camino Vista del Sol #13, Vista del Sol, Hermosillo
Sonora 83145.
On May 12, 2010, Andromeda and RDM entered into the Terrazas Agreement with MRT to purchase the
Terrazas Property in exchange for aggregate cash payments totalling US$5,000,000, issuance of 75,000
Andromeda Shares and a 2% net smelter royalty as may be modified pursuant to the terms of the Terrazas
Agreement. The Terrazas Agreement was amended on May 31, 2010 and June 6, 2011.
For a description of the material terms of the Terrazas Agreement please see below under Agreements
and Encumbrances.
On September 26, 2011, Andromeda entered into the Letter of Intent with War Eagle, pursuant to which
the parties have agreed, subject to certain conditions, to complete the RTO, which if completed, would
result in the Resulting Issuers listing on the TSXV.

57 AC/1463772.11

NARRATIVE DESCRIPTION OF THE BUSINESS

The Terrazas Property
The full text of the NI 43-101 compliant Terrazas Technical Report has been filed on the SEDAR website
under War Eagles profile at www.sedar.com in conjunction with this Circular. A full copy of the
Terrazas Technical Report may be inspected in the same manner as material contracts. See Information
Concerning War Eagle Material Contracts.
Independent Mining Consultants, Inc. (IMC) (Michael G. Hester, FAusIMM) is the author of the
Terrazas Technical Report. Mr. Hester is a Qualified Person and considered to be independent of
Andromeda and War Eagle as those terms are defined in NI 43-101.
The information below has been extracted in whole or in part from the Terrazas Technical Report and this
Circular incorporates by reference, and is fully qualified by the detailed disclosure contained in the
Terrazas Technical Report which readers are encouraged to review in full.
Property Description and Location
Property Location
The Terrazas Property site is located about 42 km north-northwest of the city of Chihuahua, the capital of
the state of Chihuahua, in northern Mexico (Figure 4-1). It is located about 2 km east of the village of
Terrazas. Approximate coordinates are 28588N latitude, 1061330W longitude.

Figure 4-1. Project Location

58 AC/1463772.11

Land Area and Mining Claim Description

The Terrazas Property consists of seven mineral concessions as follows:
Concession name

Title #

Type

Area
(Hectares)

Granted
Date

Expiration
Date

Terrazas

Title No. 212071

Exploitation

487.00

August 31,
2000

August, 30,
2050

Unificacion Rio Tinto

Title No. 211211

Exploitation

167.12

April 11,
2000

April 10,
2050

RT9

Title No. 212713

Exploitation

9.00

November
22, 2000

November
21, 2050

RT10

Title No. 214282

Exploitation

161.75

September
6, 2001

September
5, 2051

RT11

Title No. 217027

Exploitation

32.89

June 14,
2002

June 13,
2052

RT11

Title No. 220930

Exploitation

387.24

October 28,
2013

October 27,
2053

RT12-2005

Title No. 224877

Exploitation

265-.94

June 21,
2005

June 20,
2055

Figure 4-1 shows the boundary of the mineral concessions. The concession boundaries are surveyed
boundaries. The total land area in the concessions is 1511 hectares.
Mineral concessions in Mexico are considered to be secure mineral tenure. Generally, in Mexico, surface
rights and mineral rights are severed. Mining rights are generally superior to surface rights, but the
surface owner must be compensated for the disturbance or occupation of the land. This is generally
accomplished through a negotiated surface occupation lease or an outright purchase of the land.
Additional surface rights will have to be acquired for the Terrazas Property to proceed to development. In
addition to this, agreements must also be made with surface owners to access the land to carry out
additional work required to evaluate the project, such as drilling, etc.
Agreements and Encumbrances
On May 12, 2010, Andromeda and RDM entered into the Terrazas Agreement with MRT to purchase the
Terrazas Property. The terms of Andromedas purchase of the Terrazas Property from MRT are as
follows:

A cash payment of US$1,000,000 on or before May 31, 2010 (paid);

A cash payment of US$2,000,000 on or before May 12, 2011; and

A cash payment of US$2,000,000 on or before May 12, 2012.

Upon payment of the second cash payment, MRT is to deliver to Andromeda a duly executed transfer of
the Terrazas Property in favour of Andromeda to be held in escrow or trust until the final cash payment to
MRT is completed. Upon payment of the third cash payment (i.e., a payment of an aggregate of
US$5,000,000), Andromeda will be entitled to transfer the Terrazas Property into its name.
Andromeda has also agreed to contribute up to US$20,000,000 to advance the Terrazas Property to an NI
43-101-compliant Feasibility Study within three years of the execution of the Terrazas Agreement. The

59 AC/1463772.11

Terrazas Agreement allows for exceptions for circumstances beyond the control of Andromeda, but in
any case Andromeda shall expend a minimum of US$5,000,000 on Eligible Expenditures during the
first two years of the Terrazas Agreement.
The Terrazas Agreement also states that if the commercial production has not commenced within four
years of the completion of the Feasibility Study, the Terrazas Property could be transferred back to MRT.
This event could be deferred for a year if the zinc price was below a minimum price established in the
Feasibility Study as the price necessary for a 10% post-tax internal rate of return.
Andromeda has also granted to MRT a Net Smelter Return (NSR) Royalty (the Royalty). Upon
Andromeda raising all of the financing required to commence development of the Terrazas Property,
Andromeda is to make a payment to MRT of US$5,000,000, which is considered an advance on the
Royalty. The Royalty rate is defined as 2% of NSR and is reduced 0.1% for every $0.10 decrease in the
zinc price below $1.00 and increased 0.1% for every $0.10 increase in zinc price, up to a maximum rate
of 3% of NSR. Mining and on-site processing costs may not be deducted in calculating the Royalty.
Also, prior to Andromedas third cash payment, MRT has reserved the back-in right option to conduct
mining activities in the Los Bronces area of the deposit (west side of the Main Zone orebody) above the
1530 elevation. To execute this option, MRT must make a payment of US$2,500,000 to Andromeda.
Also, if the designated ores are mined as part of planned open pit detailed in the Feasibility Study, MRT
has the right to purchase those ores from Andromeda for US$2,500,000 plus reimbursement of the mining
costs.
All of the terms described above are from a single contract, the Terrazas Agreement.
The first cash payment of US$1,000,000 was paid to MRT. On June 6, 2011 the Terrazas Agreement was
amended as follows:

The second cash payment of $2,000,000 to be paid on or before September 30, 2011 is extended
to December 15, 2011 subject to Andromeda making an advance payment of $200,000 on or
before September 30, 2011. The advance payment would be credited to the aggregate $2,000,000
due; and
Andromeda is to issue 25,000 common shares of Andromeda to MRT on or prior to September
30, 2011.

All the other terms of the Terrazas Agreement remained the same. It is reported to IMC that the advance
payment of $200,000 was made to MRT and the stock was issued. Note that MRT is the owner of record
of the concessions and will retain the concessions if the terms of the purchase agreement are not fulfilled.
Under the Letter of Intent, War Eagle agreed to advance Andromeda $250,000 to fund a staged
acquisition payment, an updated NI 43-101 report, and incidental expenses to further the Terrazas
Property.
War Eagle entered into a letter of intent with Andromeda in August 2010; however, Andromeda
terminated that letter of intent in December 2010. The terms of the Letter of Intent which was
subsequently entered into are proposed to better satisfy the requirements of prospective investors.
The Letter of Intent was superceded by the Amalgamation Agreement which provides that, among other
things, each Andromeda Share will be exchanged for 6.67 Resulting Issuer Shares (except for the 500,000
Andromeda Shares held by War Eagle which will be cancelled without the repayment of capital in respect
thereof) and each Andromeda Warrant will be exchanged for 6.67 Replacement Warrants, each Broker
Option will be exchanged for 6.67 Replacement Broker Options and each Work Fee Warrant will be
exchanged for 6.67 Replacement Work Fee Warrants. On completion of the Amalgamation and assuming
60 AC/1463772.11

the maximum Equity Financing is completed, the current shareholders of War Eagle would own
approximately 16.5% of the Resulting Issuer versus approximately 83.5% for the Andromeda
Shareholders, i.e. the arrangement constitutes a RTO.
Completion of the Amalgamation is conditional upon receipt of regulatory and shareholder approval and
the completion of the Equity Financing to raise gross proceeds of at least $7,000,000. The Equity
Financing is anticipated to be comprised of Andromeda Units at an issue price of $3.00 per Andromeda
Unit. Each Andromeda Unit will contain one Andromeda Share and one-half of one Andromeda Warrant.
Each Andromeda Warrant will be exercisable into one Andromeda Share at an exercise price of $4.00 per
Andromeda Share for a period of 24 months. Andromeda securities issued pursuant to the Equity
Financing will be exchanged for securities of War Eagle pursuant to the RTO on the basis of the same
exchange ratio as will be used for current Andromeda Shareholders and the exercise price of the
Replacement Warrants will be adjusted accordingly.
Under the Equity Financing, Andromeda will pay a cash commission of 8% of the gross proceeds of the
Equity Financing and issue such number of Broker Options as is equal to 8% of the number of
Andromeda Units issued pursuant to the Equity Financing. Andromeda has also agreed to pay Union
Securities Ltd. a work fee of $25,000 (plus taxes) in cash and to issue to Union Securities Ltd. 25,000
Work Fee Units.
Each Broker Option will be exchanged for 6.67 Replacement Broker Options, each of which will, in turn,
be exercisable into one Replacement Broker Unit at an adjusted exercise price of $0.45 per Replacement
Broker Unit for a period of 24 months from the Closing Date. Each Replacement Broker Unit will be
comprised of one Resulting Issuer Share and one-half of one Replacement Broker Warrant. Each
Replacement Broker Warrant will be exercisable into one additional Resulting Issuer Share at an adjusted
exercise price of $0.60 per Resulting Issuer Share for a period of 24 months from the Closing Date.
Each Andromeda Share and Work Fee Warrant issued as part of the Work Fee Units will be exchanged
for 6.67 Resulting Issuer Shares and 6.67 Replacement Work Fee Warrants, respectively. Each
Replacement Work Fee Warrants will be exercisable into one additional Resulting Issuer Share at an
adjusted exercise price of $0.60 per Resulting Issuer Share for a period of 24 months from the Closing
Date.
Andromeda and War Eagle will enter into an agency agreement with the Brokers prior to the Closing
Date. Under the agency agreement, War Eagle will grant a right of first refusal to Union Securities Ltd.,
allowing Union Securities Ltd. the right to act as agent for the Resulting Issuer for any financing
undertaken by the Resulting Issuer for a period of twelve months from the Closing Date.
A couple of the concessions, RT-11 (220930) and Terrazas (212071) were formerly held by Minera
Terrazas, S.A. de C.V. (Minera Terrazas), a Constellation Copper Corporation (Constellation)
subsidiary. During July 2010 these concessions were transferred to MRT, as per a former agreement
between Constellation and MRT.
During the Constellation tenure Constellation had a purchase
agreement with MRT (the Constellation Agreement), the concession owner of record. The
Constellation Agreement provided Constellation the option of purchasing the MRT concessions for
US$3,000,000 plus a 1.5% to 2.0% royalty on production. This Constellation Agreement expired in 2007
with MRT retaining possession of the concessions. Minera Terrazas does not have any back-in rights to
the concessions transferred to MRT.
On December 28, 2010 Andromeda entered into an agreement with Mr. Efren Gonzalez to purchase 50
hectares of land (surface rights) over the Cerro Verde deposit area (the Efren Gonzalez Land).
Graduated payments of US$400,000 are to be made as shown on the following table, with a bonus of
$50,000 at the start of production.

61 AC/1463772.11

Amount (US$)

Date

Status

12,000

July 2010

Done

18,000

December 2010

Done

25,000

June 2011

Done

35,000

December 2011

35,000

June 2012

60,000

December 2012

60,000

June 2013

70,000

December 2013

85,000

June 2014

Subtotal: 400,000
Bonus of 50,000 once production starts

IMC does not know of any other agreements or encumbrances on the Terrazas Property. As mentioned
above, additional agreements will be required with surface rights holders for the Terrazas Property to be
developed.
IMC is also not aware of any existing environmental liabilities to which the Terrazas Property is subject.

Figure 4-2. Mineral Concession Boundary (Andromeda, September 2010)

62 AC/1463772.11

Permit Status
To IMCs knowledge, there has not been any activity on the Terrazas Property since the 2006 drilling
program, so it is not expected that there are any active permits. Andromeda will require a permit from the
Mexican government environmental agency, SEMARNAT, to conduct the sampling and other work
proposed by Andromeda. Andromeda will also need executed agreements with local surface owners to
access the land to perform work.
Other Land Issues
The severing of surface and mineral rights means that there is the potential for others to retain mineral
rights on land that the Terrazas Property requires for surface facilities. Several condemnation holes drilled
in 2004 and 2005 demonstrate the non-mineral character of the land where some important infrastructure
might be located.
Securing the necessary surface rights to develop the Terrazas Property is a significant factor and is a
source of project risk. This is however, typical of almost all projects in Mexico. In addition to the Efren
Gonzalez Land that is under purchase contract, additional surface rights will be required to develop the
Terrazas Property.
Also, it should be noted that the landowners of interest are individual property owners; there is no
communal property, i.e. ejido land required to develop the project.
Accessibility, Climate, Local Resources, Infrastructure and Physiography
Accessibility
The Terrazas Property is readily accessible via a divided four lane highway (Federal Highway 45D). The
site is 42 km north-northwest of the city of Chihuahua and 320 km south of Juarez City and El Paso,
Texas. The site is connected to the main road via about 4 km of dirt road that also goes through the nearby
village of Terrazas.
Climate
The climate is high desert, generally arid and generally not subject to freezing conditions. Winter low
temperatures tend to average 2 to 5C and summer high temperatures tend to average 28 to 33C. Average
annual rainfall is about 45 centimeters with the majority of this during a July through September
monsoon season. The Terrazas Property will be amenable to year-round operations. The most difficult
weather condition will likely be occasional, short term, flooding due to severe summer thunderstorms.
Local Resources
The population of Chihuahua, the capital of the state of Chihuahua, is about one million. This includes an
abundance of available and qualified labour in the area. There is also an ample base of service providers
in Chihuahua, Juarez, and El Paso to support heavy industry.
Northern Mexico in general has a well-established mining industry so there is an established network of
vendors of heavy equipment, fuel, tires, explosives, etc.

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Infrastructure
In addition to the major road discussed above, there is an active existing rail line, owned by Ferrocarril
Mexicana. It runs between Chihuahua and El Paso and is right next to the project site, running parallel to
the highway.
There are also several existing power lines near the Terrazas Property. One of them will have to be
relocated for the project.
Water is also abundant in the area. A significant water main, servicing Chihuahua, runs through the
property. The source of the water for this system is limestone caverns located near the site. The karsted
limestone geology in the project area generally makes for productive production of groundwater from
wells.
Preliminary site layouts indicate that there is sufficient land in the vicinity available to support the
required infrastructure such as the plant, and mine waste storage areas and spent ore (or tailings) storage
areas. However, negotiations still have to be conducted with some surface owners to secure rights to these
lands.
Physiography
The Terrazas Property is located on the eastern flanks of a valley in an area with a local relief of about
200 meters or less, ranging from about 1,600 meters in the valley floor up to about 1,800 meters at the top
of the generally isolated hills and ranges. The vegetation in the area is quite sparse but consists of range
grass along with scattered cacti and other shrubs with occasional Mesquite trees.
History
The following is excerpted from the report Technical Report for the Terrazas Copper Zinc Project
Chihuahua, Mexico by Gary Parkison, dated September 2005, for Constellation. IMC believes the
information to be accurate.
The Terrazas or Rio Tinto copper-zinc deposit has been exploited since the late 1800s, but the main
period of historical activity was from about 1904 to 1916. Operations during this time frame account for
nearly all of the past production from the property, estimated at 250,000 tonnes grading about 2.5%
copper. The property has been developed by about 10 shafts, of up to about 75 to 100 meters depth. There
are at least 2,500 meters of underground drifting, much of which is still accessible, and an undetermined
amount of inaccessible production stopes. During this main production period, the mines supported two
smelters located adjacent to the mines and connected by a small rail line. The smelters directly treated
the oxidized copper ore, but did not attempt to recover zinc.
In the early 1970s about 100,000 tonnes of low grade copper ore were mined from several open cuts and
processed in open vats with copper extracted by iron precipitation.
Modern exploration of the property was initiated in 1957 when ASARCO, Inc. performed mapping and
sampling and drilled 28 core holes. They dropped the property in 1958, and it remained idle until 1976
when Minas Frisco drilled four rotary holes before they dropped their interest. Exploration did not
resume on the property until Canadian junior Swannel Minerals optioned the property from the current
owner in 1994 and performed an extensive amount of mapping and sampling, and drilled 16 reverse
circulation holes. Swannel dropped the property in 1996, but another junior, Newcoast Silver Mines
picked up the option, in 1997. Newcoast drilled 7 core holes in 1998, but dropped the property in 1999
due to low prevailing commodity prices.

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Summo acquired an option on the property in early 2000 and drilled 34 reverse circulation holes as well
as performing extensive investigations into the geology, mineralization, metallurgy and processing, and
preliminary economics of a proposed copper-zinc operation.
During 2001, Summo Minerals Corporation (Summo) retained Jacobs Engineering to conduct a
Prefeasibility Study of the Terrazas Property. IMC was retained to work on the resource modeling and
mining portions of that study. The study was based on open pit mining and conventional heap leaching of
crushed ore. Copper metal was to be extracted by solvent extraction and electrowinning. Zinc metal
powder was to be extracted by direct electrowinning. The study, completed during February 2002,
indicated the technical viability of the project, i.e. the ability to produce marketable copper and zinc. The
project was shelved due to low prevailing commodity prices at that time. The historic mineral reserve
developed by that study is not relevant. It was not an NI 43-101 compliant mineral reserve, it did not
include the high zinc Cerro Verde area, and it was based on processing by heap leaching, a process that
later studies discredited as a viable processing option for Terrazas.
Summo changed its name to Constellation Copper Corporation in 2003. In May 2004, Constellation
initiated additional drilling activities at the Terrazas site. During 2004 and early 2005, 25 core holes
totaling 4,541meters, 119 reverse circulation holes totaling 17,960 meters, and 12 condemnation holes
totaling 1,494 meters were drilled. Much of this additional drilling was in the newly discovered, high
zinc, Cerro Verde extension of the deposit. Additional metallurgical work was also initiated in 2004 and
continued into 2006.
During early 2005, Constellation retained M3 Engineering to commence work on a feasibility study of the
project. IMC was retained to develop the resource model and mine design in support of this study. A
resource model and mineral resource estimate was completed in August 2005 and an NI 43-101 technical
report was published, dated November 17, 2005. This technical report is available on SEDAR. The
mineral resource developed is not materially different than the current mineral resource.
The M3 Feasibility Study was to be based on bulk open pit mining and processing by heap leaching. The
study was not completed as on-going column leach tests tended to plug and hamper solution flow.
During 2006 nine additional holes were drilled. Three of these were for geotechnical investigations and
six were to test deep, high grade, Cerro Verde resource that was classified as inferred mineral resource in
the 2005 model. Work on the Terrazas Property was suspended before these holes could be incorporated
into an updated resource model. Constellation went into bankruptcy and the ownership of the mining
concessions remained with MRT since the purchase agreement was not completed.
In May 2010, Andromeda entered into a purchase agreement to acquire the Terrazas mining concessions
from MRT. During July 2010 they requested IMC to update the mineral resource model by incorporating
the 2006 drilling and provide an updated NI 43-101 technical report. This work was completed during
September 2010.
Geology Setting
Regional Geology
The Terrazas area lies along the northwest trending zone that separates the Laramide-aged Mexican
Thrust Belt to the east and the Tertiary volcanic plateau of the Sierra Madre Occidental to the west. More
locally, the Terrazas deposit lies within the western margin of the Chihuahua Tectonic Belt, the northnorthwest trending and northernmost portion of the Mexican Thrust Belt. Here, a thick section of
evaporates, black limey shales and limestones accumulated in a subsiding trough during mostly
Cretaceous time. Laramide-aged, compressional deformation affected the sediments in the trough and

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resulted in thin-skinned folding and thrust faulting of the sedimentary package. Tertiary volcanism in the
Sierra Madre Occidental commenced towards the end of this deformational event.
Following the Laramide deformation event, the area was uplifted and subject to considerable erosion and
related karst type dissolution along with the onset of local volcanic activity. Part of the eroded material,
comprised of both limestone and volcanic fragments, accumulated in contemporaneously forming basins.
Middle Tertiary igneous activity continued giving rise to numerous intrusive and extrusive features
throughout the area to the east of the Sierra Madre Occidental, including Terrazas. Starting about 30
million years ago, the area was involved with northeast-southwest directed extension related to the
formation of the Mexican portion of the Basin and Range Province. This extension may have resulted in
the reactivation of some of the earlier compression-related low angle faults, and local volcanic-related
features. The large El Sauz-Encinillas Basin just to the west of Terrazas is likely a fault-bounded feature
related to Basin and Range extension.
Local Geology
Lithology
Rock units exposed at Terrazas range in age from Cretaceous to Quaternary and with the exception of the
Quaternary units, have been subject to variable degrees of structural deformation, alteration and
mineralization. These features will be described in some detail in the following sections.
The oldest rock units exposed at Terrazas are part of a Cretaceous sedimentary sequence that has been
divided into three different formations. From oldest to youngest, they are the Finlay Limestone, the
Benavides Shale and the Loma de Plata Limestone.
The Finlay Limestone (Kf) is the most widespread of the Cretaceous units in the Terrazas area. In this
area, the Finlay is typically a gray, medium to thick bedded or massive micritic limestone with local
accumulations of shell fragments. Black chert nodules are fairly common along with a few shaley layers
that become more prominent towards the upper contact with the Benavides Shale. Through most of the
area, the top of the Finlay has been eroded off, and the base of the unit is not exposed, but the exposed
thickness of the unit is likely several hundred meters. It is the most widespread host rock to mineralization
and is altered to skarn and marble in the deposit area.
The Benavides Shale, unit Kb, overlies the Finlay with a gradational contact with the contact normally
defined at the base of the first thick shale layer. The upper contact with the overlying Loma de Plata
Limestone is also gradational, as the predominant dark shale gives way to progressively more limestone.
The upper and lower contacts of the unit have often localized low angle faults, but the preserved thickness
in the Terrazas area is perhaps 50 meters. The Benavides is not known to host any significant
mineralization.
The Loma de Plata Limestone, unit Kpl, consists of thin to medium bedded micritic and shaly limestone.
It is typically gray, pink or orange in color and may be from 20 to 100 meters thick in the Terrazas area.
The Loma de Plata is also not known to host any significant mineralization.
Uplift and erosion of the Cretaceous strata described above resulted in an uneven erosion surface
developed on top of the limestone, with local relief on the contact to several tens of meters. Dissolution
and karst related features, including laminated void infilling deposits, document this period of subaerial
exposure.
A depositional contact separates the underlying Cretaceous units from an overlying Tertiary age unit of
conglomerate and sedimentary breccia, herein referred to as the Tinto Conglomerate, unit Tc. The Tinto
Conglomerate is at least 75 meters thick in the Terrazas area and is an important host rock to
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mineralization and is often altered to skarn and marble. The conglomerate is widely exposed on the flanks
of Cerro La Gloria and Cerro La Verde and to the north, and is generally similar to other conglomerate
deposits in this part of Chihuahua. The conglomerate is typically matrix supported, with about 50 percent
clasts and 50 percent matrix on average. The matrix is typically sand sized while the subrounded to
angular clasts are often in the range of two to five centimeters, but can be up to several meters in size. The
conglomerate is generally massive to crudely bedded. Locally it is comprised mostly of sand sized
particles which can be distinctly bedded and show cut and fill and cross-bedding textures. Clast
compositions are predominantly limestone and igneous, mostly rhyolitic, in nature with a general
decrease in the proportion of limestone clasts higher in the section. Where not converted to skarn, the
limestone or marble clasts typically weather to a distinctive negative relief in exposures of conglomerate.
There are a large number of somewhat distinct igneous rock types present in and around the Terrazas area
that are most likely Tertiary in age but can be both intrusive and extrusive in nature. For the sake of
simplicity, a distinction will be made here between the monzonite, unit Tm, which both underlies the
mineralized skarn and outcrops to the south at Cerro La Cruz, and all the other igneous rocks. The
monzonite is typically in fault contact with the overlying skarn and does not appear to be genetically
related to it. It is typically altered in close proximity to the fault, but is essentially unaltered elsewhere,
and only locally on the hillside west of Cerro La Cruz does it show any endoskarn type of alteration. It is
generally fine to medium grained with sparse phenocrysts and is white to gray in color.
The other igneous rocks have been lumped together as unit Tr (Tertiary Rhyolite), but are characterized
by a wide variety of compositions and textures which probably represent several distinctly different
periods of intrusive and extrusive activity, likely related to recurring activity along a major structural
zone. Plutonic intrusions dominate in the northern part of the area, mostly north of Cerro La Gloria, where
remnant conglomerate has largely been converted to garnet skarn but which is barren of metal values.
These plutonic rocks could be related to the monzonite (unit Tm). Numerous high angle, generally eastwest trending dikes are present in the south and east part of the area, where they intrude along preexisting faults and are strongly porphyritic. Dikes closer to Cerro La Gloria and Cerro La Verde are
generally rhyolitic as described below.
The rhyolitic rocks that underlie both Cerro La Gloria and Cerro La Verde, and outcrop extensively in the
northern part of the deposit area, show a wide variety of textures, fabrics and alteration types. The
rhyolitic rocks appear to be both intrusive and extrusive in nature and to encompass multiple phases that
may be related. Most of the rhyolite in the area of Cerro La Verde appears to be part of a flow or flows,
while the rhyolite closer to Cerro La Gloria seems to mostly be intrusive in nature. Flow-banding, flow
breccias and intrusive breccias are all associated with most rhyolite outcrops, along with silicification,
local clay alteration, and the introduction of fine grained pyrite. Along the south side of Cerro La Gloria,
rhyolite appears to have intruded along a pre-existing fault and is in contact with earlier formed
mineralized skarn. In this same area, rhyolite has intruded mineralized skarn as noted both in surface
exposures and in drilling, suggesting that at least some of the rhyolite is younger than skarn formation. In
the area of Cerro La Verde there are zones where the rhyolite has clearly intruded and engulfed what are
relatively unaltered marble clasts. The age of the rhyolite units appears to bracket the age of the skarn
formation and mineralization as there are unskarnified fragments of rhyolite in the Tinto Conglomerate,
and it is clear that some rhyolite cuts mineralized skarn. Nevertheless, it is a phase or phases of the
rhyolite which appears to be most closely related in time and space to the formation of the skarn and the
copper and zinc mineralization.
Quaternary aged rock units include unconsolidated alluvium that is present in the intermittent stream
drainages as well as local deposits of caliche-cemented coluvium on some of the hillsides. Rock units of
recent age include dumps of waste rock generally associated with the old underground and more recent
open cut mine workings and the slag deposit associated with the old smelters at the site.

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Figure 7-1 shows the relatively simplified surface geology, as captured in the current resource model.
The relatively un-mineralized limestone/marble/shale units discussed above make up the
limestone/marble rock type on the figure. Figure 7-2 is a cross section through Main Zone, Figure 7-3 is
a cross section through Cerro Verde, and Figure 7-4 is a long section through both deposit areas. Figure
10-1, under drilling, shows the location of these sections.

68 AC/1463772.11

Figure 7-2. Geologic Cross Section 350 Main Zone Looking NE (IMC, October 2011)
(See Figure 10-1 for Index Map)

Figure 7-3. Geologic Cross Section 850 Cerro Verde Looking NE (IMC, October 2011)

69 AC/1463772.11

Figure 7-4. Geologic Long Section 100 Looking NW (IMC, October 2011)

Structure
The Terrazas area is complexly faulted and contains both low angle and high angle faults. The low angle
faults typically are found within or along the margins of the Cretaceous-age formations, with the contacts
between the Loma de Plata, Benavides and Finlay Formations all being low angle normal faults. These
faults typically have dips of from 10 to 40 degrees, and most often strike east-west. This group of faults
also includes the fault contact between the skarnified Finlay and the underlying monzonite, hereafter
referred to as the Terrazas Fault. This fault underlies and cuts off the mineralization in the main deposit at
depth, but has not been noted to underlie the mineralization in the Cerro la Verde area. High angle faults
generally trend north-northwest and west-southwest and appear to cut all of the Tertiary and older rock
units. The Verde and Bronce Faults, both of which dip steeply to moderately to the east, typify the north
trending faults. The Verde Fault has about 200 meters or so of down to the east displacement, while the
Bronce has a down to the west displacement of maybe 10 meters or less. The east-west trending faults are
often occupied by monzonite-type or rhyolitic dikes, including the fault which separates skarn and
rhyolite to the west of Cerro La Gloria. Multiple periods of movement along these high angle faults are
indicated by the localization of dikes along them, which themselves were later brecciated.
Folding of the Cretaceous units is locally significant but is often difficult to discern owing to the thickbedded nature of the widespread Finlay Limestone and fact that much of the Finlay in the deposit area has
been converted to skarn. Where folding can be discerned, the Finlay is generally broadly folded along
generally north-south axes, while the thinner bedded and less competent rock units are sometimes
isoclinally folded. Folding clearly appears to pre-date the skarn forming event.
There were at least four distinct periods of carbonate dissolution or karsting in the Terrazas area. The
earliest was developed during surface exposure of the Cretaceous units prior to and during the deposition
of the Tertiary Tinto Conglomerate. Next was a period that appears to be contemporaneous with the
development of the skarn and the related introduction of the sulfide mineralization, which can be referred
to as hydrothermal karsting. This period resulted in the development of both open voids as well as
voids filled with karst-related collapse breccias. Many of the areas of breccia development have been
thoroughly converted to skarn with relict breccia texture. During active oxidation of the deposit, many of
the areas subject to hydrothermal karsting were further subjected to renewed dissolution, particularly in

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areas with extensive sulfide mineralization. More recent carbonate dissolution is noted underground
where a large cavern has been developed along the Verde Fault, along with active cave formations.
Alteration
Alteration in the carbonate-bearing rocks is quite extensive and comprises both recrystallization and the
formation of marble as well as the generation of skarn. The marble is generally peripheral to the areas of
skarn development, and has affected the Finlay and Loma de Plata Formations, as well as the carbonaterich portions of the Tinto Conglomerate. Marblization preceded, but was likely associated with, the
formation of the skarn. Other less significant types of alteration common to skarn and carbonate
replacement type deposits in northern Mexico and found in the Terrazas area include dolomitization,
silicification, and local manganese oxide enrichment.
Essentially all of the copper and zinc mineralization at Terrazas is hosted in skarn that is developed within
the Finlay Limestone and the Tinto Conglomerate. Significantly, skarn development has not been noted in
any of the rhyolite units. The skarn has essentially totally replaced the minerals present in the precursor
rock type with those characteristic of skarn (garnet, quartz, pyroxene) and generally obliterated the
original texture so that it is hard to distinguish skarned Tinto Conglomerate from skarned Finlay
Limestone. Most skarn is fine to medium grained, with the extremely fine-grained zones referred to as
hornfels. The variations in sulfide content, grain size of the garnets and the development of hornfels
appear to be related to specific beds in the original rock. Locally the skarn exhibits a brecciated texture
that based on its cohesive nature appears to have been developed pre- or intra-skarn formation. Largely
based on the mineralogy of the skarn, comprised of mostly andradite garnet (Ca,Fe) with some grossular
garnet (Ca,Al) along with lesser quartz, calcite, iron oxides and clays, the skarn has undergone minor to
moderate amounts of retrograde alteration. Some of the calcite is likely a retrograde product, while the
iron oxides and clays likely developed from near surface oxidation.
Two areas of potentially economically significant skarn alteration are present at Terrazas, one forming a
semicircle to the south of Cerro La Gloria, referred to as the Main Zone deposit area, while a smaller area
is centered on Cerro La Verde, which lies to the east of the Verde Fault. The two areas of skarn could
merge at depth and be part of the same mineralizing system. Within the area shown as skarn, skarn
development is generally more pervasive towards the interior of the zones. Towards the margins of the
skarn there is generally a transition zone to marble alteration that in turn has a somewhat gradational
contact into unaltered limestone. The contact zone between the skarn and the marble, often referred to as
the marble front, is often quite erratic in detail with skarn alteration preferentially developed along
certain beds or structures which sometimes give rise to patchy skarn developed in marble and remnant
marble masses in skarn. The contact itself is generally quite sharp from skarn to marble or vice versa,
with a transition zone ranging from a few centimeters to a few meters. While the skarn development in
the main deposit is cut-off at depth by the Terrazas Fault, the skarn development at Cerro La Verde is
known by drilling to extend to a depth of more than 400 meters below surface, and appears in gross form
as similar to a mushroom. The south side of this skarn body is a nearly vertical contact with marble, while
the northern side is defined by the somewhat irregular contacts of intrusive rhyolite.
Alteration in the non-carbonate rocks is restricted to the monzonite and the various rhyolitic rocks.
Argillic alteration with the development of clay has affected the monzonite, especially near the fault
contact with the skarn. Some argillic alteration has also affected the rhyolitic rocks. Moderate to
pervasive silicification with the introduction of fine-grained pyrite is common in the various rhyolite
bodies in the area around Cerro La Gloria and Cerro La Verde. Much of the pyrite has been oxidized to
iron oxides.

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Paragenesis
The deposition of the various carbonate sequences in the Terrazas area was followed by the development
of low angle faults and subaerial erosion. This erosion was likely related to uplift which led to the
deposition of the locally derived Tinto Conglomerate in adjacent basins. Skarn formation followed and
was likely contemporaneous with the development of peripheral marble and recrystallized carbonate, with
all features likely related to the sequence of rhyolitic intrusive and extrusive rocks exposed on Cerro La
Gloria and Cerro La Verde. The prograde formation of the skarn included the introduction of silica and
iron along with increased heat and temperature supplied by the rhyolite. The elongate northeast-trending
development of the skarn bodies and the common occurrence of rhyolite intruding marble, and not skarn,
in the area of Cerro La Gloria suggest that the actual heat source which gave rise to the skarn is likely not
exposed and resides at depth. With the demise of the skarn-forming environment, retrograde alteration
affected the area that was accompanied by brecciation, the formation of solution collapse features and the
introduction of sulfide minerals.
Oxidation of the sulfide minerals resulted in limited redistribution of the copper and zinc grades and was
likely accompanied by continued low angle faulting and rhyolitic volcanic activity. Contemporaneous
with the onset of the regional Basin and Range tectonic regime, the Terrazas area was subjected to a final
period of uplift, solution-related features and oxidation along with the development of several high angle,
north-trending faults. It is likely that the skarn at Cerro La Verde is the down-faulted offset of skarn
which was originally part of the main deposit area until cut by the Verde Fault. Most of the displacement
along the Verde and Terrazas Faults likely occurred after much of the oxidation was already complete.
There has locally been continued dissolution along these faults.
Based on the overall geologic setting and the information from a single drill hole in the central part of the
deposit which penetrated through the monzonite "floor" of the deposit, there is the possibility of
additional skarn-related sulfide mineralization at depths of 100 meters or more below the base of the
known mineralization in the main deposit area. This suggests that the monzonite that underlies the
Terrazas deposit may be a fault-bounded intrusive sill and/or tectonic slice which could have separated
a larger, once contiguous skarn body into two parts, with the upper, exposed, part of the skarn being
subjected to oxidation and possible future exploitation.
Mineralization
Copper and zinc mineralization at Terrazas took place over several episodes and comprises both the
introduction of the original copper and zinc bearing sulfide minerals as well as a subsequent oxidation
stage. Based on the study of thin sections, the introduction of the sulfide minerals appears to have
followed the main period of skarn formation and be closely related to the formation of vugs and
retrograde alteration. The sulfide minerals pyrite, chalcopyrite and sphalerite all appear to have been
deposited broadly contemporaneously but not in equal proportions.
Discounting for the moment the remobilization of the copper and zinc during oxidation, the common noncoincidence of the grades for each of the metals suggests different source fluids, depositional controls
and/or somewhat different timing over the deposition of the two metals. The sulfide minerals are often
found in fractures and lining vugs as well as other features thought to be associated with brecciation and
volume reduction related to the change from a carbonate rock to mostly skarn and/or retrograde related
dissolution of remnant carbonate. Sulfides have also been noted replacing skarn-related minerals,
primarily garnet. As is common for many mineralized skarns, the highest metal grades are often
concentrated in close proximity to the transition from skarn to marble (the marble line or marble front). At
Terrazas, this seems to be particularly true for copper, and hence was a locus for the past underground and
surface production areas. Higher zinc grades are, for the most part, well inboard from the marble front.

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Associated with the marble front mineralization (oxide or sulfide) is often very coarse-grained, sparrytype yellow to black calcite that appears to be filling voids or vugs.
Thick, high-grade intercepts of zinc oxide mineralization (+150 meters grading greater than 5% zinc)
have been noted in the Cerro La Verde area. These zinc grades are much higher than the average for the
remainder of the deposit, but the mineralogy consists of the same zinc oxide species found elsewhere in
the deposit. In contrast to the high zinc grades, the copper grades are somewhat less than the average for
the deposit.
Oxidation has been quite pervasive at Terrazas with a large suite of copper and zinc oxide minerals
recognized. Remnant sulfides are noted locally, generally associated with massive, fine-grained, tight
skarn zones that have prevented the ingress of oxidizing conditions. These un-oxidized zones are minor in
extent and dispersed through the deposit, do not appear to be strictly depth-related and are often
surrounded by well-oxidized areas. The most thoroughly oxidized zones are often associated with the
occurrence of significant iron oxides and proximity to open dissolution type cavities and fault and breccia
zones. For the Main Zone deposit, oxidation extends down to the Terrazas Fault, or to a depth of about
130 meters, slightly below the current water table. In contrast, thorough oxidation at Cerro La Verde
extends to a depth of nearly 400 meters, some 200 meters or so below the current water table. There was
likely not an extensive amount of re-mobilization of the copper and zinc during oxidation as the
abundance of carbonate in the system would have prohibited the development of the low pH conditions
necessary for extensive remobilization. There has only been very limited migration of copper, and lesser
zinc, from the mineralized skarn into immediately adjacent rhyolite and monzonite.
Common copper oxide minerals noted are malachite, chrysocolla and tenorite as well as the secondary
sulfide chalcocite. The copper oxides are commonly along fractures and rimming clasts and/or grains.
Common zinc oxide minerals include hemimorphite, willemite, smithsonite, and zinc-bearing clay, with
lesser aurichalcite and rosasite. In contrast to the quite discernable copper oxides, areas of even highgrade zinc oxide mineralization (>5 percent) are quite subtle and most commonly noted as areas with
abundant to pervasive orange to brick red color iron oxides. Scanning Electron Microscope work
conducted by DCM Science Lab of Denver has also demonstrated that much of the iron oxides contains
from 1 to 5 percent copper and zinc.
Based on the underground exposures and drilling, there are numerous open voids within the skarn that
have been filled with earthy iron oxides (limonite, goethite, and hematite) as well as others that have been
filled by coarse calcite. These voids are thought to represent areas that had not been thoroughly replaced
by skarn and where the remnant carbonate was later dissolved and/or recrystallized with the resultant
voids localizing the deposition of mobile iron related to oxidation.
Deposit Types
The Terrazas deposit is one of a number of carbonate-hosted skarn or replacement Pb-Zn-Cu-Ag-Au
deposits within the northern part of the Chihuahua Trough that share many common characteristics. Most
of these deposits have some association with intrusive or subvolcanic stocks, dikes or sills and include the
large deposits at Naica and Santa Eulalia to the south of Chihuahua City.
Exploration
Other than drilling, there has not been any relevant exploration work conducted at the Terrazas Property,
especially on behalf of Andromeda. The Terrazas Property is well exposed at the surface and there was
small scale mining conducted from the late 1800s to about 1916.

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Modern exploration of the Terrazas Property was initiated in the mid-1950s with a drilling program by
Asarco. To IMCs knowledge, no geophysical or geochemical surveys have been performed in the
immediate area of the project.
During 1994-1995 Swannel Minerals Corporation (Swannel) conducted extensive chip sampling in
existing underground stopes and adits, but this data is not used in the current mineral resource calculation.
Drilling
Table 10-1 summarizes the drilling and sampling programs completed to date for the Terrazas Property. It
can be seen that the entire drilling database amounts to 264 drillholes and 41,010 meters of drilling, of
which 34,876 meters was assayed for at least total copper.
The most recent drilling is the Constellation 2006 drilling, which amounted to 9 holes and 2,956 meters of
drilling. It can be seen that only 1,420 meters was assayed. Six of the holes targeted deep Cerro Verde
resource that was classified as inferred resource in IMCs 2005 resource model. Much of this drilling was
in relatively sterile rhyolite and marble and was not assayed. The other three of the Constellation 2006
holes were drilled for the slope stability study. There were also three water wells drilled within the
orebody limits as part of the 2006 drilling. These were RC holes and were assayed for total copper and
total zinc, but it was reported to IMC that the sampling procedures were sub-standard, so the holes were
not included for this resource update.
Table 10-1 shows the Frisco sampling was conventional rotary drilling and the average sample length was
35m. It is suspected that this actually reflects a compositing of smaller sample intervals. Due to this large
sampling interval, the Frisco data was not used for resource modeling.
Studies conducted during the 2002 preliminary feasibility study and re-confirmed by IMCs 2005 work
indicate that the Swannel underground samples are biased high compared with nearby drilling data. The
Swannel underground samples were also excluded from consideration for current resource modeling.
Table 10-2 summarizes the drilling and sampling data used for current resource modeling. Compared to
Table 10-1, the Frisco, Swannel underground, and Constellation condemnation drilling is removed. This
shows the data available for resource modeling to be 238 drillholes and 37,155 meters of drilling. Of this,
32,516 meters have been assayed for at least total copper.
The database includes assay values for total copper, total zinc, acid soluble copper, acid soluble zinc, and
acid consumption. Table 10-3 summarizes the total meters assays for each assay by drilling campaign.
Only the campaigns used in resource modeling are included. It can be seen that total copper and total zinc
assaying was fairly complete at 87.5% and 80.9% of the total meters drilled respectively.
It can be seen that the soluble copper, soluble zinc, and acid consumption values are somewhat undersampled in the database. Summo and Constellation assayed for soluble copper and soluble zinc when the
total copper/zinc values were over about 0.1%.
It was reported to IMC that the acid soluble zinc and acid consumption assays for the Swannel RC
drilling were done by Summo.
Figure 10-1 shows a hole location map, highlighted by drilling campaign, for the holes used in this study.
The Asarco core holes (28 holes) include 25 vertical holes and three angle holes. The database does not
include detailed downhole survey information, so the presumed bearing and plunge of the angle holes are
recorded in the database.

74 AC/1463772.11

The Swannel RC holes (16 holes) include 13 vertical holes and three angle holes. Again, detailed
downhole survey information is not available and the presumed orientations of the angle holes are
recorded in the database.
The seven Newcoast Silver Mines (Newcoast) core holes are all vertical holes. Again, downhole
surveys are not available for these holes.
The 34 Summo RC holes include 17 vertical and 17 angle holes. The angle holes are all inclined at 60
degrees. Downhole surveys were not done for the Summo drilling.
For the 119 Constellation RC holes, 94 are vertical and 25 angle holes. One of these holes, MT05-02 has
detailed downhole survey information; for the rest of the holes, presumed orientations of the holes are
recorded in the database.
Of the 34 Constellation core holes, 20 are angle holes and 14 vertical. Downhole surveys were started for
the late 2004 drilling and continued for the 2005 and 2006 drilling, so about 23 of these holes have
detailed downhole orientation surveys. Holes without detailed surveys include three of the angle holes. A
review of the detailed downhole survey information indicates only very small deviations of no more than
a couple degrees in bearing and plunge from initial orientation for the angle core holes.
In the Main Zone the mineralization is relatively flat lying, so the sample length of the vertical holes is
reflective of true mineralization thickness. In Cerro Verde, however, sample length should not be relied
on to provide accurate estimates of mineralized length. The orientation of Cerro Verde mineralization is
not well known, but appears to be relatively steeply dipping. The 3D modeling should be used to estimate
mineralized thickness.
Table 10-1: Summary of Drilling and Sampling Programs
No. of
No. of
Company
Year
Type
Size
Holes
Intervals
Asarco
1956-57
Core
NX,BX,AX
28
1,577
Frisco
1976
Rotary
?
4
31
Swannel
1994-95
RC
13.3 cm
16
925
Swannel
1994-95 UG chips
N.A.
10
264
Newcoast
1998
Core
HQ,NQ,BTW
7
341
Summo
2000
RC
12.1 cm
34
1,488
Constellation 2004-05
Core
NC,NX
25
1,354
Constellation 2004-05
RC
13.3,12.4cm
119
5,921
Constellation 2005-05 Condem
12
39
Constellation
2006
Core
NC,NX
9
532
TOTAL
264
12,472
tcu = total copper, tzn = total zinc, scu = soluble copper, szn = soluble zinc

Nom. Int.
Meters Lngth (m)
4,569 1.5, 3m
1,041 avg 35m
1,893
2m
1,320
5m
775
2m
4,461
3m
4,541
3m
17,960
3m
1,494
2,956
3m
41,010

Intervals
Meters
Assayed Assayed
1,091
2,461
30
1,040
915
1,855
264
1,320
324
663
1,467
4,352
1,318
3,979
5,889
17,786
0
0
474
1,420
11,772
34,876

Assayed
For
tcu
tcu
tcu tzn scu szn
tcu tzn scu
tcu tzn scu
tcu tzn scu szn
tcu tzn scu szn
tcu tzn scu szn
tcu tzn scu szn

Table 10-2: Summary of Drilling and Sampling Data Used for Resource Modeling
No. of
No. of
Company
Year
Type
Size
Holes
Intervals
Asarco
1956-57
Core
NX,BX,AX
28
1,577
Swannel
1994-95
RC
13.3 cm
16
925
Newcoast
1998
Core
HQ,NQ,BTW
7
341
Summo
2000
RC
12.1 cm
34
1,488
Constellation 2004-05
Core
NC,NX
25
1,354
Constellation 2004-05
RC
13.3,12.4cm
119
5,921
Constellation
2006
Core
NC,NX
9
532
TOTAL
238
12,138
tcu = total copper, tzn = total zinc, scu = soluble copper, szn = soluble zinc

Nom. Int.
Meters Lngth (m)
4,569 1.5, 3m
1,893
2m
775
2m
4,461
3m
4,541
3m
17,960
3m
2,956
3m
37,155

Intervals
Meters
Assayed Assayed
1,091
2,461
915
1,855
324
663
1,467
4,352
1,318
3,979
5,889
17,786
474
1,420
11,478
32,516

Assayed
For
tcu
tcu tzn scu szn
tcu tzn scu
tcu tzn scu szn
tcu tzn scu szn
tcu tzn scu szn
tcu tzn scu szn

Recent drilling (Summo and Constellation) in the Cerro Verde area amounts to 72 holes and 13,296
meters of drilling of which 25 holes and 6,000 meters is core and 47 holes and 7,296 meters is RC.

75 AC/1463772.11

Figure 10-1. Hole location Map (IMC, October 2011)

Figure 10-2. Cross Section 350 Main Zone with Copper Grades (IMC, October 2011)

76 AC/1463772.11

Figure 10-3. Cross Section 850 Cerro Verde with Zinc Grades (IMC, October 2011)

Table 10-3: Assay Statistics by Sampling Campaign

Company/Type
Asarco Core
Swannel RC
Newcoast Core
Summo RC
Constellation Core
Constellation RC
Constellation 2006 Core
TOTAL
% of Total

Total
Meters
Drilled
4,569
1,893
775
4,461
4,541
17,960
2,956
37,155

Total
Copper
2,461
1,855
663
4,352
3,979
17,786
1,420
32,516
87.5%

Assayed Length in Meters

Total
Soluble
Soluble
Zinc
Copper
Zinc
1,855
663
4,352
3,979
17,783
1,420
30,052
80.9%

1,853
639
2,865
2,582
8,528
1,270
17,737
47.7%

Acid
Consum.

846

1,627

2,859
2,403
7,792
1,270
15,170
40.8%

2,865
2,602
8,993
0
16,088
43.3%

Sampling
The Asarco core samples were small-diameter, dominantly 4.2 centimeter BX or 3.0 centimeter AX core.
The sampling interval tended to be either 1.5 meter or 3 meter. The core recovery was not incorporated
into the database provided to IMC, but inspection of the drill logs showed it to be quite variable and the
reported average core recovery was 66.3%.
The Swannel RC drilling is reported to be from 13.3 centimeter diameter holes and was sampled on 2
meter intervals. A cyclone and a three-tiered Jones splitter were used to collect samples at the rig. Percent
recoveries for the Swannel RC drilling are not recorded in the drill logs.

77 AC/1463772.11

The Swannel underground chip samples were done on 5 meter sampling intervals. They were taken with a
hammer over a 0.3 meter height on drift sidewalls. Recall from the previous section that they are not used
for this present evaluation.
The Newcoast core generally utilized larger samples than the Asarco core, either 6.4 centimeter HQ, 4.8
centimeter NQ, or 4.1 centimeter NTW core. The sampling interval was two meters. Percent core
recoveries were not recorded.
The Summo RC drilling was with a 12.1 centimeter hole and was sampled on 3 meter intervals. Summo
used a center-return hammer for dry drilling and a conventional hammer for wet drilling (about 90% of
the drilling was dry). A cyclone and a three-tiered Jones splitter were used for dry sampling and a rotary
splitter for wet sampling. Sample recoveries were estimated visually during the Summo program (samples
were not weighed). Core recoveries in most intervals were estimated to have been better than 75%
although some zones of low recovery were also recorded, particularly in the vicinity of old workings.
The Constellation RC holes were drilled by Layne de Mexico using a track mounted drill rig. Normally
the hole diameter was from 13.3 and 12.4 centimeter, and in most cases a center return hammer was used.
Exceptions were when abundant water was encountered in the hole and a tri-cone type bit was used. In
rare cases a conventional hammer and interchange was used. For RC holes drilled below about 225
meters an auxiliary air compressor and booster were utilized. The holes were generally drilled dry for as
long as possible, typically about 100-125 meters depth or more. Of the approximately 20,000 meters of
RC drilling performed during 2004-2005, about 13,500 meters were drilled dry. Once groundwater was
encountered in the holes some water was injected into the hole to aid in drilling and to prevent the drill
rods from sticking.
Dry samples were collected in a cyclone on the drill and then passed through a vibrating three tiered Jones
type splitter. The sample interval was typically three meters. A one eight split of the sample was generally
passed over a single splitter to provide a one-sixteenth split which was bagged and held for the assay lab.
This sample generally weighed about 6 to 7 kilograms, and represented a sample recovery of about 60 to
80% of the total interval drilled. The rods were evacuated or blown out before the drill rig advanced to the
next sample interval.
The wet samples were collected in the cyclone and passed over a rotary wet splitter. The amount of
covers on the splitter was varied to obtain one 5 gallon bucket full of cuttings and water for each three
meter sample interval. Once the interval was complete most of the water in the sample was poured off and
the sample passed through a single splitter to obtain a sample that generally weighed about 5 kilograms
after it dried out. Both dry and wet samples were placed in olefin polyester sample bags that were labeled
with the drill hole and sample interval. For about one in twenty samples a duplicate sample was collected
at the drill rig and submitted for assay.
Constellation core drilling was done mostly (+90%) with 6.4 centimeter NC core. When necessary, this
was reduced to NX size (4.8 centimeter). The sample interval was 3 meter. Core recovery was recorded
for the core holes and incorporated into the database. Overall core recovery was about 85%. The core
samples were drilled by Perforaciones Godbe de Mexico and by Major Drilling de Mexico.
Summary of Drilling and Sampling
Reported sample recoveries for RC drilling are about 75% for the Summo drilling and 60% to 80% for
Constellation drilling. Constellation core recovery averaged about 85%. These are slightly lower than
typical sample recoveries, but are probably reasonable given the voids and fractures in the skarn. There is
some risk that the accuracy of the sampling is affected by sample recovery. Other than this, IMC does not
know of any other factors that might impact the sampling results.

78 AC/1463772.11

The sampled area is defined here as the maximum lateral extent of the skarn rock type. In the Main Zone
this is about 384,000 meters2 or 38.4 hectares on the 1590 bench. There are also 132 five meter
composites on the bench sampled for copper and 120 composites sampled for zinc. Using the square root
of the area divided by the square root of the number of composites as an estimate of sample spacing, i.e.
the geometric mean, this is an average spacing of 54 meter for copper and 56.5 meter for zinc.
In Cerro Verde the maximum lateral extent of skarn is 52,800 meters2 or 5.3 hectares on the 1635 bench.
There are also 32 copper composites and 30 zinc composites on the bench. This indicates average sample
spacings of 40.6 meter for copper and 42 meter for zinc.
The total sampled area amounts to a total of about 43.7 hectares.
It is the opinion of IMC that the available drilling and density of sampling is sufficient to support resource
modeling at the level required for preliminary feasibility studies or feasibility studies.
All of the drilling has been conducted by previous holders of the Terrazas Property; to date, none has
been done by or on behalf of Andromeda.
Drilling to date has defined two mineral bodies. In Cerro Verde, zinc grades are elevated and are
about 5 times the concentration of zinc in the Main Zone. In Main Zone copper grades are about
30% higher than in Cerro Verde.
Sample Preparation, Analyses and Security
There is not any specific information on sample preparation, analyses, or security measures available to
IMC for the Asarco, Swannel, or Newcoast drilling, other than that the Asarco assays were done at the
Asarco laboratory at Santa Eulalia. As will be discussed in the Data Verification section below, these
data were validated by comparison with recent drilling data.
For the Summo and Constellation samples, sample preparation prior to shipping the samples to the
analytical labs was minimal, consisting of collecting the RC samples at the rig and splitting the core.
These procedures were discussed in the Sampling section.
For the Summo RC samples, nominal 1/16 splits taken at the rig (5-8 kilograms) were crushed to 10
mesh at the Chemex lab in Chihuahua and a 250 gram split of the 10 mesh material was then pulped to
150 mesh. This material was then split into two 125 gram pulps, one of which was retained in Chihuahua
while the other was sent to the Chemex lab in Vancouver for assay.
Total copper and total zinc assays were run using a 4-acid digestion on 0.5 gram samples with the
solution read for both total copper and total zinc using atomic absorption (AA). Acid soluble copper
and zinc assays were run by shaking a 0.25 gram sample in 10 mls of 5% sulfuric acid solution for 20
minutes at room temperature, and read for acid soluble copper and acid soluble zinc using AA. Acid
soluble assays were run only on samples where the total copper or the total zinc assay exceeded 0.1%.
The Chemex lab is a highly regarded facility and is independent of the issuer. Chemex lab certifications
include ISO 9001:2008 and ISO 17025 though it is not certain to IMC what certifications were in place
for the Summo 2000 drilling.
Summo quality assurance/quality control (QA/QC) procedures are discussed in the section entitled
Sampling.
The Constellation samples were sent to a BSi Inspectorate (BSi) prep lab facility in Durango, Mexico.
The samples were dried in an oven at about 150 degrees F and then crushed to >80% -10 mesh by jaw

79 AC/1463772.11

crusher and/or roller mill. About 250-300 grams were then split out using a Jones splitter and pulverized
to >90% -150 mesh using Labtech ring and puck pulverizers. Barren quartz sand is used between each
sample. The 250 gram sample pulps were then split in half using a Jones splitter, with one half sent off to
the assay lab, also a BSi lab either in Reno or Lima, Peru. The other half of the sample was sent back to
Constellation/Minera Terrazas in Chihuahua for storage, along with the remainder of the -10 mesh assay
reject material.
For total copper and zinc, a 0.5 gram sample was obtained from the pulp, and is then subject to a 4-acid
total digestion (HF, HNO3, HClO4, HCl). The solution was then read for total copper and total zinc using
AA. For acid soluble copper and zinc, a 0.25 gram. sample was used. It was digested in 10 millileters of
5% sulfuric acid using a mechanical shaker table at room temp (20 degrees Celsius) for 60 minutes. The
solution was read for copper and zinc using AA. As with the Summo data, the soluble copper and zinc
assays were generally only done if one either the total copper or total zinc assay exceeded 0.1%.
The BSi Inspectorate labs are highly regarded facilities and are independent of the issuer. At the time of
the Constellation work the Reno facility was ISO 9002 certified.
The Constellation QA/QC procedures were extensive and well executed, as discussed in the section
entitled Sampling.
The acid consumption assays were done by the Cardwell method, as follows. Thirty grams of 150 mesh
material are mixed with 50 milliliters of pH 1.5 sulfuric acid to form a slurry. The pH is measured and
concentrated sulfuric acid is added to adjust and hold the pH to 1.5 while mixing for one hour. The
amount of sulfuric acid used allows calculation of acid consumption. The acid consumption tests for the
Constellation samples were by Professor Sergio Trejo of the Metallurgy Department of the Chihuahua
Institute of Technology. The tests done by Summo for the 2000 campaign were by the same method and
were done by Cone Geochemical. Acid consumption determinations were generally only done for
samples with either total copper or total zinc greater than 0.1%. Also the 2004-2005 samples were
generally done on six meter pulp composites, rather than the three meter intervals. This was a cost saving
measure, since the tests are quite labour intensive.
The Chihuahua Institute of Technology is a metallurgical research institute, not a commercial lab. IMC is
not aware of any specific certifications that may apply. Note that the only work done was the acid
consumption tests.
Concerning sample security for the Summo and Constellation samples, the RC samples were picked up at
the drill rig at the end of each drill shift and taken to a secure warehouse for storage until they were
picked up by the assay lab, Chemex for the Summo samples and BSi for the Constellation samples, who
took the samples to their respective preparation facilities in Mexico. For the core samples, the core was
also stored in the secure facility in the village of Terrazas where it was photographed and logged for
geology and geotechnical purposes. The core was then marked into three meter intervals, sawn using a
diamond saw, and then placed into sample bags which were securely stored until picked up by Chemex or
BSi.
It is the opinion of IMC that the sample preparation and analytical procedures are adequate to
develop a mineral resource for the Terrazas Property. The sample preparation and analytical
procedures used are appropriate for the mineralization being sampled, i.e. low to medium grade
base metals.

80 AC/1463772.11

Data Verification
Collar Coordinates and Downhole Surveys
As of March 2005, collar monuments were still readily locatable in the field, at least for the recent drill
hole locations. Constellation re-surveyed and re-calculated hole collar locations to make sure they tie to
the coordinate grid currently being used.
IMC did a careful comparison of hole collar locations with topography which resulted in further
surveying and checking of a dozen or so holes. Hole collars in the database match topography well. Other
than this check, IMC did not check surveying or the downhole orientation surveys.
IMC Database Audit
IMC randomly selected 18 holes from the database and compared assay certificates with the assay values
currently in the database. The 18 holes included one Asarco hole, one Swannel hole, one Newcoast hole,
three Summo holes, and 12 Constellation holes. The 18 holes also represent 8% of the accepted holes in
the database. Note that accepted holes exclude the Frisco, Swannel underground, and Constellation
condemnation drilling.
Table 12-1 summarizes the results of the check. It can be seen that assay certificate data was not
available for the Asarco drilling, or for the Swannel drilling (other than the soluble zinc and acid
consumption assays done by Summo).
There were no errors discovered between the database values and assay certificate values for either the
Summo or Constellation drilling. The Summo check included total copper, total zinc, soluble copper,
soluble zinc, and acid consumption. The Constellation checking was mostly limited to the total and
soluble copper and zinc assays. Limited assay certificate data for acid consumption assays was available
as many of these assays were still pending when the IMC check was done.
One minor error was discovered in the Newcoast hole; a soluble copper assay of 0.64% on the assay
certificate was entered into the database as 0.74% soluble copper. For the Swannel hole, there were two
acid consumption assays on the assay certificate that were not incorporated into the database. It was also
noted that there were two acid consumption assays at the upper detection limit, i.e. actual value would be
higher than what is in the database.
Overall, results were excellent. There do not appear to be any errors of any significance in the database.

81 AC/1463772.11

Table 12-1: Comparison of Drillhole Database With Assay Certificates

Hole ID
AS57-28
MT00-11
MT00-17
MT00-20
MT04-05
MT04-16
MT04-17
MT04-18-2
MT04-74
MT04-76
MT05-03
MT05-23
MTC04-02
MTDD04-11
MTDD05-09
MTDD05-12
RC95-09

Company
Asarco
Summo
Summo
Summo
Const.
Const.
Const.
Const.
Const.
Const.
Const.
Const.
Const.
Const.
Const.
Const.
Swannel

RT98-02
TOTAL

Newcoast

No. of
Intervals
22
57
53
32
38
61
90
40
57
95
67
49
33
104
80
64
65

59
1,066

Errors

Comments
No certificate data available
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2 Only soluble zinc and acid consumption data available
Two acid consumption values on certificates, but not
in database. Two assays over upper limit set at upper.
1 a soluble copper assay, 0.64 certificate, 0.74 database
3

IMC Samples
As an independent check of sampling and assaying procedures and results, IMC designated 50 samples
from recent Constellation drilling. Coarse rejects (not pulps) from these samples were sent to Chemex for
sample preparation and assaying. The pulp prepared by Chemex was also sent to IPL for another
analytical check. Coarse reject material was not available for one of the designated samples, leaving 49
samples.
The Chemex analytical procedure for total copper and zinc was done with a three acid digestion followed
by ICP analysis. IPL used the same assay methods for total copper and zinc as BSi, i.e. four acid
digestion followed by AA analysis.
Table 12-2 summarizes the results. For total copper, Cases 1 and 2 shows the Chemex assays to be 7.4%
lower than the original BSi assay and IPL to be 1.8% greater than the original BSi assay. Expected
precision is 7.9% and 8.6% respectively for these cases. This is interpreted as any one assay is expected
to be within 7.9% and 8.6% respectively of the true value. Case 3 shows IPL to be about 9.9% greater
than Chemex. It seems possible that the Chemex three acid digestion is not as aggressive as the four acid
digestion used by the other labs; it might not be dissolving all the copper in the sample.
Review of xy plots (not shown) show four samples with a large difference between original BSi values
and new Chemex and IPL assays. This seems likely to be an error in sample identification or labeling.
With these samples removed (Cases 4 and 5) Chemex assays are about 5.5% less than the original BSi
assays and IPL assays are 3.5% greater than original BSi assays. Precision estimates improve to 4.2%
and 5.4% respectively.
For total zinc, Cases 9 and 10 (outliers removed) show Chemex assays to be 2.2% greater than the
original BSi assays and IPL to be 16.0% greater than original BSi assays. The indicated precision is 4.3%
and 8.0% respectively. Case 8 shows IPL greater than Chemex by 14.0% on the same pulp.

82 AC/1463772.11

Cases 11 and 12 show results for BSi versus IPL for acid soluble copper and zinc respectively. Chemex
did not perform acid soluble assays for this data. Soluble copper assays compare well, with IPL 6.1%
greater than the original BSi results. For soluble zinc however, IPL is 22.2% greater than BSi.
Overall, the results of this program demonstrated comparable amounts of copper and zinc in the coarse
rejects samples as was reported in the original sampling program.

Table 12-2: Summary of IMC Check Assays

Case
1
2
3
4
5
6
7
8
9
10
11
12

Assay
totcu
totcu
totcu
totcu
totcu
totzn
totzn
totzn
totzn
totzn
solcu
solzn

Original
Lab
bsi
bsi
chemex
bsi
bsi
bsi
bsi
chemex
bsi
bsi
bsi
bsi

Check
Lab
chemex
ipl
ipl
chemex
ipl
chemex
ipl
ipl
chemex
ipl
ipl
ipl

No. of
Assays
49
49
49
45
45
49
49
49
45
45
45
44

Original
Mean
(%)
0.569
0.569
0.527
0.548
0.548
2.702
2.702
2.325
1.858
1.858
0.476
2.117

Check
Mean
(%)
0.527
0.579
0.579
0.518
0.567
2.325
2.651
2.651
1.899
2.156
0.505
2.586

%
Precision
Difference
(%)
Comments
-7.4%
7.86%
1.8%
8.64%
9.9%
5.06%
-5.5%
4.23% Four outlier samples removed
3.5%
5.39% Four outlier samples removed
-14.0%
8.71%
-1.9%
11.83%
14.0%
5.32%
2.2%
4.34% Four outlier samples removed
16.0%
8.00% Four outlier samples removed
6.1%
9.86%
22.2%
9.50%

Summo QA/QC Programs

Summo took duplicate 1/16th splits from 53 of the 1,488 samples it assayed (i.e. about one every 30th
sample) and prepared two 125g pulps from these duplicate splits. One of these duplicate pulps was
stored. The other was assayed at Chemex for total copper, acid soluble copper, total zinc, and acid
soluble zinc using the Chemex procedures described in Section 13.0, and also total copper and total zinc
using inductively coupled plasma (ICP). This pulp was then reassayed at Cone Geochemical for total
copper, acid soluble copper, total zinc, and acid soluble zinc. Table 12-3 summarizes these various
checks.

Table 12-3. Summary Results of Summo QA/QC Checks

Case
1
2
3
4
5
6
7
8
9
10

Assay
Tot Cu
Tot Cu
Tot Cu
Sol Cu
Sol Cu
Tot Zn
Tot Zn
Tot Zn
Sol Zn
Sol Zn

Original Duplicate
No. of
Original
Check
Percent
Assay
Assay
Samples Mean (%) Mean (%) Difference
Chemex Chemex
53
0.203
0.210
3.4%
Chemex Chem ICP
51
0.209
0.220
5.3%
Chemex
Cone
53
0.203
0.209
3.0%
Chemex Chemex
34
0.179
0.175
-2.2%
Chemex
Cone
34
0.179
0.205
14.5%
Chemex Chemex
53
0.251
0.232
-7.6%
Chemex Chem ICP
51
0.244
0.220
-9.8%
Chemex
Cone
53
0.251
0.241
-4.0%
Chemex Chemex
34
0.256
0.255
-0.4%
Chemex
Cone
34
0.256
0.278
8.6%

Overall, the mean values of original and check assays are reasonably close. Total copper check assays
tended to be slightly higher than original assays, from 3.0 to 5.3% higher, while total zinc checks tended
to be 4.0 to 9.8% lower than original assays. Based on these comparisons, and comparisons of the
various drilling campaigns, discussed below, the Summo data was accepted by IMC for mineral resource
estimations.
IMC has no record of any blanks or standards assays being used in the Summo QA/QC work. Note also
that this work is predominantly a check of analytical procedures only because most of the check assays
83 AC/1463772.11

were done on the same pulp. Duplicate splits of original RC chips or core halves, or duplicate splits of
coarse rejects, are required to check the entire sample preparation and analytical procedures.
Constellation QA/QC Programs
A comprehensive QA/QC program was initiated for the Constellation 2004-2005 drilling program. A
couple standards were submitted with the samples from each drillhole, bracketing the expected values in
the hole. Duplicates were taken every 20th sample from sample splits collected at the site. Early in the
project the standards used were developed from Carlota and San Manuel ores, which are copper oxide
projects in Arizona. These standards did not contain zinc. Later standards were developed from Terrazas
ore, from bulk samples acquired from underground openings.
Jeffrey A. Jaacks, a consulting geochemist, was retained by Constellation to analyze and report the results
of the QA/QC program. Results are presented in the report QA/QC Review of the Terrazas Project,
Chihuahua, Mexico dated October 14, 2005.
The main conclusions from the report are as follows:
1.

Original studies indicated that the Lima facility of BSI has better accuracy and precision
than the Reno facility. Later analyses on check samples indicated no reproducibility
problems. It appears that there was an issue with the reproducibility of the early Carlota
standards instead.

2.

Overall accuracy and precision for the Terrazas Property are within acceptable limits for
standards used later in the drilling program.

3.

Duplicate analysis of the reverse circulation drilling program samples displayed

acceptable reproducibility for copper and zinc analyses.

4.

Check samples using the same pulp show acceptable reproducibility between ALSChemex, IPL, and BSI-Lima analyses with no or only slight bias existing between the
check laboratories.

The report also included some recommendations:

1.

Some batches of samples with outliers in either the standards or duplicates analyses were
identified and it was recommended that assays in the batches be re-run.

2.

The variance between IPL and BSI for acid soluble zinc on 44 check samples (Case 12 on
Table 12-2) should be investigated.

To IMCs knowledge the recommendations were not completed; the samples were lost during the hiatus
between the Summo and Constellation work. For item 2, it should be noted that the BSi assays that the
database is based on is the more conservative of the two assays. For item 1, IMC does not expect rerunning a few selected batches of assays to make a significant difference in resource results.
There were additional suggestions pertaining to the future maintenance of the QA/QC program that are
not repeated here.
Due to the limited nature of the 2006 drilling, and also that the project was being shut down as the drilling
was being completed, QA/QC was limited to 26 standards. There were not any duplicate samples
analyzed. With one exception, the assays on the standards appear reasonable.

84 AC/1463772.11

Comparison of Recent and Historic Drilling Information

The Asarco, Newcoast, and Swannel data are historic data and little is known about the sampling and
analytical methods used. Recent Constellation drilling effectively twinned several of these legacy holes.
IMC has done a comparison of assay results in these various sets of twin holes.
Constellation drilling twinned four Asarco holes. Table 12-4 shows the holes and hole depths considered
comparable. Recall that the Asarco holes were only assayed for total copper. The number of assay
intervals is also not the same due to different interval lengths. The table shows a mean total copper grade
of 0.317% for Asarco samples versus 0.332% for Constellation drilling. This is only about a 5%
difference, indicating the Asarco holes can be accepted for resource evaluation.
Tables 12-5 and 12-6 compare Newcoast and Constellation total copper and total zinc for two twin holes.
Table 12-5 shows a very close comparison between mean total copper grades at 0.293% for Newcoast
versus 0.293% for Constellation. For total zinc (Table 12-6) Newcoast values are higher than
Constellation at 0.589% versus 0.380% zinc.
Tables 12-7 and 12-8 compare Swannel RC drilling with Constellation drilling for total copper and total
zinc for three sets of twin holes. For copper, Constellation is higher than Swannel at 0.375% versus
0.297%. For zinc, the converse is true, Swannel is higher than Constellation (0.505% zinc versus 0.409%
zinc).
Tables 12-9 and 12-10 compare Constellation and Summo drilling for two twin holes. For total copper
Summo values are higher than Constellation values, 0.382% copper versus 0.289% copper. For zinc,
Constellation is slightly higher than Summo values, 0.489% zinc versus 0.446% zinc. It appears to IMC
that the sampling and assaying is reasonably consistent between the various sampling campaigns. IMC
elected to use all the data from these sources for resource modeling. Recall that the Frisco data and
Swannel underground samples were not used for resource modeling.
It appears to IMC that the sampling and assaying is reasonably consistent between the various sampling
campaigns. IMC elected to use all the data from these sources for resource modeling. Recall that the
Frisco data and Swannel underground samples were not used for resource modeling.

85 AC/1463772.11

Table 12-4: Asarco Versus Constellation Total Copper in Twin Holes

Asarco
Const
Depths
Hole ID
Hole ID
(m)
AS56-08 MT04-18-1 0 - 223m
AS57-11 MT04-06 55 - 97m
AS57-14 MT04-07 0 - 100m
AS57-13 MT04-10 0 - 115m
TOTAL

Asarco Samples
Constellation Samples
No. of
Mean
Std. Dev.
No. of
Mean
Std. Dev.
Intervals
(%Cu)
(%Cu)
Intervals
(%Cu)
(%Cu)
121
0.190
0.140
74
0.277
0.257
22
0.812
0.698
14
0.700
0.700
40
0.263
0.307
32
0.241
0.270
45
0.462
0.581
39
0.379
0.488
228
0.317
0.417
159
0.332
0.398

Table 12-5: Newcoast Versus Constellation Total Copper in Twin Holes

Newcoast
Const
Depths
Hole ID
Hole ID
(m)
RT98-03 MTDD04-03 0 - 125m
RT98-07 MT04-48 0 - 68m
TOTAL

Newcoast Samples
Constellation Samples
No. of
Mean
Std. Dev.
No. of
Mean
Std. Dev.
Intervals
(%Cu)
(%Cu)
Intervals
(%Cu)
(%Cu)
56
0.303
0.290
40
0.292
0.198
32
0.290
0.189
24
0.296
0.208
88
0.298
0.256
64
0.293
0.200

Table 12-6: Newcoast Versus Constellation Total Zinc in Twin Holes

Newcoast
Const
Depths
Hole ID
Hole ID
(m)
RT98-03 MTDD04-03 0 - 125m
RT98-07 MT04-48 0 - 68m
TOTAL

Newcoast Samples
Constellation Samples
No. of
Mean
Std. Dev.
No. of
Mean
Std. Dev.
Intervals
(%Zn)
(%Zn)
Intervals
(%Zn)
(%Zn)
56
0.313
0.764
40
0.175
0.371
32
1.073
1.868
24
0.725
1.566
88
0.589
1.322
64
0.380
1.026

Table 12-7: Swannel RC Versus Constellation Total Copper in Twin Holes

Swannel
Const
Depths
Hole ID
Hole ID
(m)
RC94-03 MTDD04-04 0 - 98m
RC95-12 MT00-29 0 - 75m
RC95-16 MT04-34 0 - 124m
TOTAL

Swannel Samples
Constellation Samples
No. of
Mean
Std. Dev.
No. of
Mean
Std. Dev.
Intervals
(%Cu)
(%Cu)
Intervals
(%Cu)
(%Cu)
48
0.278
0.276
32
0.262
0.368
36
0.497
0.421
25
0.681
0.597
60
0.193
0.135
41
0.276
0.380
144
0.297
0.301
98
0.375
0.473

Table 12-8: Swannel RC Versus Constellation Total Zinc in Twin Holes

Swannel
Const
Depths
Hole ID
Hole ID
(m)
RC94-03 MTDD04-04 0 - 98m
RC95-12 MT00-29 0 - 75m
RC95-16 MT04-34 0 - 124m
TOTAL

Swannel Samples
Constellation Samples
No. of
Mean
Std. Dev.
No. of
Mean
Std. Dev.
Intervals
(%Zn)
(%Zn)
Intervals
(%Zn)
(%Zn)
48
0.087
0.075
32
0.096
0.143
36
0.872
2.320
25
0.316
0.450
60
0.620
1.021
41
0.710
0.823
144
0.505
0.136
98
0.409
0.639

86 AC/1463772.11

Table 12-9: Summo RC Versus Constellation Total Copper in Twin Holes

Summo
Hole ID
MT00-05
MT00-21
TOTAL

Const
Depths
Hole ID
(m)
MT04-32
0 - 118m
MTDD04-05 0 - 90m

Summo Samples
Constellation Samples
No. of
Mean
Std. Dev.
No. of
Mean
Std. Dev.
Intervals
(%Cu)
(%Cu)
Intervals
(%Cu)
(%Cu)
39
0.225
0.245
39
0.302
0.275
29
0.594
1.309
29
0.273
0.578
68
0.382
0.885
68
0.289
0.428

Table 12-10: Summo RC Versus Constellation Total Zinc in Twin Holes

Summo
Hole ID
MT00-05
MT00-21
TOTAL

Const
Depths
Hole ID
(m)
MT04-32
0 - 118m
MTDD04-05 0 - 90m

Summo Samples
Constellation Samples
No. of
Mean
Std. Dev.
No. of
Mean
Std. Dev.
Intervals
(%Zn)
(%Zn)
Intervals
(%Zn)
(%Zn)
39
0.086
0.188
39
0.258
0.741
29
0.931
1.783
29
0.801
2.317
68
0.446
1.235
68
0.489
1.621

Summary of Data Verification Programs

Based on the various QA/QC and other data verification programs, conducted by IMC and others, IMC
concludes that the Terrazas assay data base is adequate for resource modeling for feasibility study
purposes.
It is also noteworthy that the drillhole database and resource models have been in the possession of IMC
since the Summo study of 2002. There has been no opportunity for the integrity of the databases to be
corrupted by others. Also, IMC entered the 2006 drilling results from assay certificates.
Adjacent Properties
There are no known adjacent properties to that of the Terrazas Property that have any known or implied
mineral resources that would impact on the future exploration or development of the Terrazas Property.
Mineral Processing and Metallurgical Testing
Mineral Processing
Under the previous management of the project by Constellation, substantial test work was performed and
a number of engineering studies performed on the basis of that test work, including a prefeasibility study
that was completed and filed with the Canadian authorities under NI 43-101 in 2002 and an in-house
scoping study based on agitated leaching that was completed in 2006 but was not filed under NI 43-101.
The former was based on heap leaching of main zone material and predated the discovery and
quantification of the Cerro Verde deposit. The discovery of a discrete zone of much higher grade material
at Cerro Verde led to consideration of alternative processes. The study of agitated leaching also
considered the addition of various zinc smelter slags, a potential additional source of metal but not an
intrinsic part of this project.
Test work performed relative to various proposed processes includes:

The characterization of each assay interval from drill core according to acid solubility of zinc and
copper and sulfuric acid consumption

The response of the mineralization to sulfuric acid leaching at different size ranges in columns
under varying solution addition conditions

87 AC/1463772.11

The response of mineralization to sulfuric acid leaching after grinding at different size ranges, at
different pulp densities and at varying pH

The determination of settling characteristics of leached material

Various tests on potential pre-concentration techniques

The column leach tests were used as a basis for a prefeasibility study that indicated economic potential
but concern was raised about percolation rates and leach kinetics.
The agitated leach tests over a wide range of samples showed excellent response of zinc mineralization to
sulfuric acid dissolution, with recoveries to solution in excess of 90% being achieved in a short time and
over a range of size, pH and pulp density. Generally, lower pH and finer grind gave marginally better
results. The response of copper minerals to agitated leach showed a generally slower response for a
particular size distribution and overall recoveries to solution of the order of 75%.
Acid consumption of 330 kilogram/tonne of ore was determined to be the average for agitated leaching of
Terrazas ores. The addition of slags to the feed increased the overall acid consumption. Test work on preconcentration methods, including flotation, heavy media separation and optical sorting were considered
incomplete and inconclusive.
Constellation, therefore, considered the economics of a project to produce 160 million pound/year of zinc
from combined Terrazas ores and slags using agitated acid leach of whole ore. An on site acid plant
producing both sulfuric acid and cogenerated power was considered together with separation of liquids
and solids by filtering. Pregnant solution conditions were determined from the above test work and used
as the basis for conceptual design of metal recovery circuits, which were not themselves tested but
considered to be conventional technology.
The circuit considered consisted of conventional crushing and grinding operations followed by agitated
leaching of ground ore and the separation of solids from the solution now containing zinc and copper in
solution. The solution was then considered to be treated by sequential processes to recover copper,
remove iron and other contaminants and eventually zinc. Copper was considered to be recovered by
conventional solvent extraction and electrowinning while iron, gypsum and other contaminants are
removed by increasing the pH by the addition of limestone. Finally, zinc is recovered by solvent
extraction and electrowinning, with the recovered zinc melted to produce ingots. The sulfuric acid plant is
considered to use molten sulfur as a feedstock, delivered by rail via the main line railway that currently
runs through the property.
The results indicated a viable project but recognized that the capital cost would be high and the report
recommended separate consideration of Terrazas ores and slags. Further work on the project by
Constellation was curtailed for reasons external to the merits of the project. The current owners believe
that this study shows a viable metallurgical process which might be optimized in a number of areas and
by consideration of alternate unit processes.
Metallurgical Testing
The discussion on metallurgical testing that was excerpted from the report Constellation Copper
Corporation Minera Terrazas Project Scoping Study dated May 10, 2007 is found in the Terrazas
Technical Report. It is a report of testing results that are historic in nature. The testing described in this
section was done at METCON Research Inc. in Tucson, Arizona. IMC does not know of any specific
certifications for this facility; it is a metallurgical research facility, not a commercial analytical laboratory.

88 AC/1463772.11

Standard bottle roll tests were performed on a variety of Terrazas ore samples; Avalos slag and blends of
ore and slag.
Many tests were conducted as part of a combined heap leach agitation leach scenario where the plus 4
mesh (or minus 6 mesh) material would be heap leached in an effort to improve percolation. The minus 4
mesh material was to be agitation leached. Even though the agitation leach tests were conducted only
with the fine fractions, there is little evidence to date that the character of the fines is unrepresentative of
the whole ore.
Terrazas Ore Characterization Tests
Tests were conducted on the minus 6 mesh fraction of the bulk composites to determine the influence of
leach duration; mesh-of-grind; percent solids in the leach and pH. The bulk composites were made from
various Terrazas samples to represent variations in assay acid consumption. Tests on the influence of
mesh of grind are identified in Table 13-1.
Test No.
WO6AL-01
WO6AL-02
WO6AL-03
WO6AL-04

Composite
No. 1
No. 1
No. 1
No. 2A

AAC
200 kg/t
200 kg/t
200 kg/t
250 kg/

Mesh-of-Grind
80% < 48 mesh
80% < 100 mesh
80% < 150 mesh
80% < 48 mesh

WO6AL-05
WO6AL-06

No. 2A
No. 2A

250 kg/
250 kg/

80% < 100 mesh

80% < 150 mesh

WO6AL-07
WO6AL-08
WO6AL-09
WO6AL-10
WO6AL-11

No. 2B
No. 2B
No. 2B
No. 3
No. 3

250 kg/
250 kg/
250 kg/
300 kg/t
300 kg/t

80% < 48 mesh

80% < 100 mesh
80% < 150 mesh
80% < 48 mesh
80% < 100 mesh

WO6AL-12

No. 3

300 kg/t

80% < 150 mesh

Table 13-1 Bottle Roll Testing Mesh of Grind.

Tests were run for 24 hours while adding acid as necessary to maintain a pH set point. The recovery of
zinc for these tests versus time is depicted in Figure 13-1. The data in Figure 13-1 shows the change in
mesh-of-grind has little influence on the zinc recovery. The average recovery, represented by the red line,
is 95.3% after 24 hours with a standard deviation of 0.8%.
Copper recovery for the tests listed in Table 13-1 is depicted in Figure 13-2. As with the zinc recovery
profile it is apparent from Figure 13-2: mesh-of-grind has little influence on the recovery of copper. The
average 24 hour copper recovery is 78.0% with a standard deviation of 0.08%.

89 AC/1463772.11

100%
90%
WO6AL-01

Zinc Recovery, %

80%

WO6AL-02
WO6AL-03

70%

WO6AL-04
WO6AL-05

60%

WO6AL-06

50%

WO6AL-07
WO6AL-08

40%

WO6AL-09

30%

WO6AL-10
WO6AL-11

20%

WO6AL-12
Average

10%
0%
0

12

18

24

30

Leach Time, hours

Figure 13-1 Zinc Recovery versus Time, Effect of Mesh of Grind.

100%
90%
80%
Copper Recovery, %

WO6AL-01

70%

WO6AL-02
WO6AL-03

60%

WO6AL-04
WO6AL-05

50%

WO6AL-06
WO6AL-07

40%

WO6AL-08

30%

WO6AL-09
WO6AL-10

20%

WO6AL-11
WO6AL-12

10%

Average

0%
0

12

18

24

30

Leach Time, hours

Figure 13-2 Copper Recovery versus Time, Effect of Mesh of Grind.

Bottle roll tests were conducted on bulk composite No. 2A to determine the influence of percent solids on
recovery. Conditions of the tests are presented in Table 13-2.

90 AC/1463772.11

Test No.
WO6AL-13
WO6AL-14
WO6AL-15
WO6AL-16

Composite
No. 2A
No. 2A
No. 2A
No. 2A

AAC
250 kg/t
250 kg/t
250 kg/t
250 kg/t

% Solids
15%
20%
35%
45%

Table 13-2 Bottle Roll Testing Percent Solids.

Zinc recovery versus time as a function of percent solids in the test is represented by the curve in Figure
13-3. It is apparent from Figure 13-3 that changes in pulp density do not have significant effect on the
zinc recovery. The average 24 hour zinc recovery, represented by the red line, is 96.0%, with a standard
deviation of 0.2%.
100%
90%

Zinc Recovery, %

80%
70%
WO6AL-13

60%

WO6AL-14

50%

WO6AL-15
WO6AL-16

40%

Average

30%
20%
10%
0%
0

12

18

24

30

Leach Time, hours

Figure 13-3 Zinc Recovery versus Time, Effect of Percent Solids.

Copper recovery versus time as a function of percent solids in the test is represented by the curve in
Figure 13-4 which indicates that changes in pulp density do not have significant effect on the copper
recovery. The shape of the curve indicates: copper recovery may benefit from longer leach times. The
average 24 hour zinc recovery, represented by the red line, is 79.4%, with a standard deviation of 1.1%.

91 AC/1463772.11

100%
90%

Copper Recovery, %

80%
70%
60%
50%
40%
WO6AL-13

30%

WO6AL-14

20%

WO6AL-15
WO6AL-16

10%

Average

0%
0

12

18

24

30

Leach Time, hours

Figure 13-4 Copper Recovery versus Time, Effect of Percent Solids.

Additional tests were conducted on bulk composite 2A to determine the effect of pH on recovery. The
test conditions are identified in Table 13-3.
Test No.
Composite
WO6AL-1
No. 2A
WO6AL-17
No. 2A
WO6AL-18
No. 2A
WO6AL-19
No. 2A
* Max pH not identified

AAC
250 kg/t
250 kg/t
250 kg/t
250 kg/t

pH Target
1.26 1.51
1.6 1.8
1.8 2.0
2.0 2.2

pH Range
1.32 1.51*
1.74 3.41
1.96 3.71
1.96 4.01

Table 13-3 Bottle Roll Testing pH.

It is apparent from Figure 13-5 that lower pH has a positive effect on dissolution of zinc. A similar effect
is noted for the dissolution of copper in Figure 13-6. In any case, the 24-hour recovery for zinc is 92.5%
with a standard deviation of 1.9%; for copper it is 72.8% with a standard deviation of 2.9%. Since the
recovery profiles are similar to other tests run at lower pHs, and the 24-hour recovery for test 16 (lowest
pH) are similar to previous tests, it can be inferred lower pH is beneficial to metals extraction.

92 AC/1463772.11

100%
90%

Zinc Recovery, %

80%
70%
WO6AL-16

60%

WO6AL-17

50%

WO6AL-18
WO6AL-19

40%

Average

30%
20%
10%
0%
0

12

18

24

30

Leach Time, hours

Figure 13-5 Zinc Recovery versus Time, Effect of pH.

100%
90%

Copper Recovery, %

80%
70%
60%
50%
40%
WO6AL-16

30%

WO6AL-17

20%

WO6AL-18
WO6AL-19

10%

Average

0%
0

12

18

24

30

Leach Time, hours

Figure 13-6 Copper Recovery versus Time, Effect of pH.

Terrazas Ore Bulk Sample Tests
Bottle roll tests were conducted on bulk samples from the various Terrazas ore zones. These tests were
run for 48 hours at 20% solids with the pH adjusted in the range of 1.4 to 1.5. The tests were run on
various screen fractions. Additional test details are included in Table 13-4.

93 AC/1463772.11

Test No.
AL-01
AL-02
AL-03
AL-04
AL-05
AL-06
AL-07
AL-08
AL-09
AL-10
AL-11
AL-12

Fraction
Assay
Calcd
Assay
Calcd
Bulk Sx.
Mesh
Head Zn,% Head Zn,% Head Cu, % HeadCu, %
C-310
-35 X +65
1.40%
1.35%
0.62%
0.56%
C-310
-65 X +100
1.66%
1.74%
0.67%
0.61%
C-310
-100 X +150 1.82%
1.89%
0.70%
0.63%
C-310
-150
2.15%
2.20%
0.89%
0.70%
La Verde -35 X +65
14.20%
15.08%
0.93%
0.78%
La Verde -65 X +100 15.30%
16.67%
0.96%
0.83%
La Verde -100 X +150 16.00%
16.42%
1.18%
0.83%
La Verde
-150
16.70%
17.68%
0.94%
1.01%
Colombia -35 X +65
9.00%
9.43%
0.84%
0.70%
Colombia -65 X +100
8.70%
9.17%
0.82%
0.73%
Colombia -100 X +150 8.65%
8.82%
0.83%
0.70%
Colombia
-150
9.25%
9.29%
1.05%
0.88%
Table 13-4 Bottle Roll Testing Bulk Samples.

Table 13-4 shows zinc upgrades slightly in the finest fractions for C-310 and La Verde. Zinc appears to
be higher grade in the coarsest fraction for Colombia. Copper upgrades slightly in the finest fractions for
all the samples. The zinc recovery curves shown in Figure 13-7 do not demonstrate any particular trend
for recovery as a function of size fraction. Differences occur early in the leach cycle, however a
consistent trend is not apparent and the differences diminish as the leach time continues.
100%
90%
80%
AL-01

Zinc Recovery, %

70%

AL-02
AL-03

60%

AL-04
AL-05

50%

AL-06
AL-07

40%

AL-08
AL-09

30%

AL-10

20%

AL-11
AL-12

10%
0%
0

12

18

24

30

36

42

48

54

Leach Time, hours

Figure 13-7 Zinc Recovery versus Time Bulk Samples.

Figure 13-8 shows the copper recovery profiles for the samples indicated in Table 13-4. Differences in
recovery of copper by size fraction appear to be most pronounced in the early stages of leaching.
However, a consistent trend is not apparent by 24 hours of leaching.

94 AC/1463772.11

100%
90%

Copper Recovery, %

80%
70%
60%
50%
40%

AL-01
AL-03
AL-05
AL-07
AL-09
AL-11

30%
20%

AL-02
AL-04
AL-06
AL-08
AL-10
AL-12

10%
0%
0

12

18

24

30

36

42

48

54

Leach Time, hours

Figure 13-8 Copper Recovery versus Time Bulk Samples.

If similar fractions are averaged together, irrespective of the sample origin, Figure 13-9 results. These
results indicate size fractions less than 100 mesh behave differently than the fractions above 100 mesh.
The finer fractions leach to completion at a faster rate, however ultimate extraction is the same after 48
hours of leaching.
100%
95%
90%

Recovery, %

85%
80%
75%
Zn -35+65 mesh
Zn -65+100 mesh
Zn -100+150 mesh
Zn -150 mesh
Cu -35+65 mesh
Cu -65+100 mesh
Cu -100+150 mesh
Cu -150 mesh

70%
65%
60%
55%
50%
0

12

18

24

30

36

42

48

54

Leach Time, hours

Figure 13-9 Recovery versus Time by Fraction Bulk Samples.

Gangue acid consumption is plotted versus time in Figure 13-10. A consistent trend is apparent where the
finest fractions consume more acid at a higher initial rate for all samples. Ultimate consumption of acid

95 AC/1463772.11

after 48 hours of leaching remains elevated for the finer fractions. It is likely the coarser limestone
particles develop a layer of gypsum that retards the dissolution rate.

Gangue Acid Consumption, kg/t

600

AL-01

500

AL-02
AL-03

400

AL-04
AL-05
AL-06

300

AL-07
AL-08
AL-09

200

AL-10
AL-11
AL-12

100

0
0

12

18

24

30

36

42

48

54

60

Leach Time, hours

Figure 13-10 GAC versus Time Bulk Samples.

Terrazas Ore Drill Core Composite Tests
The drill core composites were the subject of extensive column testing and they represent a significant
cross section of the orebody. Each of the 19 drill core composites was comprised of a calculated blend of
3-meter split core intervals from the project core library. The calculation was intended to create a matrix
of as many as 49 blends based on seven zinc grade classes and seven copper grade classes. For both
metals, the seven grade classes were <0.09%, 0.10-0.20%, 0.21-0.30%, 0.31-0.40%, 0.41-0.50%, 0.511.00% and >1.01%. Enough of each blend was required to fill two test leach columns, plus provide head
material for characterization and preliminary tests. Due to a lack of drill core material for certain grade
combinations, the final number of composites came to 19, as shown below in Figure 13-11, which also
shows the number of 3-meter split core intervals used in each composite.
Zn Grade Class
0 1 2 3
Cu Grade

Class

14

14 15 14

12 18 28
32 88
75

16 14

32

11

23

16 15 34

19

Figure 13-11 Drill Core Composite Matrix.

96 AC/1463772.11

Two sets of bottle roll tests were conducted on each of the drill hole composites. Tests were conducted
on the minus 4 mesh fraction of the drill core composites to determine the influence of leach duration on
recovery. Preliminary bottle roll tests were run for 24 hours only. These tests did not track recovery as a
function of time. Preliminary bottle roll tests on the 19 drill core composites are identified in Table 13-5.
All these tests were run at 20% pulp density for 24 hours while maintaining the pH. pH was measured
and adjusted approximately 12 times during the course of the test. Samples were taken more frequently
during the earlier stages of the test. The measurement interval varied slightly between tests, however; for
example, Test 16 was measured at 0.25 hrs, 0.5 hrs, 1.0 hrs, 1.25 hrs, 1.75 hrs, 2.5 hrs, 3 hrs, 5 hrs, 7 hrs,
8 hrs, 23 hrs and 24 hrs. The pulverized samples were nominally 80% minus 150 mesh. Results of the
tests are presented in Table 13-6.
The pH figures represent the range of maximum and minimum values in the pulp experienced after the
first hour. The rapid reaction of the pulverized material with acid in the initial 60 minutes caused
significant pH excursions. Consumption of acid occurred throughout the test. Ultimate acid consumption
was not reached in the 25 hours of the test.

Test No. DC Comp.

DC-BR-01
1
DC-BR-02
2
DC-BR-03
3
DC-BR-04
4
DC-BR-05
5
DC-BR-06
6
DC-BR-07
7
DC-BR-08
8
DC-BR-09
9
DC-BR-10
10
DC-BR-11
11
DC-BR-12
12
DC-BR-13
13
DC-BR-14
14
DC-BR-15
15
DC-BR-16
16
DC-BR-17
17
DC-BR-18
18
DC-BR-19
19

Assay
Head Zn,%
0.17%
0.14%
0.20%
0.21%
0.28%
2.71%
0.27%
0.43%
0.46%
0.49%
0.72%
0.70%
0.75%
1.85%
2.81%
4.95%
5.80%
4.96%
6.85%

Calcd
Assay
Calcd
Head Zn,% Head Cu, % Head Cu, %
0.17%
0.20%
0.20%
0.15%
0.24%
0.34%
0.18%
0.38%
0.36%
0.21%
0.50%
0.47%
0.28%
0.60%
0.58%
2.66%
1.52%
1.50%
0.27%
0.22%
0.22%
0.45%
0.13%
0.13%
0.45%
0.07%
0.07%
0.48%
0.23%
0.22%
0.71%
0.08%
0.08%
0.73%
0.14%
0.14%
0.85%
0.35%
0.35%
2.01%
0.08%
0.09%
3.01%
0.15%
0.16%
5.39%
0.27%
0.27%
5.44%
0.34%
0.35%
4.52%
0.48%
0.47%
6.31%
0.62%
0.64%

Table 13-5 Preliminary Bottle Roll Testing Drill Core Composites.

The Gangue Acid Consumption is the acid consumed in the test minus the acid associated with the
dissolved zinc and copper. Recoveries are based on calculated heads as noted in Table 13-5.

Test No. DC Comp.

DC-BR-01
1
DC-BR-02
2
DC-BR-03
3
DC-BR-04
4
DC-BR-05
5
DC-BR-06
6

pH
1.39 1.67
1.38 1.87
1.41 1.60
1.38 1.69
1.39 1.85
1.41 1.62

GAC, kg/t Zn Rec.,% Cu Rec., %

220.2
68.8%
68.2%
231.3
63.8%
73.6%
244.1
65.5%
70.9%
232.0
54.1%
75.3%
247.1
73.8%
83.6%
277.3
92.3%
87.7%

97 AC/1463772.11

DC-BR-07
DC-BR-08
DC-BR-09
DC-BR-10
DC-BR-11
DC-BR-12
DC-BR-13
DC-BR-14
DC-BR-15
DC-BR-16
DC-BR-17
DC-BR-18
DC-BR-19

7
8
9
10
11
12
13
14
15
16
17
18
19

1.35 1.51
1.42 1.60
1.35 1.47
1.37 1.54
1.29 1.50
1.27 1.50
1.25 1.54
1.38 1.62
1.27 1.62
1.40 1.61
1.39 1.64
1.36 1.68
1.37 1.56

154.9
285.9
284.2
199.0
304.2
274.7
290.7
259.7
297.7
231.9
213.6
209.2
292.0

73.1%
80.3%
78.1%
78.1%
81.5%
83.8%
67.8%
93.4%
87.9%
91.1%
90.4%
93.8%
94.4%

71.8%
74.8%
66.5%
71.9%
72.2%
69.8%
56.2%
76.6%
66.6%
71.2%
72.8%
81.4%
81.9%

Table 13-6 Preliminary Bottle Roll Results Drill Core Composites.

Interpretation of the recovery data in Table 13-6 is complicated by the variations in head assay. 24-hour
bottle roll recovery is plotted versus calculated head in Figure 13-12.
100%
90%

24 Hr. Leach Recovery, %

80%
70%
60%
50%

zinc
copper

40%
30%
20%
10%
0%
0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Calculated head, %

Figure 13-12 Recovery versus Calculated Head Prelim. Drill Core Composites.
Interestingly, the data points for copper and zinc fall on the same curve and both metals are represented
by data in Figure 13-13. The curve fit in Figure 13-13 indicates recovery is constant around 92.5% above
a head grade of 2% and proportional to grade below 2%.

98 AC/1463772.11

100

Metals Recovery ,%

90

80
y = m1 + m2*(1 - exp(-m3*x))
Value
Error
m1
64.77
2.4627
m2
28.042
2.9482
m3
1.0432
0.33559
Chisq
1151.9
NA

70

0.71706

60

NA

50
0

Calculated Head, %

Figure 13-13 Recovery versus Calculated Head Prelim. Drill Core Composites.
Additional bottle roll tests were conducted on the minus 4 mesh fraction of the drill core composites.
These tests were conducted at an 80% passing 48 mesh-of-grind for 24 hours. Samples were withdrawn
at 1 hrs, 2 hrs; 4 hrs; 8 hrs and 24 hours. Test conditions are included in Table 13-7.

Test No. DC Comp.

AL-DC-01
1
AL-DC-02
2
AL-DC-03
3
AL-DC-04
4
AL-DC-05
5
AL-DC-06
6
AL-DC-07
7
AL-DC-08
8
AL-DC-09
9
AL-DC-10
10
AL-DC-11
11
AL-DC-12
12
AL-DC-13
13
AL-DC-14
14
AL-DC-15
15
AL-DC-16
16
AL-DC-17
17
AL-DC-18
18
AL-DC-19
19

Assay
Head Zn,%
0.26%
0.16%
0.22%
0.24%
0.29%
3.90%
0.32%
0.58%
0.50%
0.59%
0.92%
0.83%
0.86%
2.26%
3.57%
5.55%
6.90%
5.50%
8.45%

Calcd
Head Zn,%
0.25%
0.15%
0.20%
0.23%
0.28%
3.60%
0.36%
0.56%
0.48%
0.56%
0.85%
0.82%
0.86%
2.12%
3.44%
5.27%
6.79%
5.40%
8.02%

Assay
Head Cu, %
0.25%
0.26%
0.46%
0.55%
0.71%
1.79%
0.27%
0.19%
0.09%
0.31%
0.12%
0.18%
0.48%
0.11%
0.19%
0.33%
0.45%
0.58%
0.80%

Calcd
Head Cu, %
0.24%
0.27%
0.44%
0.55%
0.70%
1.77%
0.29%
0.19%
0.09%
0.31%
0.12%
0.17%
0.48%
0.12%
0.20%
0.32%
0.44%
0.56%
0.77%

Table 13-7 Bottle Roll Testing Drill Core Composites.

99 AC/1463772.11

Zinc recoveries versus time are depicted in Figure 13-14. The variation of the 24-hour recovery is
representative of the performance of the earlier tests. Copper recovery as a function of time is shown in
Figure 13-15 and the 24-hour recovery is similar to that in Table 13-6.
100%
90%

Zinc Recovery, %

80%
70%
60%
50%
40%
30%
20%
10%

AL-DC-01

AL-DC-02

AL-DC-03

AL-DC-04

AL-DC-05

AL-DC-06

AL-DC-07

AL-DC-08

AL-DC-09

AL-DC-10

AL-DC-11

AL-DC-12

AL-DC-13

AL-DC-14

AL-DC-15

AL-DC-16

AL-DC-17

AL-DC-18

AL-DC-19

Average

0%
0

12

18

24

30

Leach Time, hours

Figure 13-14 Zinc Recovery versus Time Drill Core Composites.

100%
90%

Copper Recovery, %

80%
70%
60%
AL-DC-01

AL-DC-02

AL-DC-03

AL-DC-04

AL-DC-05

AL-DC-06

AL-DC-07

AL-DC-08

AL-DC-09

30%

AL-DC-10

AL-DC-11

AL-DC-12

20%

AL-DC-13

AL-DC-14

AL-DC-15

AL-DC-16

AL-DC-17

AL-DC-18

AL-DC-19

Average

50%
40%

10%
0%
0

12

18

24

30

Leach Time, hours

Figure 13-15 Copper Recovery versus Time Drill Core Composites.

Figure 13-16 shows the Gangue Acid Consumption as a function of time for the drill core composites.
The rate of consumption of acid by gangue appears to be slower than the recovery of metals but continues
throughout (and likely beyond) the test duration.

100 AC/1463772.11

400

Gangue Acid Consumption , kg/t

350
300

AL-DC-01
AL-DC-02

250

AL-DC-03
AL-DC-04
AL-DC-05

200

AL-DC-06
AL-DC-07

150

AL-DC-08
AL-DC-09

100

AL-DC-10
AL-DC-11

50

AL-DC-12

0
0

12

18

24

30

Leach Time, hours

Figure 13-16 GAC versus Time Drill Core Composites.

As discussed for Figures 13-12 and 13-13 recovery of metals in Figure 13-14 and 13-15 has a dependence
on head grade. Data for these tests are plotted in Figure 13-13. Figure 13-17 shows the same correlation
as in Figure 13-13 with a higher correlation; however the ultimate recovery is lower. Data for both zinc
and copper is included in Figure 13-17.
Since mesh-of-grind does not appear to have much impact on recovery, the difference in ultimate
recovery between Figures 13-13 and 13-17 is likely due to pH.
Metallurgical Samples and Location
In the opinion of IMC, the most representative metallurgical samples are the samples discussed in the
section Terrazas Ore Drill Core Composite Test. This metallurgical sampling program was based on
drillhole samples extracted from 491 sample intervals from 24 holes drilled by Constellation during 2004
and 2005. This amounts to about 1479 meters of drilling. The samples were combined into 19 bulk
composites to cover various ranges of zinc and copper grades. Figure 13-18 shows the distribution of the
holes that were used. The figure shows the meters of sample from each hole and the average zinc grade.
The Constellation 2004-2005 drilling was concentrated in Cerro Verde rather than Main Zone, which is
reflected in the figure. The samples are reasonable well distributed through the deposit and can be
considered representative of the various ore types and locations. Note that these are the samples that form
the basis for the recovery predictions.
The materials for the bulk samples described in herein were collected from areas relatively easy to access
including available underground openings. They do not represent a wide range of locations or grade
ranges; they tend to be relatively high grades compared with the average of the deposit. Recoveries for
these samples tend to be higher than for the drill core composites.
The samples described in the section Terrazas Ore Characterization Tests, are based on the relatively
fine, minus 6 mesh fraction, of the bulk samples. At the time the bottle roll tests were run on these
samples the process under consideration was screening the crusher product and treating the coarse

101 AC/1463772.11

fraction by heap leaching and the fine fraction by agitated leaching. These samples were used primarily
for preliminary work on effect of grind size, percent solids in the agitated leach, and pH, etc.
Mineral Resources
Table 14-1 shows the mineral resource of the Terrazas Property by resource class and deposit area (Cerro
Verde versus the Main Zone). It was developed by Michael G. Hester of IMC during September 2010,
but is considered current.
Table 14-1. Mineral Resource Estimate for Terrazas Zinc-Copper Project
Eq Zinc
Cutoff
(%)

Ore
Ktonnes

Total
Zinc
(%)

Soluble
Zinc
(%)

Total
Copper
(%)

Soluble
Copper
(%)

Equiv
Zinc
(%)

Contained Contained
Zinc
Copper
(mlbs)
(mlbs)

Resource Class/Zone
Measured Mineral Resource
Cerro Verde
0.89
3,853 3.664
3.259
0.314
0.237
4.502
311.2
Main Zone
0.94
23,532 0.603
0.469
0.406
0.308
1.753
312.8
Total Measured Resource
27,385 1.034
0.862
0.393
0.298
2.140
624.1
Indicated Mineral Resource
Cerro Verde
0.89
23,937 3.085
2.683
0.298
0.211
3.880
1,628.0
Main Zone
0.94
29,150 0.611
0.480
0.378
0.275
1.680
392.7
Total Indicated Resource
53,087 1.727
1.473
0.342
0.246
2.672
2,020.7
Measured/Indicated Resource
Cerro Verde
0.89
27,790 3.165
2.763
0.300
0.215
3.966
1,939.2
Main Zone
0.94
52,682 0.607
0.475
0.391
0.290
1.713
705.5
Total Measured/Indicated
80,472 1.491
1.265
0.359
0.264
2.491
2,644.7
Inferred Mineral Resource
Cerro Verde
0.89
4,311 1.990
1.392
0.335
0.169
2.884
189.1
Main Zone
0.94
2,286 0.768
0.669
0.400
0.232
1.899
38.7
Total Inferred Resource
6,597 1.567
1.141
0.358
0.191
2.543
227.8
Notes:
Zinc Equivalent = Total Zinc + 2.67 x Total Copper for Cerro Verde, Cutoff for Mineral Resource = 0.89% Zinc Equivalent
Zinc Equivalent = Total Zinc + 2.83 x Total Copper for Main Zone, Cutoff for Mineral Resource = 0.94% Zinc Equivalent
Total Material in Cone Shell
331,198 Ktonnes
Waste:Ore Ratio
3.12
(Inferred as Waste)
Waste:Ore Ratio
2.80
(Inferred as Ore)

26.7
210.6
237.3
157.3
242.9
400.2
183.9
453.5
637.5
31.8
20.2
52.0

Measured and indicated mineral resources amount to 80.5 million tonnes at 1.49% total zinc and 0.36%
total copper. This also amounts to 2.64 billion pounds of contained zinc and 637.5 million pounds of
contained copper. Inferred resource is an additional 6.6 million tonnes at 1.57% total zinc and 0.36%
total copper.
The resources are contained within a floating cone pit shell and are compliant with the reasonable
prospects for economic extraction clauses of Canadas NI 43-101 regulations and also Australias JORC
code. The cone shell is based on a zinc price of US$1.00 per pound and a copper price of US$3.15 per
pound.
Table 14-2 shows the cost and recovery parameters used to develop the cone shell. The mining cost of
$1.10 per total tonne is a preliminary IMC estimate based on bulk open pit mining. The process and
general and administrative cost and the process recoveries are based on Constellations 2007 scoping
study (the 2007 Scoping Study) that considered grinding and agitated leach followed by copper and
zinc extraction by solvent extraction and electrowinning. IMC escalated the operating cost estimates
from that report by 10% to approximate 3rd quarter 2010 costs. This resulted in unit operating costs of
$12.94 per ore tonne plus $0.167 per pound zinc and $0.480 per pound copper.

102 AC/1463772.11

Table 14-2. Economic Parameters for Resource Determination

Parameter
Zinc Price Per Pound
Copper Price Per Pound
Mining Cost Per Total Tonne
Processing Cost Per Ore Tonne
G&A Cost Per Ore Tonne
Zinc Extraction/Marketing Per Pound
Copper Extraction/Marketing Per Pound
Zinc Recovery (% of Total Zinc)
Copper Recovery (% of Total Copper)
Royalty (% of Gross Revenue)
NSR Factor for Zinc
NSR Factor for Copper
Copper Multipier for Zinc Equivalent
Breakeven Zinc Equivalent Cutoff
Internal Zinc Equivalent Cutoff

CV
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
(%)
(%)
(%)
(US$)
(US$)
(none)
(%Zn)
(%Zn)

1.00
3.15
1.100
12.940
1.452
0.167
0.480
90.0%
75.0%
2.0%
16.13
43.11
2.67
0.96
0.89

MZ
1.00
3.15
1.100
12.940
1.452
0.167
0.480
85.0%
75.0%
2.0%
15.23
43.11
2.83
1.02
0.94

The 10% escalation is somewhat arbitrary, but the producer price index for industrial chemicals is up
about 15% compared with mid-2007 and the producer price index for steel foundry products is up about
5% (grinding balls, crusher liners, etc.). Of course, acid (or sulfur) costs have a large impact and will
need detailed market studies. The power cost is dependent on whether or not an acid plant is constructed
for Terrazas and the amount of co-generated power the acid plant produces.
The 2007 Scoping Study also documented expected head grade versus recovery relations for copper and
zinc based on bottle roll testwork. The recoveries on Table 14-2 are averages based on the provided
relationships.
Based on the parameters in Table 14-2:
For Cerro Verde:
Zinc Equivalent = Total Zinc + 2.67 x Total Copper
Breakeven Zinc Equivalent Cutoff
0.96%
Internal Zinc Equivalent Cutoff
0.89%
For Main Zone:
Zinc Equivalent = Total Zinc + 2.83 x Total Copper
Breakeven Zinc Equivalent Cutoff
1.02%
Internal Zinc Equivalent Cutoff
0.94%
Resources on Table 14-1 are tabulated at the internal cutoff grades of 0.89% zinc equivalent for Cerro
Verde and 0.94% zinc equivalent for Main Zone.
Measured, indicated, and inferred skarn resource blocks were allowed to contribute to the development of
the floating cone shell used for the resource tabulation; non-skarn blocks (all inferred) were treated as
waste to develop the cone shell. However, non-skarn blocks inside the shell are tabulated on Table 14-1.
Total material in the cone shell is 331.2 million tonnes. An overall slope angle of 45o was used to
develop the cone shell. Knight-Piesold did a slope stability report as part of the 2005 study. The 45o

103 AC/1463772.11

overall slope angle is based on interramp slope angles specified by that study and consideration of the
impact of haul roads. Figure 14-1 shows the cone shell used for this the mineral resource estimation.
There is, of course, no guaranty that any of the mineral resource will be converted to mineral reserve.
There is also no guaranty that inferred mineral resource will be upgraded to measured or indicated
mineral resource or mineral reserves.
IMC does not know of any environmental, permitting, legal, title, taxation, socio-economic, marketing, or
political issue that might materially impact the mineral resource. There is, however, some risk due to
surface ownership issues. Additional surface rights will be required to develop the Terrazas project.

Figure 14-1. Floating Cone for Resource Calculation (IMC, September 2010
Description of the Block Model
The mineral resource stated Mineral Resources is based on an ore resource block model developed by
IMC during July and August 2010. It represents a minor update of the 2005 model developed by IMC.
The key points of the model are summarized as follows:
1.

The model is based on regular blocks of size 10m by 10m by 5m high. The model is not rotated.

2.
A geologic interpretation of the skarn, marble, monzonite, and rhyolite rock types was done and
incorporated into the model during 2005. Constellation personnel did the rock type interpretation on
cross sections. IMC reconciled the sections into an interpretation on level maps that was digitized and
used to assign model blocks. For this update level maps with the 2005 geology and new drilling were
plotted and revisions made to adjust for the new data. The changes are considered to be relatively minor.

104 AC/1463772.11

3.
Three faults were also interpreted and put in the model. The most important is the Cerro Verde
Fault that separates the Cerro Verde and Main Zone orebodies. The Bronce Fault separates the Main
Zone orebody into east and west portions, but does not appear to be very significant from grade modeling
perspective.
4.
Block grade estimations were based on regular 5m bench composites. Assays were length
weighted for each composite. Lithology was first assigned based on the majority rock type in each
composite. Lithology and fault zone codes were reviewed against model rock types and final values were
set to be consistent with the model interpretation.
5.
Main Zone copper composites were capped at 3.0% copper. This affected seven composites of
4.55%, 4.39%, 4.02%, 3.88%, 3.82%, 3.47%, and 3.32%. Main Zone zinc composites were capped at
8.5%, affecting two composites of 20.0% and 10.3%.
6.
Cerro Verde copper composites were capped at 2.5% copper, affecting one composite of 4.88%
copper. Cerro Verde zinc composites were capped at 20.0%, affecting two composites of 30.17% and
27.2%. IMC capped composites, instead of assays (for both Main Zone and Cerro Verde) because there
were considerable differences in sample intervals for the various drilling campaigns.
7.
Rock type boundaries were respected for all grade estimations. Skarn blocks were only estimated
with skarn composites, marble blocks were only estimated with marble composites, etc. The Cerro Verde
Fault was also a hard boundary for grade estimation purposes.
8.
Additional grade zones were established in the skarn by indicator kriging to segregate blocks into
higher and lower grade populations. First, an ore/waste code of 1 for ore and 0 for waste was assigned to
the 5m bench composites. For Main Zone and Cerro Verde total copper a threshold grade of 0.1% copper
was used. In general, the ore zones were established to have a minimum thickness of 5m (one bench).
Ore zones could incorporate 5m (one bench) of internal waste if the average of the zone remained about
0.1% copper. Finally, consecutive ore zones with a bench of waste between them were consolidated into
a single zone. This procedure incorporates some dilution into the zone codes. Ore/waste zone codes were
also established for Main Zone zinc, using the same methods, at a threshold cutoff grade of 0.15% zinc.
For Cerro Verde zinc three zones were established, waste, low grade, and high grade at threshold cutoff
grades of 0.15% and 3% respectively. Note that copper zones and zinc zones were established
independently of each other. The ore codes in the composites were then used to estimate block ore code
values by an indicator kriging (actually inverse distance). This estimation provided a value between 0
and 1 for each block that may be interpreted as the probability that the block is above specified grade
threshold to be considered in one of the ore zones. Blocks with a probability greater than or equal to 0.5
were assigned a code to designate them inside the relevant ore zone.
9.
Variograms were developed for total copper and total zinc in Main Zone and Cerro Verde and
block grades were estimated by ordinary kriging. Table 14-3 shows all the estimation parameters. Note
for all non-skarn rock types a search radius of 50m by 50m by 15m vertical was used. This was to limit
grade extrapolation in these sparsely drilled areas outside the skarn.
10.
To estimate the acid soluble copper and zinc grades the ratio of soluble to total copper (and zinc)
were calculated for each composite and used to krige ratios for the blocks. Estimation parameters were
the same as used for total copper and zinc. The block ratios were then multiplied by the total copper
(zinc) to calculate the block soluble values. This approach was necessary because soluble copper and
zinc assays were not done for assay intervals with total copper and zinc less than 0.1%.
11.
Block acid consumption values were also estimated by ordinary kriging. Rock type boundaries
were respected, but the grade boundaries were not since acid consumption is related more to gangue
mineralogy than metal grades. A review by IMC showed poor correlation between acid consumption and
105 AC/1463772.11

metal grades. Blocks with missing acid consumption values due to sparse data were set to the mean value
of the composites on a rock type basis.
12.
A resource classification code (measured, indicated, and inferred resources) was also assigned to
the model by IMC. Section 14.4 provides the details of this assignment. All non-skarn blocks with grade
estimates were assigned as inferred resource; they were not allowed to be measured or indicated resource.
13.
Block bulk densities were also assigned to the model based on rock type, zone (Main Zone versus
Cerro Verde), and also based on grade. More details on the specific gravity data and bulk density
assignments are in Section 14.3.
The differences in approach between this model and the 2005 model are relatively minor and are
summarized as follows:

Ore zones were established by inverse distance cubed for this model versus ordinary kriging in
the 2005 study. This should have the effect of unsmoothing final block grade estimates by a small
amount.

Maximum number of composites was reduced from 15 to 12. Also the maximum number of
composites per holes was set at three; this constraint was not used in 2005. Again, these tend to
unsmooth block grades some.

There was a subtle difference in setting ore zone codes for the composites (point 8 above). In
2005 the composite zone codes were set by back assignment from the model after indicator kriging,
instead of being pre-set before the indicator kriging. The purpose of this is to reduce mis-assignment of
ore zone codes.

Table 14-3. Block Grade Estimation Parameters

Assay
Tot Zn
Tot Zn

Rock
Type
Skarn
Skarn

Phi
(deg)
-22.5
-22.5

Psi
(deg)
67
67

Area
CV
CV

CV

Non-skarn Total Zinc, Also aszn/tzn ratio

4
5
6
7
8
9

CV
CV
CV
CV
CV
CV

Tot Cu
Skarn 0.1% Discriminator
Tot Cu
Skarn Total Copper Grade, Also ascu/tcu ratio
Tot Cu Non-skarn Total Coper, Also ascu/tcu ratio
Acid Con
Skarn Skarn acid consumption (kg/t)
Acid Con Non-skarn Non-skarn acid consumption (kg/t)
Tot Zn
Skarn Special kriging for resource classification

225
225
0
0
0
225

-22.5
-22.5
0
-67.5
0
-22.5

67
67
0
0
0
67

10
11
12
13
14
15
16
17
18

MZ
MZ
MZ
MZ
MZ
MZ
MZ
MZ
MZ

Tot Zn
Skarn 0.1% Discriminator
Tot Zn
Skarn Total Zinc Grade, Also aszn/tzn ratio
Tot Zn Non-skarn Total Zinc, Also aszn/tzn ratio
Tot Cu
Skarn 0.1% Discriminator
Tot Cu
Skarn Total Copper Grade, Also ascu/tcu ratio
Tot Cu Non-skarn Total Coper, Also ascu/tcu ratio
Acid Con
Skarn Skarn acid consumption (kg/t)
Acid Con Non-skarn Non-skarn acid consumption (kg/t)
Tot Cu
Skarn Special kriging for resource classification

-67.5
-67.5
0
-67.5
-67.5
0
45
0
-67.5

-22.5
-22.5
0
-22.5
-22.5
0
-22.5
0
-22.5

0
0
0
0
0
0
0
0
0

Tot Zn

Description
0.15% and 3.0% Discriminator
Total Zinc Grade, Also aszn/tzn ratio

Theta
(deg)
225
225

Item
1
2

R1
(m)
150
88
200
88
200
90
75
75
150
150
88
200
150
130
130
200
175
175
175
175
175

R2
(m)
112
66
150
88
200
90
75
75
60
60
66
150
200
100
130
160
110
175
120
120
110

R3
(m)
38
25
50
25
50
35
25
25
60
60
25
50
75
50
50
75
50
50
90
90
50

IDS
Spherical Variogram Parameters
Weight Nugget
C
Sill
3
N.A.
N.A.
N.A.
N.A.
4.25
3.77
3.68
11.7
N.A.
4.25
3.77
3.68
11.7
3
N.A.
N.A.
N.A.
N.A.
0.0463
0.0463
0.0926
N.A.
0.0463
0.0463
0.0926
N.A.
0
30,600
30,600
N.A.
0
30,600
30,600
N.A.
0.25
0.375
0.375
1.000
3
N.A.
N.A.
N.A.
N.A.
0.270
0.383
0.653
N.A.
0.270
0.383
0.653
3
N.A.
N.A.
N.A.
N.A.
0.0400
0.0246
0.0646
N.A.
0.0400
0.0246
0.0646
N.A.
6,500
8,100
14,600
N.A.
6,500
8,100
14,600
N.A.
0.25
0.75
1.00

S1
(m)
N.A.
150

S2
(m)
N.A.
112

S3
(m)
N.A.
38

Min.
Max. Max Per
Comps Comps Hole
1
12
3
1
12
3

50

50

15

12

N.A.
125
50
150
50
134

N.A.
125
50
60
50
100

N.A.
40
15
40
15
34

1
1
1
1
1
1

12
12
12
12
12
8

3
3
3
3
3
1

N.A.
158
50
N.A.
175
50
175
50
117

N.A.
122
50
N.A.
110
50
120
50
74

N.A.
25
15
N.A.
25
15
25
15
17

1
1
1
1
1
1
1
1
1

12
12
12
12
12
12
12
12
8

3
3
3
3
3
3
3
3
1

Description of Parameters:
theta
Rotation of Y (north) axis clockwise to principal direction in horizontal plane.
phi
Dip of principal axis, negative is down
psi
Rotation around principal axis, clockwise is negative (from perspective of looking down axis back toward origin.
R1,R2,R3
Variogram ranges in primary, secondary, and tertiary directions respectively. Additional lines are for nested variogram models.
S1,S2,S3
Search radii in primary, secondary, and tertiary directions respectively.
Spherical Variogram Parameter units are assay units squared, I.e. (%)^2, (kg/t)^2, discriminators for indicator kriging are dimensionless.

Specific Gravity Determinations

Three sets of specific gravity measurements were available for this study.
As part of their 2000 study, Summo selected 16 samples from available Newcoast core and sent them to
Resource Development Inc.s laboratory in Wheat Ridge Colorado. The 16 samples by rock type
included two intrusive rocks (monzonite), one limestone, one marble, one hornfel, and 11 garnet skarns

106 AC/1463772.11

(three relatively unmineralized and eight mineralized). Seventeen measurements were actually done since
one sample was large enough to make two sub-samples. The tests were by standard water immersion.
The tests were first run on un-waxed samples, and then the samples were coated in wax and the tests done
again. IMC received the raw data for these tests and they appear to have been correctly done, including
adjusting for the wax as a tare for the waxed samples. Samples were oven dried before testing. The tests
were done in November 2000.
At the request of IMC, Constellation pulled 24 core samples from their recent core drilling to be used for
unconfined uniaxial compressive strength testing. Twenty three of the samples survived shipping and
were sent to Call & Nicholas, Inc.s lab in Tucson. The cylinders prepared for the testing were carefully
measured for diameter and length by micrometer and also weighed, so a weight and volume, and resultant
specific gravity could be calculated from this data. The samples were not oven dried, but moisture
content was very low. By rock type this data represented five limestone/marble samples, six rhyolite
samples, six mineralized skarn samples and six unmineralized skarn samples. These tests were completed
in May 2005.
During May 2005, IMC specified 146 samples by hole id and depth to be pulled from Constellation 2004
and 2005 core for additional specific gravity measurements. By rock type these were 13 rhyolite samples,
11 monzonite samples, 24 limestone/marble samples, and 98 garnet skarn samples. On a rock type basis
IMC calculated an approximate sampling interval to evenly distribute the samples through the available
core. The target of about a dozen rhyolite and monzonite samples was based on these rock types are
generally unmineralized and represent only a modest amount of total expected pit tonnage. Twenty four
limestone/ marble samples was because this rock type represents a much larger tonnage and also
represents rocks in various states of alteration. The garnet skarn was considered to be quite variable with
respect to specific gravity so a considerably larger sample base was specified. This also gives enough
samples to look for any sub-populations of the skarn that might be present.
Constellation personnel augmented IMCs list so the number of samples pulled amounted to 174 samples.
By rock types the actual samples delivered to the lab were 10 rhyolite samples, 12 monzonite samples, 24
limestone/marble samples, and 128 garnet skarn samples. In particular, since recent core holes were
mostly in the Cerro Verde area, Constellation personnel pulled additional samples to provide more
coverage in the Main Zone.
The samples were sent to Metcon lab in Tucson, Arizona. Tests were done by standard water immersion
of waxed samples. The raw measurement data was provided to IMC for processing. The tests were
completed in July 2005.
Table 14-4 summarizes the results by rock type for the accepted measurements. The table also shows
bulk density values used for resource calculation. In particular, note that skarn densities were reduced 3%
to adjust for voids in the rock mass. This value is an estimate by IMC based on observing the rock mass
in underground openings at the site.

107 AC/1463772.11

Table 14-4: Summary of Specific Gravity Data and Block Bulk Density Parameters
Sample Statistics
No. of
Samples
Mean
Std. Dev.
21
2.696
0.008
9
2.606
0.031
15
2.506
0.087
13
2.496
0.115

Population Description
High Density Limestone/Marble
Low Density Limestone/Marble
Rhyolite
Monzonite
Mineralized Skarn (> 0.12% copper)
Cerro Verde Mineralized Skarn
38
2.787
Main Zone Mineralized Skarn
46
2.932
Unmineralized Skarn (<= 0.12% copper)
Cerro Verde Unmineralized Skarn
31
2.990
Main Zone Unmineralized Skarn
35
3.093
Note: Ktonnes Per Block is Based on 10m x 10m x 5m high blocks

Block Model Parameters

Bulk
Bulk
Ktonnes/
Factor
Density
Block
1.00
2.70
1.348
1.00
2.61
1.303
1.00
2.51
1.253
1.00
2.50
1.248

0.285
0.321

0.97
0.97

2.70
2.84

1.350
1.422

0.265
0.300

0.97
0.97

2.90
3.00

1.450
1.500

Resource Classification
The resource classification was done as follows for the Terrazas Property. A special grade kriging was
done, specifically for the purpose of resource classification. Note that the grades from this kriging were
not used, but the number of samples and kriging standard deviation from it were used for the resource
classification. A zinc grade kriging was used for resource classification in Cerro Verde and a copper
grade kriging in Main Zone.
1.
The special krigings (total zinc in Cerro Verde and copper in Main Zone) were done as follows.
The maximum search radii for the kriging were set to 67% (2/3rds) of the variogram range. The
variogram model was also normalized to a sill value of 1.0 and a nugget of 0.25. A maximum of one
composite per drill hole was allowed in the kriging and population boundaries were ignored. This
procedure basically counts the number of holes within 2/3 of the variogram range and also calculates a
kriging standard deviation with this data. These values (number of holes and kriging standard deviation)
are stored in the model.
2.
Probability plots of block kriging standard deviations by number of holes are plotted. See Figure
14-2 for Cerro Verde.
3.
First, all blocks with kriged grades are set to a default of inferred resource. Note that for blocks
with the closest hole more than 2/3rd of the variogram range that is their final classification. They will
not be examined in the special kriging.
4.
The plots of kriging standard deviations indicate that blocks estimated with four or more holes
generally have standard deviations less than 1.0. Blocks kriged with four or more holes within 2/3rds of
the variogam range are classified as indicated resource.
5.
Blocks kriged with three holes and with a kriging standard deviation less than 1.0 are classified as
indicated resource. This is about 83% of the blocks kriged with three holes. Blocks kriged with two
holes and with a kriging standard deviation less than 0.9 are also classified as indicated resource. This is
about 40% of the blocks kriged with only two holes. Blocks kriged with one hole and with a kriging
standard deviation less than 0.7 (1.2% of these blocks) are also classified as indicated resource.
6.
Blocks with a kriging standard deviation less than 0.5 are then re-classified as measured resource.
Note from the graph that one hole cannot develop measured resource and blocks kriged with two and
three holes will develop only minimal quantities of measured resource.

108 AC/1463772.11

Visually the described method appears to give good results. Indicated resources are not extrapolated far
outside of the drilling data and measured resources are developed only in well-drilled areas. Blocks
kriged with one and two holes can generate indicated resources only very close to the holes.

Figure 14-2. Resource Classification for Cerro Verde (IMC, September 2010)
Mineral Resource at Other Cutoff Grades
Tables 14-5 and 14-6 show the mineral resource tabulation at zinc equivalent cutoff grades of 0.5% and
1.3% respectively to show potential variation of the resource with cutoff grade. Both tabulations are
inside the same cone shell used for the mineral resource presented in Table 14-1. It can be seen that
Cerro Verde is only moderately sensitive to cutoff grade within these ranges. Main Zone, however, is
quite sensitive to cutoff grade.
Table 14-5. Mineral Resource Estimate for Terrazas Zinc-Copper Project - 0.5% Eq Zn Cutoff
Resource Class/Zone
Measured Mineral Resource
Cerro Verde
Main Zone
Total Measured Resource
Indicated Mineral Resource
Cerro Verde
Main Zone
Total Indicated Resource
Measured/Indicated Resource
Cerro Verde
Main Zone
Total Measured/Indicated
Inferred Mineral Resource
Cerro Verde
Main Zone
Total Inferred Resource

Eq Zinc
Cutoff
(%)

Ore
Ktonnes

Total
Zinc
(%)

Soluble
Zinc
(%)

Total
Copper
(%)

Soluble
Copper
(%)

Equiv
Zinc
(%)

Contained Contained
Zinc
Copper
(mlbs)
(mlbs)

0.50
0.50

4,468
34,516
38,984

3.209
0.450
0.766

2.848
0.347
0.634

0.288
0.346
0.339

0.218
0.261
0.256

3.978
1.430
1.722

316.1
342.4
658.5

28.4
263.3
291.7

0.50
0.50

27,495
44,578
72,073

2.732
0.438
1.313

2.370
0.339
1.114

0.275
0.322
0.304

0.195
0.234
0.219

3.468
1.350
2.158

1,656.0
430.5
2,086.5

166.7
316.5
483.1

0.50
0.50

31,963
79,094
111,057

2.799
0.443
1.121

2.437
0.342
0.945

0.277
0.332
0.316

0.198
0.246
0.232

3.539
1.385
2.005

1,972.1
772.9
2,745.0

195.1
579.7
774.8

0.50
0.50

7,380
4,931
12,311

1.293
0.511
0.980

0.905
0.429
0.714

0.252
0.260
0.255

0.129
0.156
0.140

1.964
1.247
1.677

210.4
55.6
265.9

41.0
28.3
69.3

109 AC/1463772.11

Table 14-6. Mineral Resource Estimate for Terrazas Zinc-Copper Project - 1.3% Eq Zn Cutoff
Resource Class/Zone
Measured Mineral Resource
Cerro Verde
Main Zone
Total Measured Resource
Indicated Mineral Resource
Cerro Verde
Main Zone
Total Indicated Resource
Measured/Indicated Resource
Cerro Verde
Main Zone
Total Measured/Indicated
Inferred Mineral Resource
Cerro Verde
Main Zone
Total Inferred Resource

Eq Zinc
Cutoff
(%)

Ore
Ktonnes

Total
Zinc
(%)

Soluble
Zinc
(%)

Total
Copper
(%)

Soluble
Copper
(%)

Equiv
Zinc
(%)

Contained Contained
Zinc
Copper
(mlbs)
(mlbs)

1.30
1.30

3,372
15,890
19,262

4.088
0.788
1.366

3.643
0.618
1.148

0.337
0.451
0.431

0.254
0.341
0.326

4.988
2.065
2.577

303.9
276.0
579.9

25.1
158.0
183.0

1.30
1.30

21,531
19,504
41,035

3.355
0.774
2.128

2.921
0.615
1.825

0.314
0.420
0.364

0.221
0.305
0.261

4.192
1.962
3.132

1,592.5
332.8
1,925.3

149.0
180.6
329.6

1.30
1.30

24,903
35,394
60,297

3.454
0.780
1.885

3.019
0.616
1.609

0.317
0.434
0.386

0.225
0.321
0.282

4.300
2.008
2.955

1,896.4
608.9
2,505.3

174.1
338.6
512.7

1.30
1.30

2,921
1,549
4,470

1.293
1.034
1.203

0.905
0.903
0.904

0.252
0.442
0.318

0.129
0.240
0.167

1.964
2.286
2.076

83.3
35.3
118.6

16.2
15.1
31.3

The case presented on Table 14-5, at the 0.5% equivalent zinc cutoff grade, would require a less
expensive process than what is presented as the base case economics (Table 14-2) to meet the reasonable
prospects for economic extraction clause of NI 43-101, particularly for Main Zone. This could potentially
be achieved with lower acid prices, a successful pre-concentration process that would limit the amount of
material to leach, or different reagents.
2005 Versus 2010 Resource Models and Cone Shells
This section provides a comparison of the 2005 and 2010 resource models and cone shells used to report
mineral resource results.
Table 14-7 compares the 2010 model with the 2005 model inside the cone shell used for the 2005 mineral
resource. The comparison is based on 2010 economic and recovery parameters so Cerro Verde is
presented at a 0.89% zinc equivalent cutoff grade and Main Zone at a 0.94% cutoff grade. Because of
this difference in economics the 2005 results shown on the table are not the same as the 2005 mineral
resource. It can be seen that in terms of measured plus indicated mineral resource for both zones the 2010
model contains 2.4% more resource tonnes at a 6.6% higher total zinc grade and a 4.4% higher copper
grade.
Most of the increase in resource tonnes is in the Cerro Verde indicated resource category. A focus of the
2006 drilling was to upgrade some deep, high grade, Cerro Verde zinc resource. Note that though the
Cerro Verde inferred resource tonnes have not decreased much, the zinc grade has decreased
significantly; the higher grade inferred zinc in the 2005 model has been upgraded.
Table 14-8 compares the 2010 cone shell with the 2005 cone shell for the 2010 model. The 2010 shell is
slightly larger; measured and indicated resource increased 6.4% in terms of resource tonnes at a 1.4%
lower total zinc grade and 1.2% higher copper grade. Most of this increased tonnage (and lower) is in
Main Zone; the new cone shell pulled in some additional resource, though at a lower grade.
Table 14-9 shows the cumulative of effect of model and cone shell. It compares the 2005 model in the
2005 cone shell with the 2010 model in the 2010 cone shell. Measured and indicated mineral resource
increased 8.9% at a 5.1% higher zinc grade and 5.7% higher copper grade.

110 AC/1463772.11

Table 14-7. 2010 Resource Model Vs 2005 Resource Model Inside 2005 Resource Cone Shells - 2010 Economic Parameters
Resource
Class
Meas

Ind

Meas/Ind

Inf

Zone
CV
MZ
Total
CV
MZ
Total
CV
MZ
Total
CV
MZ
Total

Eq Zn
Cutoff
0.89
0.94
0.89
0.94
0.89
0.94
0.89
0.94

Ore
Ktonnes
3,749
24,178
27,927
20,645
25,305
45,950
24,394
49,483
73,877
3,480
1,371
4,851

2005 Resource Model in 2005 Cone Shell

Eq Zn
Tot Zn
Sol Zn
Tot Cu
Sol Cu
%
%
%
%
%
3.882
3.109
2.763
0.289
0.223
1.718
0.611
0.476
0.391
0.299
2.009
0.946
0.783
0.377
0.289
3.738
2.995
2.590
0.278
0.201
1.641
0.653
0.513
0.349
0.261
2.583
1.705
1.446
0.317
0.234
3.760
3.013
2.617
0.280
0.204
1.679
0.633
0.495
0.370
0.280
2.366
1.419
1.196
0.340
0.255
6.057
5.044
3.685
0.380
0.215
1.403
0.358
0.276
0.369
0.261
4.742
3.720
2.722
0.377
0.228

Acid
Ore
kg/t
Ktonnes
317.4
3,808
220.0
22,370
233.1
26,178
344.4
22,605
193.9
26,868
261.5
49,473
340.3
26,413
206.7
49,238
250.8
75,651
370.4
3,207
316.4
1,804
355.1
5,011

2010 Resource Model in 2005 Cone Shell

Eq Zn
Tot Zn
Sol Zn
Tot Cu
Sol Cu
%
%
%
%
%
4.491
3.653
3.256
0.314
0.238
1.767
0.622
0.485
0.405
0.310
2.163
1.063
0.888
0.392
0.300
3.855
3.055
2.687
0.300
0.216
1.689
0.652
0.514
0.366
0.273
2.679
1.750
1.507
0.336
0.247
3.946
3.141
2.769
0.302
0.220
1.724
0.638
0.501
0.384
0.290
2.500
1.512
1.293
0.355
0.266
2.536
1.606
1.115
0.348
0.184
1.846
0.536
0.450
0.463
0.263
2.288
1.221
0.876
0.389
0.212

Acid
Ore
kg/t
Ktonnes
302.4
1.6%
223.3
-7.5%
234.8
-6.3%
337.2
9.5%
194.2
6.2%
259.5
7.7%
332.2
8.3%
207.4
-0.5%
251.0
2.4%
457.5
-7.8%
340.8
31.6%
415.5
3.3%

Eq Zn
%
15.7%
2.9%
7.7%
3.1%
2.9%
3.7%
4.9%
2.7%
5.6%
-58.1%
31.6%
-51.8%

Percent Difference
Tot Zn
Sol Zn
Tot Cu
%
%
%
17.5%
17.8%
8.7%
1.8%
1.9%
3.6%
12.3%
13.4%
3.8%
2.0%
3.7%
7.9%
-0.2%
0.2%
4.9%
2.6%
4.2%
5.9%
4.2%
5.8%
7.9%
0.8%
1.2%
3.8%
6.6%
8.1%
4.4%
-68.2%
-69.7%
-8.4%
49.7%
63.0%
25.5%
-67.2%
-67.8%
3.3%

Sol Cu
%
6.7%
3.7%
3.7%
7.5%
4.6%
5.5%
7.8%
3.6%
4.2%
-14.4%
0.8%
-6.8%

Acid
kg/t
-4.7%
1.5%
0.7%
-2.1%
0.2%
-0.8%
-2.4%
0.3%
0.1%
23.5%
7.7%
17.0%

Acid
Ore
kg/t
Ktonnes
303.6
1.2%
224.2
5.2%
235.4
4.6%
335.9
5.9%
195.2
8.5%
258.6
7.3%
331.5
5.2%
208.1
7.0%
250.7
6.4%
418.0
34.4%
372.7
26.7%
402.3
31.7%

Eq Zn
%
0.2%
-0.8%
-1.1%
0.6%
-0.5%
-0.3%
0.5%
-0.6%
-0.4%
13.7%
2.9%
11.2%

Percent Difference
Tot Zn
Sol Zn
Tot Cu
%
%
%
0.3%
0.1%
0.0%
-3.1%
-3.3%
0.2%
-2.8%
-3.0%
0.3%
1.0%
-0.1%
-0.7%
-6.3%
-6.6%
3.3%
-1.3%
-2.2%
1.8%
0.8%
-0.2%
-0.7%
-4.9%
-5.2%
1.8%
-1.4%
-2.1%
1.2%
23.9%
24.8%
-3.7%
43.3%
48.7%
-13.6%
28.3%
30.4%
-8.2%

Sol Cu
%
-0.4%
-0.6%
-0.5%
-2.3%
0.7%
-0.3%
-2.7%
0.0%
-0.7%
-8.2%
-11.8%
-10.2%

Acid
kg/t
0.4%
0.4%
0.2%
-0.4%
0.5%
-0.3%
-0.2%
0.3%
-0.1%
-8.6%
9.4%
-3.2%

Acid
Ore
kg/t
Ktonnes
303.6
2.8%
224.2
-2.7%
235.4
-1.9%
335.9
15.9%
195.2
15.2%
258.6
15.5%
331.5
13.9%
208.1
6.5%
250.7
8.9%
418.0
23.9%
372.7
66.7%
402.3
36.0%

Eq Zn
%
16.0%
2.0%
6.5%
3.8%
2.4%
3.4%
5.5%
2.0%
5.3%
-52.4%
35.4%
-46.4%

Percent Difference
Tot Zn
Sol Zn
Tot Cu
%
%
%
17.9%
18.0%
8.7%
-1.3%
-1.5%
3.8%
9.2%
10.0%
4.2%
3.0%
3.6%
7.2%
-6.4%
-6.4%
8.3%
1.2%
1.9%
7.8%
5.1%
5.6%
7.1%
-4.1%
-4.0%
5.7%
5.1%
5.8%
5.7%
-60.5%
-62.2%
-11.8%
114.5%
142.4%
8.4%
-57.9%
-58.1%
-5.1%

Sol Cu
%
6.3%
3.0%
3.2%
5.0%
5.4%
5.2%
4.9%
3.6%
3.5%
-21.4%
-11.1%
-16.3%

Acid
kg/t
-4.3%
1.9%
1.0%
-2.5%
0.7%
-1.1%
-2.6%
0.7%
0.0%
12.9%
17.8%
13.3%

Table 14-8. 2010 Resource Model in 2010 vs 2005 Resource Cone Shells - 2010 Economic Parameters
Resource
Class
Meas

Ind

Meas/Ind

Inf

Zone
CV
MZ
Total
CV
MZ
Total
CV
MZ
Total
CV
MZ
Total

Eq Zn
Cutoff
0.89
0.94
0.89
0.94
0.89
0.94
0.89
0.94

Ore
Ktonnes
3,808
22,370
26,178
22,605
26,868
49,473
26,413
49,238
75,651
3,207
1,804
5,011

2010 Resource Model in 2005 Cone Shell

Eq Zn
Tot Zn
Sol Zn
Tot Cu
Sol Cu
%
%
%
%
%
4.491
3.653
3.256
0.314
0.238
1.767
0.622
0.485
0.405
0.310
2.163
1.063
0.888
0.392
0.300
3.855
3.055
2.687
0.300
0.216
1.689
0.652
0.514
0.366
0.273
2.679
1.750
1.507
0.336
0.247
3.946
3.141
2.769
0.302
0.220
1.724
0.638
0.501
0.384
0.290
2.500
1.512
1.293
0.355
0.266
2.536
1.606
1.115
0.348
0.184
1.846
0.536
0.450
0.463
0.263
2.288
1.221
0.876
0.389
0.212

Acid
Ore
kg/t
Ktonnes
302.4
3,853
223.3
23,532
234.8
27,385
337.2
23,937
194.2
29,150
259.5
53,087
332.2
27,790
207.4
52,682
251.0
80,472
457.5
4,311
340.8
2,286
415.5
6,597

2010 Resource Model in 2010 Cone Shell

Eq Zn
Tot Zn
Sol Zn
Tot Cu
Sol Cu
%
%
%
%
%
4.502
3.664
3.259
0.314
0.237
1.753
0.603
0.469
0.406
0.308
2.140
1.034
0.862
0.393
0.298
3.880
3.085
2.683
0.298
0.211
1.680
0.611
0.480
0.378
0.275
2.672
1.727
1.473
0.342
0.246
3.966
3.166
2.763
0.300
0.214
1.713
0.607
0.475
0.391
0.290
2.491
1.491
1.265
0.360
0.264
2.884
1.990
1.392
0.335
0.169
1.899
0.768
0.669
0.400
0.232
2.543
1.567
1.141
0.358
0.191

Table 14-9. 2010 Resource Model and Shell Vs 2005 Resource Model and Shell - 2010 Economic Parameters
Resource
Class
Meas

Ind

Meas/Ind

Inf

Zone
CV
MZ
Total
CV
MZ
Total
CV
MZ
Total
CV
MZ
Total

Eq Zn
Cutoff
0.89
0.94
0.89
0.94
0.89
0.94
0.89
0.94

Ore
Ktonnes
3,749
24,178
27,927
20,645
25,305
45,950
24,394
49,483
73,877
3,480
1,371
4,851

2005 Resource Model in 2005 Cone Shell

Eq Zn
Tot Zn
Sol Zn
Tot Cu
Sol Cu
%
%
%
%
%
3.882
3.109
2.763
0.289
0.223
1.718
0.611
0.476
0.391
0.299
2.009
0.946
0.783
0.377
0.289
3.738
2.995
2.590
0.278
0.201
1.641
0.653
0.513
0.349
0.261
2.583
1.705
1.446
0.317
0.234
3.760
3.013
2.617
0.280
0.204
1.679
0.633
0.495
0.370
0.280
2.366
1.419
1.196
0.340
0.255
6.057
5.044
3.685
0.380
0.215
1.403
0.358
0.276
0.369
0.261
4.742
3.720
2.722
0.377
0.228

Acid
Ore
kg/t
Ktonnes
317.4
3,853
220.0
23,532
233.1
27,385
344.4
23,937
193.9
29,150
261.5
53,087
340.3
27,790
206.7
52,682
250.8
80,472
370.4
4,311
316.4
2,286
355.1
6,597

2010 Resource Model in 2010 Cone Shell

Eq Zn
Tot Zn
Sol Zn
Tot Cu
Sol Cu
%
%
%
%
%
4.502
3.664
3.259
0.314
0.237
1.753
0.603
0.469
0.406
0.308
2.140
1.034
0.862
0.393
0.298
3.880
3.085
2.683
0.298
0.211
1.680
0.611
0.480
0.378
0.275
2.672
1.727
1.473
0.342
0.246
3.966
3.166
2.763
0.300
0.214
1.713
0.607
0.475
0.391
0.290
2.491
1.491
1.265
0.360
0.264
2.884
1.990
1.392
0.335
0.169
1.899
0.768
0.669
0.400
0.232
2.543
1.567
1.141
0.358
0.191

Mineral Reserve Estimates

It is not the intent of the Terrazas Technical Report to report an updated mineral reserve for the Terrazas
Property. It is necessary to complete a Preliminary Feasibility Study or Feasibility Study as a basis for
reporting mineral reserves.
A mineral reserve was developed by Summo based on the 2002 Prefeasibility Study and is summarized in
the History section. The 2002 mineral reserve should not be considered relevant; it pre-dates the
discovery of the Cerro Verde deposit. It was also based on heap leaching of the ores, which is no longer
considered as a viable process for Terrazas.
Mining Methods
Mining will be by conventional open pit mining with drilling and blasting of the rock, followed by
loading ore and waste into trucks with hydraulic shovels or wheel loaders, assuming that the project
advances.
A slope stability study was conducted by Knight-Piesold as part of the 2005 Constellation study. Open
pit mining is a viable method for Terrazas.
Recovery Methods
As discussed in the section Mineral Processing and Metallurgical Testing the proposed process for
Terrazas is based on crushing and grinding the ores followed by agitated leach in tanks with sulfuric acid
to extract the zinc and copper from the ore. The metal is then recovered from the acid solution with
solvent extraction/electrowinning processes. Extracting the metals as separate, salable products is a
complex process.
More work, including evaluation of alternative processes, will be conducted in the next stages of the
project.

111 AC/1463772.11

Other Relevant Data and Information

In preparing the Terrazas Technical Report, IMC relied on work by Allard Engineering, as reported in
Constellation Copper Corporation Minera Terrazas Project Scoping Study for preliminary estimates
of plant metal recoveries and operating costs for processing the Terrazas ores by grinding and agitated
leaching, followed by solvent extraction and electrowinning. These parameters are used to establish
approximate cutoff grades for disclosure of a mineral resource. This work was done to support an inhouse study by Constellation during 2007. This work has never been disclosed publically and Allard
Engineering is not considered a QP for this current study. IMC is relying on this work, but has not
audited it. The Terrazas Technical Report was also the source metallurgical test results that have not been
previously reported.
The proposed processing method is based on dissolving the zinc and copper in sulfuric acid followed by
recovery of the copper and zinc by solvent extraction and electrowinning. The skarn (altered limestone)
nature of the Terrazas ores means that the consumption of sulfuric acid could be several hundred
kilograms of acid per tonne of ore (the Allard study assumed about 330 kg/tonne ore). Assuming this
process, the operating will be very sensitive to the cost of sulfuric acid. The levels of acid consumption
may be great enough to impact the market dynamics of sulfuric acid (or sulfur in the case of a dedicated
acid plant at the property). Detailed market studies need to be performed to evaluate the availability and
likely costs of the required acid (or sulfur). Due largely to lack of a secure acid source, most recent
copper heap leaching studies have included dedicated acid plants.
The Allard study also assumes a dedicated acid plant. These plants may also generate fairly significant
amounts of electrical power from the heat generated in the process. Based on obtaining a significant
portion of the power from the acid plant, the Allard study assumed an electrical power cost of 4.3 US
cents per kwh. Grid power in Mexico is currently about 9 to 10 US cents per kwh. Grinding and
electrowinning of copper and zinc are power intensive processes. Operating costs will be sensitive to
power costs and the assumption of whether or not a dedicated acid plant will be included in the project.
The zinc solvent extraction/electrowinning process proposed in the Allard study is based on technology
patented by Tecnicas Reunidas. This is the process that is used at Vedanta Resource PLCs Skorpion
Zinc mine in Namibia. This property produces 150,000 tonnes per year of high grade SHG zinc. More
testing will be required to determine if the technology is applicable to Terrazas ores.
It is also worth noting that given grinding of the ore, there may be alternative processing options that
could make the project less sensitive to acid costs and availability. These need to be investigated.
There are known voids in the Terrazas ore bodies due to previous small scale mining activity.
The
volume of these is not expected to have a significant effect on resources. The scale of previous mining
was too small to be of much concern. Of greater concern would be personnel safety and protection of
mining equipment operating in areas of previous mining. As much as possible, all accessible
underground openings need to be surveyed.
Interpretation and Conclusions
This study has developed measured and indicated mineral resources that amount to 80.5 million tonnes at
1.49% total zinc and 0.36% total copper. This amounts to 2.64 billion pounds of contained zinc and
637.5 million pounds of contained copper. Inferred resource is an additional 6.6 million tonnes at 1.57%
total zinc and 0.36% total copper. This mineral resource is not materially different from the resource
developed by IMC during 2005 in spite of the change in the proposed processing method from heap
leaching to grinding and agitated leaching. The general increase in commodity prices appear to
compensate for the higher operating costs related to the grinding and agitated leaching process.

112 AC/1463772.11

The Cerro Verde portion of the resource is a discrete, relatively high grade zinc zone, with measured and
indicated mineral resources of 27.8 million tonnes at 3.16% total zinc and 0.30% total copper.
The 2006 Constellation drilling was conducted to convert some deep, relatively high grade, Cerro Verde
zinc resource from inferred to indicated mineral resource. This goal was accomplished.
Another goal of the Terrazas Technical Report was to report metallurgical testing data that has not
previously been disclosed. This is included in the section Mineral Processing and Metallurgical
Testing.
A significant project risk concerns the development of a technically and economically viable
metallurgical process. The proposed agitated leach process is relatively costly due to the requirement to
grind the ore and the projected high consumption of sulfuric acid. Recovering the copper and zinc from
the acid solution as separate, salable products is also a complex process.
Recommendations
IMC recommends two phases of work to advance the Terrazas Property. The first phase is the
development of a Preliminary Economic Assessment (PEA) based primarily on the data already
available. The basis for the PEA would be open pit mining and the agitated leach process, with initial
emphasis on the high zinc Cerro Verde deposit area. The estimated cost for this work is about
US$264,000 as shown in the upper section of Table 26-1. This work should take about six months to
complete.
While the PEA is in progress it is recommended that additional studies be commissioned that will
culminate in the Phase 2 Preliminary Feasibility Study. In particular environmental baseline studies,
geotechnical and hydrological studies, and market studies for sulfuric acid and sulfur need to be started.
The PFS will also require detailed mine design and production scheduling, defining sources of power and
water, and determining locations for the plant, waste piles, tailings, etc. If the Phase 2 Preliminary
Feasibility Study is successful, it will define a mineral reserve for the Terrazas Property.
Phase 2 will also involve additional sampling and a considerable metallurgical testing program. As
discussed at the end of the previous section, additional work is required to validate a technically and
economically viable metallurgical process for Terrazas. The proposed sulfuric acid agitated leach process
is based on proven technology and is the most likely process, but might be augmented by alternative
processing methods such as other reagents and/or pre-concentration to further segregate ore and gangue
minerals prior to metal extraction need to be evaluated. The estimated cost of Phase 2 work is about $4.5
million and will require about a year. The anticipated cost of both programs is about US$4.8 million over
about 18 months.
NI 43-101 regulations limit the number of successive phases of recommended work to two phases.
However, as discussed in the section entitled Property Description and Location, Andromeda is
required to produce a NI 43-101 compliant feasibility study over the next three years as a condition of the
Terrazas Agreement with MRT. If the outcome of the first two phases of recommended work is positive
and Andromeda wishes to complete the purchase of the concessions, a complete feasibility study would
follow the above work. There is of course no guaranty that the outcomes of the proposed work will be
positive.

113 AC/1463772.11

Table 26-1: Proposed Terrazas Work Plan and Costs

Phase 1: Preliminary Economic Assessment
Review of Previous Studies
Review Project Basis - Production Rate, Feed Sources, Process, Acid Source
Review and Update Capital and Operating Cost Estimates
Economic Analysis, PEA Report
Phase 1 Subtotal
Contingency at
20%
Phase 1 Total
Phase 2: Preliminary Feasibility Study
Review Sample Availability and Validity
Drilling for Fresh Metallurgical Samples
Metallurgical Testing for Agitated Leach Process
Investigation of Alternative Processes
Update Process Cost Estimates
Market Studies (Acid/Sulfur)
Environmental Baseline Studies
Geotechnical and Hydrology Studies/Engineering
Preliminary Feasibility Study
Mine Planning and Scheduling
Process Flowsheet/Engineering
Infrastructure (Roads, Power, Water)
Capital and Operating Costs
Report Preparation
Phase 2 Subtotal
Contingency at
20%
Phase 2 Total
TOTAL

US$
25,000
75,000
75,000
45,000
220,000
44,000
264,000
US$
35,000
1,000,000
1,250,000
250,000
75,000
50,000
75,000
150,000
75,000
450,000
150,000
150,000
75,000
3,785,000
757,000
4,542,000
4,806,000

SELECTED CONSOLIDATED FINANCIAL INFORMATION AND MD&A FOR ANDROMEDA

Selected Financial Information
The following table sets out selected historical financial information for Andromeda for the year ended
August 31, 2011 and period from January 11, 2010 (date of incorporation) to August 31, 2010 and should
be read in conjunction with those financial statements. See Schedule F Audited Consolidated Financial
Statements of Andromeda.

114 AC/1463772.11

Statement of Operations Data

Net sales/total revenues

Loss and comprehensive loss
Basis and diluted loss per share
Balance Sheet Data

Total assets
Total liabilities
Deficit
Cash dividends declared

For the year ended

August 31, 2011
(audited)
($)

For the period from

January 11, 2010 (date
of incorporation) to
August 31, 2010
(audited)
($)

----

---

194,001

65,968

$0.07

$0.042

As at August 31, 2011

(audited)
($)

As at August 31, 2010

(audited)
($)

1,479,122

1,608,108

104,583

39,568

(259,969)

(65,968)

---

---

MD&A
Andromedas MD&A for the year ended August 31, 2011 is incorporated by reference and attached to
this Circular as Schedule G, and should be read in conjunction with Andromedas audited consolidated
financial statements for the year ended August 31, 2011 and notes attached thereto also incorporated by
reference and attached to this Circular as Schedule F.
DESCRIPTION OF SECURITIES
Andromedas authorized capital consists of an unlimited number of common shares. Immediately before
the Closing, before giving effect to the Equity Financing, there will be 2,900,000 Andromeda Shares
outstanding. Andromedas Shareholders are entitled to dividends, if, as and when declared by
Andromedas board of directors, to one vote per share at meetings of the Shareholders and, upon
liquidation, to participate equally in such assets of Andromeda as are distributable to the Shareholders.
CONSOLIDATED CAPITALIZATION

Designation of Security

Amount Authorized or to
be Authorized

Amount Outstanding as
of August 31, 2011

Amount Outstanding as
of August 31, 2011
(before giving effect to
the Amalgamation)

Common Shares

unlimited

2,875,000

2,875,000

PRIOR SALES
Prior Sales
The following table summarizes the sale of Andromeda Shares by Andromeda since incorporation.

115 AC/1463772.11

Issue Price Per

Andromeda
Share

Date

Reason for
Issuance

Number of
Securities

March 30, 2010

Founder Shares

1,500,000

N/A

N/A

N/A

April 1, 2010

Founder Shares

500,000

N/A

N/A

N/A

$2.00

$1,350,000

$1,252,956(3)

N/A

N/A

N/A

$2.00

$300,000

$282,000(4)

N/A

N/A

N/A

(1)

June 29, 2010

Private
Placement

675,000

June 30, 2010

Property
acquisition

50,000

July 8, 2010

Private
Placement

150,000(2)

September 30,
2011

Property
acquisition

25,000

Total

Aggregate Issue
Price

Consideration
Received

2,900,000

Notes:
(1)

Of this number, 350,000 Andromeda Shares were issued to War Eagle.

(2)

These Andromeda Shares were issued to War Eagle.

(3)

This amount represents the net amount, after deducting the agents commission in the amount of $81,000 and $16,044
representing the expenses incurred by the agent.

(4)

This amount represents the net amount, after deducting the agents commission in the amount of $18,000.

Stock Exchange Price

Andromeda Shares are not posted for trading on any stock exchange.
EXECUTIVE COMPENSATION
The objective of this disclosure is to communicate the compensation that Andromeda has paid, makes
payable, awards, grants, gives or otherwise provides to each NEO, for the period.
Compensation Discussion and Analysis
Philosophy and Objectives
Andromedas executive compensation is predominantly based on prevailing industry compensation
practices for junior, development-stage, mining companies of similar size and scope and Andromedas
performance in achieving certain goals.
To date, the board of directors of Andromeda has not established a compensation committee. It is the
responsibility of Andromedas board of directors as a whole to make decisions regarding executive
compensation matters. Andromedas compensation program supports its commitment to delivering strong
performance for shareholders. Andromedas overall objective of its compensation philosophy is the
attraction, motivation and retention of quality, experienced people to achieve Andromedas strategic
objectives and to align the interests of its executive officers and employees with the long-term interest of
Andromedas Shareholders.
All of the components of Andromedas executive compensation program is reviewed and confirmed by its
board of directors.

116 AC/1463772.11

Andromedas executive compensation is comprised of the following components: base salary, and
options. Together, these components are designed to address the key objectives of the Andromedas
compensation program.
Base Compensation
The base salary component is intended to provide a fixed level of pay that reflects each NEOs primary
duties and responsibilities. While base salaries are an important element of NEOs compensation, the size
and stage of Andromeda prevents it from paying base salaries which are comparable to those of larger
companies in the mining industry and, accordingly, performance-based compensation elements are an
integral component of the executive compensation package.
In setting base compensation levels for executive officers, consideration is given to objective factors such
as level of responsibility, experience and expertise as well as subjective factors such as leadership.
Option-Based Awards
Stock options to purchase the Andromeda Shares can be granted to directors, executive officers,
employees and consultants of Andromeda and are intended to align such individuals interests by
attempting to create a direct link between compensation and shareholder return. There are currently no
stock options to purchase the Andromeda Shares issued and outstanding.
Summary Compensation Table
During the year ended August 31, 2011, Andromeda had two NEOs, being Chris Davie, the President,
CEO and a director, and Andres Tinajero, the CFO.
The following table sets forth all direct and indirect compensation for, or in connection with, services
provided to Andromeda and for the year ended August 31, 2011, and for the period from incorporation on
January 11, 2010 to August 31, 2010, in respect of each NEO.

Name and
Principal
Position

Time
Period

Salary
($)

Share
based
award
s ($)

Option
based
awards
($)

Non-equity
incentive
plan compensation ($)
Annual
incentive
plans

Long term
incentive
plans

Pension
Value ($)

All Other
Compensation
($)

Total
Compensation
($)

Chris Davie,
President,
CEO and a
director

August
31, 2011

71,048

N/A

Nil

N/A

N/A

N/A

71,048

71,048

Incorpor
ation to
August
30, 2010

3,808

N/A

Nil

N/A

N/A

N/A

3,808

3,808

Andres
Tinajero,
CFO

August
31, 2011

12,125

N/A

Nil

N/A

N/A

N/A

12,125

12,125

Incorpor
ation to
August
30, 2010

Nil

N/A

Nil

N/A

N/A

N/A

Nil

Nil

Incentive Plan Awards

Andromeda has no long term incentive plans in place, therefore no disclosure is provided for share-based
compensation and option based awards for either NEOs or directors.

117 AC/1463772.11

Pension Plan Benefits

No pension or retirement benefit plans have been instituted by Andromeda and none are proposed at this
time.
Termination and Change of Control benefits
As at August 31, 2011, there were no contracts, agreements or plans of arrangement that provide for
payment to an NEO at, following or in connection with any termination (whether voluntary, involuntary
or constructive), resignation, retirement, a change in control of Andromeda or a change in a NEOs
responsibilities.
Compensation of Directors
Andromeda has three directors, Chris Davie, Rick Moscone and Rene Mladosich, one of which is also a
NEO, Chris Davie. For a description of the compensation paid to the NEO who also acts as a director, see
the Summary Compensation Table above.
Director Compensation Table
The following table sets forth the value of all compensation provided to Rene Mladosich for the year
ended August 31, 2011.

Annual
incentive
plans

Long term
incentive
plans

Pension
Value
($)

All
Other
Compen
sation
($)

Name

Year
Ending(1)

Salary
($)

Share
based
awards
($)

Rene
Mladosich

August
31, 2011

32,612

Nil

Nil

N/A

N/A

N/A

32,612

32,612

Rick
Moscone

August
31, 2011

Nil

Nil

Nil

N/A

N/A

N/A

Nil

Nil

(1)

Option
based
awards
($)

Non-equity incentive
plan compensation ($)

Total
Compensation
($)

For the year ended August 31, 2011.

Management Contracts
Andromeda entered into a consulting agreement with RIM Resources Inc., a corporation incorporated
pursuant to the laws of the State of Colorado, of which Chris Davie is the Principal, on July 1, 2010,
pursuant to which Mr. Davie serves as the President and the CEO of Andromeda. Mr. Davies time and
expenses are charged to RIM Resources Inc. on the basis of US$1,000 per day of service up to a
maximum of US$20,000 per month and reimbursement of his expenses. In addition, Mr. Davie is eligible
to receive stock options of Andromeda. Mr. Davies consulting agreement with Andromeda contains
confidentiality obligations.
NON-ARMS-LENGTH PARTY TRANSACTIONS
Andromeda has entered into certain Related Party Transactions in the normal course of operations. Such
transactions are measured at the exchange amount, which is the amount of consideration established and
agreed to by the related parties. Please refer to note 4 of Andromedas audited financial statements for the
year ended August 31, 2011 which is attached to this Circular as Schedule F.
The proposed Amalgamation is an Arms Length Transaction.

118 AC/1463772.11

LEGAL PROCEEDINGS
The management of Andromeda are not aware of any material litigation outstanding, threatened, or
pending as at the date of this Circular, by or against Andromeda or its wholly owned subsidiary, RDM.
MATERIAL CONTRACTS
The following are the material contracts entered into by Andromeda and by its wholly owned subsidiary
RDM:
1.

Terrazas Agreement

2.

Letter of Intent

3.

Amalgamation Agreement

Copies of the above-noted agreements will be available for inspection at the head office of Andromeda at
any time during ordinary business hours until the Meeting and for a period of 30 days thereafter.

119 AC/1463772.11

INFORMATION REGARDING THE RESULTING ISSUER

CORPORATE STRUCTURE
Name and Incorporation
The corporate name of the Resulting Issuer is expected to be Andromeda Resources Inc.. The Resulting
Issuer will be a company existing under the provisions of the OBCA, with Amalco as its wholly-owned
subsidiary. As discussed under Particulars of Matters to be Acted On Approval of the Continuance, in
connection with the Amalgamation, War Eagle will apply to the Director under the OBCA to continue its
corporate jurisdiction into the province of Ontario and War Eagle will have Articles of Continuance and
the By-Law as set out in Schedule J. A summary of the differences with respect to security holder rights
and remedies between the BCBCA and the OBCA are set forth under Particulars of Matters to be Acted
On Approval of the Continuance Comparison between the BCBCA and the OBCA. War Eagle
Subco and Andromeda will then amalgamate under the provisions of the OBCA in accordance with the
terms of the Amalgamation Agreement.
It is expected that the Resulting Issuers registered and head office will be located at 2810, 130 King St.
West, Exchange Tower, Toronto, Ontario M5X 1A6.
Intercorporate Relationships
Following the completion of the Amalgamation, the Resulting Issuer Shares will be held by the former
Shareholders (other than the dissenting Shareholders, if any) and Andromeda Shareholders.
The intercorporate relationship among the Resulting Issuers subsidiaries after giving effect to the
Amalgamation is set out below:

120 AC/1463772.11

DESCRIPTION OF BUSINESS
The business of the Resulting Issuer will primarily be Andromedas business. See Information
Concerning Andromeda General Development of the Business.
Business Objectives
The Resulting Issuers main business objective over the next 12 months is to complete Year 1 of the
proposed program set out in the Terrazas Technical Report.
Milestones
In order for the business objectives described above to occur, the following milestones will have to be
met:
Milestone

Expected
Completion

Property Payment of US$1,800,000 on the Terrazas

Property

December 2011

Preliminary Economic Assessment on the Terrazas

Property

May 2012

Property Payment of US$2,000,000 on the Terrazas

Property

May 2012

Metallurgical Testing Results

September 2012

Environmental Baseline Studies

September 2012

Engineering Studies

December 2012

Exploration and Development Program

The Resulting Issuers primary business objective following completion of the Amalgamation will be to
carry out development activities on the Terrazas Property in accordance with the recommendations
contained in the Terrazas Technical Report.
DESCRIPTION OF SECURITIES
The Resulting Issuer will be authorized to issue an unlimited number of Resulting Issuer Shares without
nominal or par value.
The holders of Resulting Issuer Shares are entitled to dividends, if, as and when declared by the Board of
Directors of the Resulting Issuer, to one vote per Resulting Issuer Share at meetings of the shareholders of
the Resulting Issuer and, upon liquidation, to share equally in such assets of the Resulting Issuer as are
distributable to the holders of Resulting Issuer Shares.

121 AC/1463772.11

PRO FORMA CONSOLIDATED CAPITALIZATION

Pro Forma Consolidated Capitalization
The following table sets forth the pro forma share and loan capital of the Resulting Issuer, on a
consolidated basis, after giving effect to the Amalgamation:

Designation of Security
Common Shares without par value

Amount Authorized
or to be Authorized

Amount
outstanding after
giving effect to the
Amalgamation

Unlimited

(1)

23,450,272

Amount outstanding after

giving effect to the
Amalgamation and Equity
Financing
Minimum
39,180,335

Maximum

(2)

45,850,355(2)

(1)

This figure does not include the War Eagle Shares which may be issuable upon exercise of War Eagle convertible
securities.

(2)

This figure does not include the War Eagle Shares which may be issuable upon exercise of War Eagle convertible
securities, the Resulting Issuer Shares which may be issuable upon exercise of Replacement Warrants, Replacement
Broker Options, Replacement Broker Warrants or Replacement Work Fee Warrants.

Fully Diluted Share Capital

The following table sets forth the fully diluted share capital of the Resulting Issuer after giving effect to
the Amalgamation:
Outstanding After Giving Effect to
the Amalgamation
Designation of Security - Resulting Issuer Shares
Resulting Issuer Shares outstanding

Amount

Percentage

7,442,272

11.54%

Resulting Issuer Shares issued under the Amalgamation Agreement (to

former Andromeda Shareholders except War Eagle)

16,008,000

24.81%

Resulting Issuer Shares issued under the Amalgamation Agreement (to

new Andromeda Shareholders participating in the Equity Financing
assuming the maximum financing is completed)

22,233,333

34.46%

166,750

0.26%

Resulting Issuer Shares reserved for issuance upon exercise of

outstanding War Eagle share purchase warrants

4,353,375

6.75%

Resulting Issuer Shares reserved for issuance upon exercise of

outstanding War Eagle finders warrants

225,207

0.35%

Resulting Issuer Shares reserved for issuance upon exercise of

outstanding War Eagle stock options

213,250

0.35%

83,375

0.13%

11,116,667

17.23%

Resulting Issuer Shares issued to the Brokers in exchange for the

Andromeda Shares issued as part of the Work Fee Units

Resulting Issuer Shares reserved for issuance upon exercise of the

Replacement Work Fee Warrants
Resulting Issuer Shares reserved for issuance upon exercise of the
Replacement Warrants under the Equity Financing (to former holders of
Andromeda Warrants assuming the maximum financing is completed)

122 AC/1463772.11

Outstanding After Giving Effect to

the Amalgamation
Designation of Security - Resulting Issuer Shares

Amount

Resulting Issuer Shares reserved for issuance upon exercise of the

Replacement Broker Options (to former holders of Broker Options
assuming the maximum financing is completed)

1,778,667

2.76%

889,333

1.38%

64,510,229

100%

Resulting Issuer Shares reserved for issuance upon exercise of the

Replacement Broker Warrants
Total Number of Securities (fully-diluted)

Percentage

AVAILABLE FUNDS AND PRINCIPAL PURPOSES

Funds Available
As at October 31, 2011, the pro forma consolidated working capital of War Eagle and Andromeda was
$7,482,400, assuming gross proceeds of a minimum Equity Financing of $7,000,000. It is anticipated that
the available funds will be sufficient to meet the Resulting Issuers administrative costs for the following
12 months and to achieve the Resulting Issuers principal purposes as described in this Circular. The
following table sets forth the estimated unaudited working capital of War Eagle and Andromeda before
and after giving effect to the Amalgamation, as at October 31, 2011:
War Eagle

Andromeda

$700,000

($217,600)

$482,400

Proposed Equity Financing

N/A

$7,000,000

$7,000,000

Working capital after Amalgamation

N/A

N/A

$7,482,400

Working capital (deficiency)

Combined

Principal Purposes of Funds

The Resulting Issuer will use the funds available to it upon the completion of the Amalgamation for the
following purposes:
Use of Working Capital

Amount
($)(1)

Phase 1 Preliminary Economic Assessment as set out in the

Terrazas Technical Report US$220,000

220,000

Phase 2 Drilling for Metallurgical Samples/Metallurgical

Testing US$535,000

535,000

Phase 2 Investigation of Alternative Process US$100,000

100,000

Phase 2 Mine Planning and Scheduling/Process Engineering

US$150,000

150,000

Property Payments - US$3,800,000

Costs of Equity Financing

3,800,000

(2)

588,000
(3)

Administrative and Consulting Fees

Unallocated Funds
Total

913,000
1,176,400
$7,482,400

(1) US dollar amounts have been translated on the basis of US$1.00 = $1.00

123 AC/1463772.11

(2) Includes the Broker Compensation but excludes the legal fees and expenses of the Brokers, which Andromeda has
agreed to pay, and the legal fees of Andromeda incurred in connection with the Equity Financing.
(3) Includes legal fees and other expenses incurred in connection with the Amalgamation and Equity Financing

There may be circumstances where, for sound business reasons, the reallocation of funds may be
necessary in order for the Resulting Issuer to achieve its stated business objectives.
Dividends
There will be no restrictions in the Resulting Issuers charter documents or elsewhere which would
prevent the Resulting Issuer from paying dividends following the completion of the Amalgamation. All of
the Resulting Issuer Shares are entitled to an equal share in any dividends declared and paid. It is
anticipated that all available funds will be invested to finance the exploration and development of the
Resulting Issuers properties and accordingly, it is not contemplated that any dividends will be paid on the
Resulting Issuer Shares in the immediate or foreseeable future. The directors of the Resulting Issuer will
determine if, and when, dividends will be declared and paid in the future from funds properly applicable
to the payment of dividends based on the Resulting Issuers financial position at the relevant time.
PRINCIPAL SECURITYHOLDERS
To the knowledge of the management of War Eagle and Andromeda, no persons or corporations will, as
at the completion of the Amalgamation, beneficially own, directly or indirectly, or exercise control or
direction over, shares carrying more than 10% of the voting rights attaching to all the outstanding
Resulting Issuer Shares.
DIRECTORS, OFFICERS AND PROMOTERS
Name, Address, Occupation and Security Holdings
The names, municipalities of residence, the number of voting securities beneficially owned, directly or
indirectly, or over which each exercises control or direction, following the Closing of the Amalgamation,
and the offices to be held by each in the Resulting Issuer and the principal occupation of the proposed
directors and senior officers of the Resulting Issuer during the past five years are as follows:
Name, Municipality of
Residence and Positions
and Offices to be Held with
the Resulting Issuer

Principal Occupation within the

Five Proceeding Years

Chris Davie
Denver, Colorado President,
CEO and Director

CEO, Quia Resources Inc.; CEO,

Virgin Metals Inc.; CEO, Queenstake
Resources Ltd.

Andres Tinajero
Toronto, Ontario
CFO

CFO of Trelawney Mining and

Exploration Inc.; CFO of Vena
Resources Inc.; CFO of Quia
Resources Inc.

Rene Mladosich
Hermosillo, Sonora,
Country Manager, Mexico
Director

General manager, Cia Minera Pena

de Bernal; Country Manager, Minera
Alamos S.A. de C.V.; Logistic
Manager/Deputy Construction
Manager, Minera Dolores S.A. de
C.V.

Resulting Issuer Shares Beneficially

Owned or Controlled Assuming
Completion of Amalgamation
Number

Percentage(1)

3,168,250

8.09%

Nil

Nil

3,335,000

8.51%

124 AC/1463772.11

Name, Municipality of
Residence and Positions
and Offices to be Held with
the Resulting Issuer

Principal Occupation within the

Five Proceeding Years

R. Brian Murray (2)(3)(4)

Toronto, Ontario
Director

President of Murcon Ltd. since

October 1990; President of Nebu
Resources Inc. since May 2006;
President of Rainbow Resources Inc.
since January 2010

Anthony Dutton (2)(3)(4)

Vancouver, B.C.
Director

President of IBC Advanced Alloys

Inc.; Principal of Delu Corp.

David Winfield (2)(3)(4)

Toronto, Ontario
Director

Executive Director and CEO of the

International Centre for Leadership in
Finance from October 2006 to May
2010

Resulting Issuer Shares Beneficially

Owned or Controlled Assuming
Completion of Amalgamation

Total

Number

Percentage(1)

Nil

Nil

100,000

0.26%

Nil

Nil

6,603,250

16.86%

(1)

Assuming that none of the proposed directors of officers subscribe for Andromeda Units under the Equity Financing.
This number is based on 39,180,355 Resulting Issuer Shares being outstanding, on a non-diluted basis, after the
completion of the Amalgamation and minimum Equity Financing, and including the Resulting Issuer Shares issued
under the Work Fee.

(2)

Proposed member of the Audit Committee.

(3)

Proposed member of the Corporate Governance & Nominating Committee.

(4)

Proposed member of the Compensation Committee.

These persons will become directors and/or officers of the Resulting Issuer effective on completion of the
Amalgamation. The term of office of each director will expire at the end of the first annual meeting of
shareholders of the Resulting Issuer.
For particulars of the occupations of the directors and officers see Management below. The directors
and officers of the Resulting Issuer, as a group, will own 6,603,250 Resulting Issuer Shares, being
16.86% of the Resulting Issuer Shares, assuming completion of the Amalgamation and minimum Equity
Financing.
To the knowledge of the Resulting Issuers directors and officers, none of the foregoing Persons are
acting in concert by virtue of an agreement, arrangement, commitment or understanding to affect
materially the control of Resulting Issuer.
Committees of the Board of Directors
Upon completion of the Amalgamation, the board of directors of the Resulting Issuer will have three
standing committees, being the Audit Committee, the Compensation Committee and the Corporate
Governance and Nominating Committee.
The Audit Committee of the Resulting Issuer will adopt the audit committee charter of War Eagle, which
is attached hereto as Schedule I. The Audit Committee will oversee the retention, performance and
compensation of the Resulting Issuers independent auditors, and oversee and establish procedures
concerning systems of internal accounting and control. The Audit Committee will be comprised of
Messrs. Murray, Dutton and Winfield.

125 AC/1463772.11

The board of directors of the Resulting Issuer will establish a Compensation Committee to assist the
board in settling the compensation of directors and senior executives, and developing and submitting to
the board recommendations with regard to other employee benefits. It is anticipated that the
Compensation Committee will be comprised of Messrs. Murray, Dutton and Winfield.
The board of directors of the Resulting Issuer will establish a Corporate Governance and Nominating
Committee which will be charged with performing an annual evaluation of the effectiveness of the board
of directors as a whole, the committees of the board and the contributions of individual directors. The
Corporate Governance & Nominating Committee will be comprised of Messrs. Murray, Dutton and
Winfield.
Management
Chris Davie (Age: 64) - Proposed CEO, President and Director
Mr. Davie has over 35 years experience in the mining industry. Most recently, Mr. Davie was CEO of
Virgin Metals Inc. which was focused on two molybdenum-copper projects in Mexico. Prior to that, he
was CEO of Queenstake Resources Ltd. (Queenstake Resources) and predecessor companies. Prior to
Queenstake Resources, Mr. Davie has been involved in the construction and financing of a number of
precious and base metal mining operations ranging from small to large scale. Mr. Davie holds a Master of
Science degree in Mining Engineering from the University of London.
It is expected that Mr. Davie will commit approximately 50% of his time in connection with the Resulting
Issuer. Mr. Davie will be an independent contractor to the Resulting Issuer.
Andres Tinajero (Age: 38) - Proposed CFO
Mr. Tinajero has been the VP of Finance and CFO of Vena Resources Inc. and Trelawney Mining and
Exploration Inc. since January 2008. He has also been the CFO of Quia Resources Inc. since April 2010.
During this same period, he has served as Controller and CFO of a number of start-ups and medium sized
public companies across Canada. He holds degrees in Business Administration and an MBA, and is also a
Member of the Canadian Institute of Certified Management Accountants, and a member of the Certified
Practicing Accountants of Australia.
It is expected that Mr. Tinajero will commit approximately 25% of his time in connection with the
Resulting Issuer. Mr. Tinajero will be an independent contractor to the Resulting Issuer.
Rene Mladosich (Age: 47) - Proposed Director
Mr. Mladosich has extensive experience in advancing mining projects to production in Mexico. He was
most recently general manager at Cia Minera Pena de Bernel (Starcore International Mines Ltd., a TSX
listed company). Prior thereto, he was the country manager at Minera Alamos S.S. de C.V. (Virgin Metals
Inc., a TSXV listed company). From May 2005 to July 2007, Mr. Mladosich was the logistic
manager/deputy construction manager at Compaa Minera Dolores S.A. de C.V. (Minefinders
Corporation Ltd., a TSX listed company). He is a graduate of the University of Sonora in mining
engineering.
Mr. Mladosich intends to devote such time to the affairs of the Resulting Issuer as is required from time
to time.
Anthony Dutton (Age: 54) - Director of War Eagle to remain a Director of the Resulting Issuer

126 AC/1463772.11

Mr. Dutton is a seasoned business executive and entrepreneur with a successful track record as an early
stage investor and business founder. His areas of expertise are corporate finance, business development
and strategic management. He is regularly engaged in developing strategic and financial plans for early
stage and high growth companies. Anthony holds a BA in Economics from the University of British
Columbia and a MBA from the Cranfield School of Management in the United Kingdom. Anthony is a
principal at Delu Corp. and is also a director of other public and private companies
Mr. Dutton intends to devote such time to the affairs of the Resulting Issuer as is required from time to
time.
R. Brian Murray, MBA., C.A., (Age: 62) Proposed Director
Mr. Murray has over 15 years of experience in both the resources and investment markets. Mr. Murray is
the President and CEO of Nebu Resources Inc. a BXV listed company exploring for gold in Ontario and
President and CEO of Rainbow Resources Inc., a TSXV listed company exploring for silver and gold in
south-west British Columbia. Mr. Murray has also been the President of Murcon Ltd., a private financial
consulting company involved in merchant banking, since 1990. He is a Chartered Accountant and holds a
Masters degree in Business Administration.
Mr. Murray intends to devote such time to the affairs of the Resulting Issuer as is required from time to
time.
David J.S. Winfield (Age: 70) Proposed Director
Mr. Winfield was the Executive Director and CEO of the International Centre for Leadership in Finance
from October 2006 to May 2010. He was a member of the Canadian Trade Commissioner and Foreign
Services from 1965 to 1995. During that time, he served Canada in Holland, Turkey, Japan, Mexico and
New York. From 1989 to 1995, he was Canadas Ambassador to Mexico, and he served, concurrently, as
Canada's Ambassador to Guatemala from 1989-91. In 1995, the President of Mexico awarded
Ambassador Winfield the Golden Aztec, the highest award that can be given to a non-Mexican. Among
other positions, Ambassador Winfield was the Chairman of the Canadian Council of the Americas (1998
2004) and was on the Board of Directors of Bancomer S.A., Mexicos largest bank, from 1996 to 2002.
Promoters
There is no person who is or who has been within the two years immediately preceding the date of this
Circular, a Promoter of War Eagle as defined under applicable Canadian Securities Laws.
Corporate Cease Trade Orders or Bankruptcies
To the best knowledge of the Resulting Issuers management, except as otherwise disclosed in this
Circular as it relates to Simon Anderson (see Particulars of Matters to be Acted Upon Election of
Directors) and Brian Murray (see below), no individual who will be a director, officer or Promoter of the
Resulting Issuer is, or has been within the past ten years, a director, officer or Promoter of any other
Issuer that, while such Person was acting in that capacity, was:
(a)

the subject of a cease trade or similar order or an order that denied the Issuer access to
any statutory exemptions for a period of more than 30 consecutive days;

(b)

was subject to an event that resulted, after the director or proposed management nominee
ceased to be a director or officer of the relevant company in the relevant company being
the subject of a cease trade order or similar order that denied the relevant company access

127 AC/1463772.11

to any exemption under securities legislation, for a period of more than 30 consecutive
days; or
(c)

within a year of the director or proposed management nominee ceasing to be a director or

officer of the relevant company, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any proceedings,
arrangement, or compromise with creditors, or had a receiver, receiver manager, or
trustee appointed to hold its assets.

In June 2007, Brian Murray was elected as a director of High American Gold Inc. (High America),
which was cease traded in September 2002 by the OSC, the Alberta Securities Commission and the
BCSC (collectively, the Commissions) for failing to file its annual financial statements. High America
currently remains cease traded by the Commissions.
Brian Murray was a director of Explorers Alliance Corp. (Explorers) in 2002 when a cease trade order
was issued against it for failure to file financial statements. Explorers remains cease traded; however, Mr.
Murray resigned as a director of Explorers in January 2008.
Penalties or Sanctions
No proposed director, officer or Promoter of the Resulting Issuer nor a securityholder anticipated to hold
a sufficient number of securities of the Resulting Issuer to affect materially the control of the Resulting
Issuer, has
(a)

been subject to any penalties or sanctions imposed by a court relating to securities

legislation or by a securities regulatory authority or has entered into a settlement
agreement with a securities regulatory authority, or

(b)

been subject to any other penalties or sanctions imposed by a court or regulatory body,
including a self-regulatory body, which would likely be considered important to a
reasonable securityholder in making a decision about the Amalgamation.

Personal Bankruptcies
No individual who will be a director, officer or Promoter of the Resulting Issuer is, or, within the ten
years before the date of this Circular, has been declared bankrupt or made a voluntary assignment in
bankruptcy, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to
or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver
manager or trustee appointed to hold the assets of that individual.
Conflicts of Interest
Conflicts of interest may arise as a result of the directors, officers and Promoters of the Resulting Issuer
also holding positions as directors or officers of other Companies. Some of the individuals who will be
directors and officers of the Resulting Issuer have been and will continue to be engaged in the
identification and evaluation of assets, businesses and Companies on their own behalf and on behalf of
other Companies, and situations may arise where the directors and officers of the Resulting Issuer will be
in direct competition with the Resulting Issuer. See Information Concerning Andromeda Non-Arms
Length Party Transactions. Conflicts, if any, will be subject to the procedures and remedies provided
under the BCBCA. Directors who are in a position of conflict will abstain from voting on any matters
relating to the conflicting Company.

128 AC/1463772.11

Other Reporting Issuer Experience

The following table sets out the proposed directors, officers and Promoters of the Resulting Issuer that
are, or have been within the last five years, directors, officers or Promoters of other reporting issuers, and
the jurisdictions in which such reporting issuers were reporting:

Name
Chris Davie

Andres Tinajero

Name and Jurisdiction(s)

of Reporting Issuer

Name of
Exchange
or Market
(if
applicable)

Position

From

To

Virgin Metals Inc.

(Ontario, BC, Alberta)

TSXV

CEO and
Director

April 2006

August 2009

Quia Resources Inc.

(Ontario, BC, Alberta)

TSXV

CEO

April 2010

February 2011

Director

April 2010

Present

Queenstake Resources Ltd.

(BC)

TSX

CEO and
Director

July 1999

March 2005

Quia Resources Inc.

(Ontario, BC, Alberta)

TSXV

CFO

April 2010

Present

Trelawney Mining and

Exploration Inc.
(BC, Alberta,
Saskatchewan, Manitoba,
Ontario, New Brunswick,
Nova Scotia, Prince Edward
Island, Newfoundland)

TSXV

CFO

January 2008

Present

Vena Resources Inc.

(Ontario, BC, Alberta)

TSXV

CFO

January 2008

Present

Canada Lithium Corp.

(BC, Alberta,
Saskatchewan, Manitoba,
Ontario, New Brunswick,
Nova Scotia, Prince Edward
Island, Newfoundland)

TSX

CFO

March 20008

November
2009

Goldgroup Mining Inc.

(formed when Sierra
Minerals Inc. merged with
Goldgroup Resources Inc.
in April 30, 2010)

TSXV

CFO

July 2009

July 2010

Portage Minerals Inc.

(Ontario, BC, Alberta)

CNSX

CFO

January 2008

November
2010

Azabache Energy Inc.

(formerly Argenta Oil and
Gas Inc.)
(Ontario, BC, Alberta)

TSXV

CFO

January 2009

June 2010

Hy Lake Gold Inc.

(Ontario, BC, Alberta)

CNSX

CFO

November
2009

January 2011

129 AC/1463772.11

Name
Brian Murray

Anthony Dutton

David Winfield

Name and Jurisdiction(s)

of Reporting Issuer

Name of
Exchange
or Market
(if
applicable)

Position

From

To

Nebu Resources Inc.

(Ontario, BC, Alberta)

TSXV

President,
CEO and
Director

January 2008

Present

Shoal Point Energy Ltd.

(Ontario)

TSXV

CFO and
Director

November
2010

November
2010

Rainbow Resources Inc.

TSXV

President,
CEO and
Director

December
2010

Present

Sea Green Capital Corp.

(Ontario, BC, Alberta)

TSXV

CFO and
Director

July 1997

Present

Antioquia Gold Inc.

(Ontario, BC, Alberta)

TSXV

Director

June 2006

Present

Process Capital Corp.

(Ontario, BC, Alberta)

TSXV

Director

November
1996

Present

Burnstone Ventures Inc.

(formerly Pure Diamonds
Exploration Inc.)

TSX

Director

June 1992

May 2009

Explorers Alliance
Corporation
(Ontario, BC, Alberta)

OTC

Director

October 1993

January 2008

Desert Gold Ventures Inc.

(BC, Alberta)

TSXV

Director

March 2004

January 2009

Hawkstone Energy Corp.

(formerly Range Energy
Resources Inc.)

CNSX

CFO

February 2007

November
2007

Director

February 2007

July 2011

Range Gold Corp.

(Ontario, BC, Alberta,
Saskatchewan)

CNSX

Director

November
2006

May 2010

Portage Minerals Inc.

(Ontario, BC, Alberta)

N/A

Director

August 2007

October 2008

Virgin Metals Inc. (Ontario,

BC, Alberta)

TSX

Director

May 2008

July 2009

Trillium North Minerals

Inc.
(Ontario, BC, Alberta)

TSXV

Director

August 2009

March 2011

IBC Advanced Alloys Inc.

(BC, Alberta, Ontario)

TSXV

Director, CEO

May 2006

Present

Josephine Mining Corp.

(BC, Alberta)

TSXV

Director

June 2007

Present

Virgin Metals Inc. (Ontario,

BC, Alberta)

TSXV

Director

February 2007

January 2010

130 AC/1463772.11

EXECUTIVE COMPENSATION
The Resulting Issuer anticipates negotiating compensation agreements with its directors and officers
following completion of the Amalgamation. For information on the compensation of War Eagles officers
and directors see in the Circular under the heading Executive Compensation. For information on the
compensation of Andromedas officers and directors see Information Concerning Andromeda
Executive Compensation.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
As of the completion of the Amalgamation, no proposed director or officer of the Resulting Issuer or any
Associate thereof, will be indebted to the Resulting Issuer or any of its subsidiaries, or has been at any
time during the preceding financial year.
INVESTOR RELATIONS ARRANGEMENTS
The Resulting Issuer has not arranged any investor relations agreements nor does it have any
understanding regarding investor relations arrangements; however, the Resulting Issuer may enter into
investor relations arrangements in the future.
OPTIONS TO PURCHASE SECURITIES
The following lists the 213,250 outstanding options to purchase securities of the Resulting Issuer as at
November 3, 2011, which will be held on completion of the Amalgamation, including the terms of those
options. The Board of the Resulting Issuer will determine option grants to eligible optionees sometime
after the Closing.
Optionee Group
Current directors and
officers of War Eagle (1)
Consultants of War Eagle (2)

Number of
Securities
75,000
22,500
25,000
60,750
30,000

Exercise Price
$3.00
$3.00
$3.00
$3.00
$3.00

Grant Date
April 28, 2009
April 28, 2009
April 28, 2009
April 28, 2009
January 7, 2009

Expiration Date
April 28, 2014
March 31, 2012
April 28, 2014
March 31, 2012
January 7, 2014

(1)

For the directors and officers of War Eagle who are not remaining as directors or officers of the Resulting Issuer on
completion of the Amalgamation, the options held by such persons will expire within 90 days after they cease to hold a
position with War Eagle, in accordance with the terms of the Stock Option Plan.

(2)

For the consultants of War Eagle who are not remaining as consultants of the Resulting Issuer on completion of the
Amalgamation, the options held by such persons will expire within 30 days after they cease to hold a position with War
Eagle, in accordance with the terms of the Stock Option Plan.

Stock Option Plan

A full copy of the Resulting Issuer Stock Option Plan will be available at the Meeting for review by
Shareholders. A summary of the material terms of Resulting Issuer Stock Option Plan is set out under
Particulars of Matters to Be Acted On Resulting Issuer Stock Option Plan.
ESCROWED SECURITIES
As required by the TSXV, the shareholders listed below will enter into an escrow agreement with
Computershare and the Resulting Issuer (the Escrow Agreement) pursuant to which they will deposit
an aggregate of 6,603,250 Resulting Issuer Shares with Computershare. The Escrow Agreement is a
Form 5D Value Security Escrow Agreement which provides for escrow releases on the date of the Final

131 AC/1463772.11

Exchange Bulletin and the 6, 12, 18, 24, 30 and 36 month anniversaries of the date of the Final Exchange
Bulletin.
The release of securities held under the Escrow Agreement may be accelerated in certain circumstances,
including if the Resulting Issuer becomes a Tier 1 Issuer under the policies of the TSXV or if it becomes
listed on the Toronto Stock Exchange.
Name and Municipality
of Residence

Class

Number of
Escrowed Shares

Percentage of Class(1)

Chris Davie

Common Shares

3,168,250

8.09%

Rene Mladosich

Common Shares

3,335,000

8.51%

Anthony Dutton

Common Shares

100,000

0.26%

6,603,250

16.86%

Total
(1)

This number assumes there will be 39,180,355 Resulting Issuer Shares outstanding, on a non-diluted basis, assuming a
minimum Equity Financing.

AUDITOR, TRANSFER AGENT AND REGISTRAR

Auditor
The Resulting Issuers auditor will be MacKay LLP, Chartered Accountants, of 1100-1177 West Hastings
Street, Vancouver, British Columbia V6E 4T5.
Transfer Agent and Registrar
The Resulting Issuers transfer agent and registrar will be Computershare. The Resulting Issuer expects to
transfer the principal location of its registrar and transfer agency services to Computershares office in
Toronto, Ontario.
GENERAL MATTERS
SPONSORSHIP AND AGENT RELATIONSHIP
It is expected that Union Securities Ltd. and Canaccord Genuity Corp. will act as agents in connection
with the Equity Financing.
Pursuant to the Engagement Letter, Andromeda will pay a cash fee equal to 8% of the gross proceeds
raised under the Equity Financing and issue that number of Broker Options as is equal to 8% of the
Andromeda Units sold under the Equity Financing. Each Broker Option will be exchanged for 6.67
Replacement Broker Options, each of which will, in turn, be exercisable into one Replacement Broker
Unit at an adjusted exercise price of $0.45 per Replacement Broker Unit for a period of 24 months from
the Closing Date. Each Replacement Broker Unit will be comprised of one Resulting Issuer Share and
one-half of one Replacement Broker Warrant. Each Replacement Broker Warrant will be exercisable into
one additional Resulting Issuer Share at an adjusted exercise price of $0.60 per Resulting Issuer Share for
a period of 24 months from the Closing Date.
Each Work Fee Warrant issued as part of the Work Fee Units will be exchanged for 6.67 Work Fee
Warrants, each of which will, in turn, be exercisable into one Resulting Issuer Share at an adjusted
exercise price of $0.60 per Resulting Issuer Share for a period of 24 months from the Closing Date.

132 AC/1463772.11

Andromeda has also agreed to pay Union Securities Ltd. a work fee of $25,000 (plus taxes) in cash and to
issue 25,000 Work Fee Units. Andromeda and War Eagle will enter into an agency agreement with the
Brokers, which agreement will supercede the Engagement Letter, prior to the Closing Date. Under the
agency agreement, War Eagle will grant a right of first refusal to Union Securities Ltd., allowing Union
Securities Ltd. the right to act as agent for the Resulting Issuer for any financing undertaken by the
Resulting Issuer for a period of twelve months from the Closing Date.
EXPERTS
Except as disclosed in this Circular, no Person or Company whose profession or business gives authority
to a statement made by the Person and who is named as having prepared or certified a part of this Circular
or as having prepared or certified a report or valuation described or included in this Circular holds any
beneficial interest, direct or indirect, in any securities or property of War Eagle or Andromeda or of an
Associate or Affiliate of War Eagle or Andromeda and no such person is expected to be elected,
appointed or employed as a director, senior officer or employee of War Eagle or Andromeda or of an
Associate or Affiliate of War Eagle or Andromeda and no such Person is a Promoter of War Eagle or
Andromeda or an Associate or Affiliate of War Eagle or Andromeda.
OTHER MATERIAL FACTS
Management of War Eagle knows of no other matters to come before the Meeting other than those
referred to in the Notice of Meeting for War Eagle. Should any other matters properly come before the
Meeting, the shares represented by the Proxy solicited hereby will be voted on such matter in accordance
with the best judgment of the persons voting by proxy. There are no material facts about War Eagle,
Andromeda, the Resulting Issuer or the Amalgamation which are not otherwise disclosed in this Circular.
BOARD APPROVAL
War Eagles Board of Directors has approved the delivery of this Circular to the Shareholders.
Andromeda has provided the information contained in this Circular concerning Andromeda and its
business, including its financial information and financial statements and War Eagle assumes no
responsibility for the adequacy or accuracy of such information.
ADDITIONAL INFORMATION
Additional information about War Eagle is located on SEDAR at www.sedar.com. Financial information
is provided in War Eagles comparative financial statements and MD&A. Shareholders may contact War
Eagle to request copies of the applicable financial statements and MD&A at the following address:
WAR EAGLE MINING COMPANY INC.
906-595 Howe Street
Vancouver, British Columbia V6C 2T5
Phone: (604) 681-7010

133 AC/1463772.11

AUDITOR'S CONSENT
We have read the Management Information Circular of War Eagle Mining Company Inc.
(the Company) dated November 3, 2011 in respect of the Transaction involving the
Company and Andromeda Resources Inc. and certain other transactions. We have
complied with Canadian generally accepted standards for an auditor's involvement with
offering documents.
We consent to the use in the above-mentioned Management Information Circular of our
reports to the shareholders of the Company on the consolidated balance sheets of the
Company as at March 31, 2011, 2010 and 2009, and the consolidated statements of
comprehensive loss, cash flows and shareholders equity for each of the three years
ended March 31, 2011, 2010 and 2009. Our reports are dated July 29, 2011 and June
22, 2010 (except for note 19 which is dated July 16, 2010).

Vancouver BC Canada
November 9, 2011

MacKay LLP
Chartered Accountants

CERTIFICATE OF WAR EAGLE MINING COMPANY INC.

The foregoing document constitutes full, true and plain disclosure of all material facts relating to the
securities of War Eagle Mining Company Inc. assuming completion of the reverse takeover transaction
described in this circular.
By order of the Board of Directors
DATED at Vancouver, British Columbia, this 9th day of November, 2011.

(signed) Simon Anderson

Simon Anderson
President and Chief Executive Officer

(signed) Salil Dhaumya

Salil Dhaumya
Chief Financial Officer

ON BEHALF OF THE BOARD OF DIRECTORS

(signed) Anthony Dutton

Anthony Dutton
Director

(signed) Terence Schorn

Terence Schorn
Director

1 AC/1463772.11

CERTIFICATE OF ANDROMEDA RESOURCES INC.

The foregoing document constitutes full, true and plain disclosure of all material facts relating to the
securities of Andromeda Resources Inc. assuming completion of the reverse takeover transaction
described in this circular.
By order of the Board of Directors
DATED at Toronto, Ontario, this 9th day of November, 2011.

(signed) Chris Davie

Chris Davie
President and Chief Executive Officer

(signed) Andres Tinajero

Andres Tinajero
Chief Financial Officer

ON BEHALF OF THE BOARD OF DIRECTORS

(signed) Rick Moscone

Rick Moscone
Director

(signed) Rene Mladosich

Rene Mladosich
Director

1 AC/1463772.11

ACKNOWLEDGEMENT PERSONAL INFORMATION.

Personal Information means any information about an identifiable individual, and includes information
contained in any Items in the attached information circular that are analogous to Items 4.2, 11, 13.1, 16,
18.2, 19.2, 24, 25, 27, 32.3, 33, 34, 35, 36, 37, 38, 39, 41 and 42 of this Form 3D1, as applicable.
The undersigned hereby acknowledges and agrees that it has obtained the express written consent of each
individual to:
(a)

the disclosure of Personal Information by the undersigned to the Exchange (as defined in
Appendix 6B) pursuant to this Form 3D1; and

(b)

the collection, use and disclosure of Personal Information by the Exchange for the
purposes described in Appendix 6B or as otherwise identified by the Exchange, from
time to time.

(signed) Simon Anderson

Simon Anderson
President and Chief Executive Officer

1 AC/1463772.11

SCHEDULE A DISSENT PROVISIONS (BCBCA)

Section 237 to 247 of the
Business Corporations Act (British Columbia)
Definitions and application
237 (1) In this Division:
dissenter means a shareholder who, being entitled to do so, sends written notice of dissent when and as
required by section 242;
notice shares means, in relation to a notice of dissent, the shares in respect of which dissent is being
exercised under the notice of dissent;
payout value means,
(a)

in the case of a dissent in respect of a resolution, the fair value that the notice shares had
immediately before the passing of the resolution

(b)

in the case of a dissent in respect of an arrangement approved by a court order made

under section 291 (2) (c) that permits dissent, the fair value that the notice shares had
immediately before the passing of the resolution adopting the arrangement, or

(c)

in the case of a dissent in respect of a matter approved or authorized by any other court
order that permits dissent, the fair value that the notice shares had at the time specified by
the court order,

excluding any appreciation or depreciation in anticipation of the corporate action approved or authorized
by the resolution or court order unless exclusion would be inequitable.
(2) This Division applies to any right of dissent exercisable by a shareholder except to the extent
that
(a)

the court orders otherwise, or on applies to any right of dissent exercisable by a

shareholder except to the extent that

(b)

in the case of a right of dissent authorized by a resolution referred to in section 238 (1)
(g), the court orders otherwise or the resolution provides otherwise.

Right to dissent
238 (1) A shareholder of a company, whether or not the shareholders shares carry the right to vote, is
entitled to dissent as follows
(a)

under section 260, in respect of a resolution to alter the articles to alter restrictions on the
powers of the company or on the business it is permitted to carry on;

(b)

under section 272, in respect of a resolution to adopt an amalgamation agreement;

(c)

under section 287, in respect of a resolution to approve an amalgamation under Division

4 of Part 9;

A-1 AC/1463772.11

(d)

in respect of a resolution to approve an arrangement, the terms of which arrangement

permit dissent;

(e)

under section 301 (5), in respect of a resolution to authorize or ratify the sale, lease or
other disposition of all or substantially all of the company's undertaking;

(f)

under section 309, in respect of a resolution to authorize the continuation of the company
into a jurisdiction other than British Columbia;

(g)

in respect of any other resolution, if dissent is authorized by the resolution;

(h)

in respect of any court order that permits dissent.

(2) A shareholder wishing to dissent must

(a)

prepare a separate notice of dissent under section 242 for

(i)

the shareholder, if the shareholder is dissenting on the shareholders own behalf,

and

(ii)

each other person who beneficially owns shares registered in the shareholders
name and on whose behalf the shareholder is dissenting,

(b)

identify in each notice of dissent, in accordance with section 242 (4), the person on
whose behalf dissent is being exercised in that notice of dissent, and

(c)

dissent with respect to all of the shares, registered in the shareholders name, of which the
person identified under paragraph (b) of this subsection is the beneficial owner.

(3) Without limiting subsection (2), a person who wishes to have dissent exercised with respect to shares
of which the person is the beneficial owner must
(a)

dissent with respect to all of the shares, if any, of which the person is both the registered
owner and the beneficial owner, and

(b)

cause each shareholder who is a registered owner of any other shares of which the person
is the beneficial owner to dissent with respect to all of those shares.

Waiver of right to dissent

239 (1) A shareholder may not waive generally a right to dissent but may, in writing, waive the right to
dissent with respect to a particular corporate action.
(2) A shareholder wishing to waive a right of dissent with respect to a particular corporate action must
(a)

provide to the company a separate waiver for

(i)

the shareholder, if the shareholder is providing a waiver on the shareholders own

behalf, and

(ii)

each other person who beneficially owns shares registered in the shareholders
name and on whose behalf the shareholder is providing a waiver, and

A-2 AC/1463772.11

(b)

identify in each waiver the person on whose behalf the waiver is made.

(3) If a shareholder waives a right of dissent with respect to a particular corporate action and indicates in
the waiver that the right to dissent is being waived on the shareholders own behalf, the shareholders
right to dissent with respect to the particular corporate action terminates in respect of the shares of which
the shareholder is both the registered owner and the beneficial owner, and this Division ceases to apply to
(a)

the shareholder in respect of the shares of which the shareholder is both the registered
owner and the beneficial owner, and

(b)

any other shareholders, who are registered owners of shares beneficially owned by the
first mentioned shareholder, in respect of the shares that are beneficially owned by the
first mentioned shareholder.

(4) If a shareholder waives a right of dissent with respect to a particular corporate action and indicates in
the waiver that the right to dissent is being waived on behalf of a specified person who beneficially owns
shares registered in the name of the shareholder, the right of shareholders who are registered owners of
shares beneficially owned by that specified person to dissent on behalf of that specified person with
respect to the particular corporate action terminates and this Division ceases to apply to those
shareholders in respect of the shares that are beneficially owned by that specified person.
Notice of resolution
240 (1) If a resolution in respect of which a shareholder is entitled to dissent is to be considered at a
meeting of shareholders, the company must, at least the prescribed number of days before the date of the
proposed meeting, send to each of its shareholders, whether or not their shares carry the right to vote,
(a)

a copy of the proposed resolution, and

(b)

a notice of the meeting that specifies the date of the meeting, and contains a statement
advising of the right to send a notice of dissent.

(2) If a resolution in respect of which a shareholder is entitled to dissent is to be passed as a consent

resolution of shareholders or as a resolution of directors and the earliest date on which that resolution can
be passed is specified in the resolution or in the statement referred to in paragraph (b), the company may,
at least 21 days before that specified date, send to each of its shareholders, whether or not their shares
carry the right to vote,
(a)

a copy of the proposed resolution, and

(b)

a statement advising of the right to send a notice of dissent.

(3) If a resolution in respect of which a shareholder is entitled to dissent was or is to be passed as a

resolution of shareholders without the company complying with subsection (1) or (2), or was or is to be
passed as a directors resolution without the company complying with subsection (2), the company must,
before or within 14 days after the passing of the resolution, send to each of its shareholders who has not
consented to, or voted in favour of, the resolution, whether or not their shares carry the right to vote,
(a)

a copy of the resolution,

(b)

a statement advising of the right to send a notice of dissent, and

(c)

if the resolution has passed, notification of that fact and the date on which it was passed.

A-3 AC/1463772.11

(d)

Nothing in subsection (1), (2) or (3) gives a shareholder a right to vote in a meeting at
which, or on a resolution on which, the shareholder would not otherwise be entitled to
vote.

Notice of court orders

241 If a court order provides for a right of dissent, the company must, not later than 14 days after the date
on which the company receives a copy of the entered order, send to each shareholder who is entitled to
exercise that right of dissent
(a)

a copy of the entered order, and

(b)

a statement advising of the right to send a notice of dissent.

Notice of dissent
242 (1) A shareholder intending to dissent in respect of a resolution referred to in section 238 (1) (a), (b),
(c), (d), (e) or (f) must,
(a)

if the company has complied with section 240 (1) or (2), send written notice of dissent to
the company at least 2 days before the date on which the resolution is to be passed or can
be passed, as the case may be,

(b)

if the company has complied with section 240 (3), send written notice of dissent to the
company not more than 14 days after receiving the records referred to in that section, or

(c)

if the company has not complied with section 240 (1), (2) or (3), send written notice of
dissent to the company not more than 14 days after the later of
(i)

the date on which the shareholder learns that the resolution was passed, and

(ii)

the date on which the shareholder learns that the shareholder is entitled to dissent.

(2) A shareholder intending to dissent in respect of a resolution referred to in section 238 (1) (g) must
send written notice of dissent to the company
(a)

on or before the date specified by the resolution or in the statement referred to in section
240 (2) (b) or (3) (b) as the last date by which notice of dissent must be sent, or

(b)

if the resolution or statement does not specify a date, in accordance with subsection (1) of
this section.

(3) A shareholder intending to dissent under section 238 (1) (h) in respect of a court order that permits
dissent must send written notice of dissent to the company
(a)

within the number of days, specified by the court order, after the shareholder receives the
records referred to in section 241, or

(b)

if the court order does not specify the number of days referred to in paragraph (a) of this
subsection, within 14 days after the shareholder receives the records referred to in section
241.

A-4 AC/1463772.11

(4) A notice of dissent sent under this section must set out the number, and the class and series, if
applicable, of the notice shares, and must set out whichever of the following is applicable:
(a)

if the notice shares constitute all of the shares of which the shareholder is both the
registered owner and beneficial owner and the shareholder owns no other shares of the
company as beneficial owner, a statement to that effect;

(b)

if the notice shares constitute all of the shares of which the shareholder is both the
registered owner and beneficial owner but the shareholder owns other shares of the
company as beneficial owner, a statement to that effect and

(c)

(i)

the names of the registered owners of those other shares,

(ii)

the number, and the class and series, if applicable, of those other shares that are
held by each of those registered owners, and

(iii)

a statement that notices of dissent are being, or have been, sent in respect of all of
those other shares;

if dissent is being exercised by the shareholder on behalf of a beneficial owner who is not
the dissenting shareholder, a statement to that effect and
(i)

the name and address of the beneficial owner, and

(ii)

a statement that the shareholder is dissenting in relation to all of the shares

beneficially owned by the beneficial owner that are registered in the
shareholders name.

(5) The right of a shareholder to dissent on behalf of a beneficial owner of shares, including the
shareholder, terminates and this Division ceases to apply to the shareholder in respect of that beneficial
owner if subsections (1) to (4) of this section, as those subsections pertain to that beneficial owner, are not
complied with.
Notice of intention to proceed
243 (1) A company that receives a notice of dissent under section 242 from a dissenter must,
(a)

(b)

if the company intends to act on the authority of the resolution or court order in respect of
which the notice of dissent was sent, send a notice to the dissenter promptly after the later
of
(i)

the date on which the company forms the intention to proceed, and

(ii)

the date on which the notice of dissent was received, or

if the company has acted on the authority of that resolution or court order, promptly send
a notice to the dissenter.

(2) A notice sent under subsection (1) (a) or (b) of this section must
(a)

be dated not earlier than the date on which the notice is sent,

A-5 AC/1463772.11

(b)

state that the company intends to act, or has acted, as the case may be, on the authority of
the resolution or court order, and

(c)

advise the dissenter of the manner in which dissent is to be completed under section 244.

Completion of dissent
244 (1) A dissenter who receives a notice under section 243 must, if the dissenter wishes to proceed with
the dissent, send to the company or its transfer agent for the notice shares, within one month after the date
of the notice,
(a)

a written statement that the dissenter requires the company to purchase all of the notice
shares,

(b)

the certificates, if any, representing the notice shares, and

(c)

if section 242 (4) (c) applies, a written statement that complies with subsection (2) of this
section.

(2) The written statement referred to in subsection (1) (c) must

(a)

be signed by the beneficial owner on whose behalf dissent is being exercised, and

(b)

set out whether or not the beneficial owner is the beneficial owner of other shares of the
company and, if so, set out
(i)

the names of the registered owners of those other shares,

(ii)

the number, and the class and series, if applicable, of those other shares that are
held by each of those registered owners, and

(iii)

that dissent is being exercised in respect of all of those other shares.

(3) After the dissenter has complied with subsection (1),

(a)

the dissenter is deemed to have sold to the company the notice shares, and

(b)

the company is deemed to have purchased those shares, and must comply with section
245, whether or not it is authorized to do so by, and despite any restriction in, its
memorandum or articles.

(4) Unless the court orders otherwise, if the dissenter fails to comply with subsection (1) of this section in
relation to notice shares, the right of the dissenter to dissent with respect to those notice shares terminates
and this Division, other than section 247, ceases to apply to the dissenter with respect to those notice
shares.
(5) Unless the court orders otherwise, if a person on whose behalf dissent is being exercised in relation to
a particular corporate action fails to ensure that every shareholder who is a registered owner of any of the
shares beneficially owned by that person complies with subsection (1) of this section, the right of
shareholders who are registered owners of shares beneficially owned by that person to dissent on behalf
of that person with respect to that corporate action terminates and this Division, other than section 247,
ceases to apply to those shareholders in respect of the shares that are beneficially owned by that person.

A-6 AC/1463772.11

(6) A dissenter who has complied with subsection (1) of this section may not vote, or exercise or assert
any rights of a shareholder, in respect of the notice shares, other than under this Division.
Payment for notice shares
245 (1) A company and a dissenter who has complied with section 244 (1) may agree on the amount of
the payout value of the notice shares and, in that event, the company must
(a)

promptly pay that amount to the dissenter, or

(b)

if subsection (5) of this section applies, promptly send a notice to the dissenter that the
company is unable lawfully to pay dissenters for their shares.

(2) A dissenter who has not entered into an agreement with the company under subsection (1) or the
company may apply to the court and the court may
(a)

determine the payout value of the notice shares of those dissenters who have not entered
into an agreement with the company under subsection (1), or order that the payout value
of those notice shares be established by arbitration or by reference to the registrar, or a
referee, of the court,

(b)

join in the application each dissenter, other than a dissenter who has entered into an
agreement with the company under subsection (1), who has complied with section 244
(1), and

(c)

make consequential orders and give directions it considers appropriate.

(3) Promptly after a determination of the payout value for notice shares has been made under subsection
(2) (a) of this section, the company must
(a)

pay to each dissenter who has complied with section 244 (1) in relation to those notice
shares, other than a dissenter who has entered into an agreement with the company under
subsection (1) of this section, the payout value applicable to that dissenter's notice shares,
or

(b)

if subsection (5) applies, promptly send a notice to the dissenter that the company is
unable lawfully to pay dissenters for their shares.

(4) If a dissenter receives a notice under subsection (1) (b) or (3) (b),
(a)

the dissenter may, within 30 days after receipt, withdraw the dissenter's notice of dissent,
in which case the company is deemed to consent to the withdrawal and this Division,
other than section 247, ceases to apply to the dissenter with respect to the notice shares,
or

(b)

if the dissenter does not withdraw the notice of dissent in accordance with paragraph (a)
of this subsection, the dissenter retains a status as a claimant against the company, to be
paid as soon as the company is lawfully able to do so or, in a liquidation, to be ranked
subordinate to the rights of creditors of the company but in priority to its shareholders.

(5) A company must not make a payment to a dissenter under this section if there are reasonable grounds
for believing that

A-7 AC/1463772.11

(a)

the company is insolvent, or

(b)

the payment would render the company insolvent.

Loss of right to dissent

246 The right of a dissenter to dissent with respect to notice shares terminates and this Division, other
than section 247, ceases to apply to the dissenter with respect to those notice shares, if, before payment is
made to the dissenter of the full amount of money to which the dissenter is entitled under section 245 in
relation to those notice shares, any of the following events occur:
(a)

the corporate action approved or authorized, or to be approved or authorized, by the

resolution or court order in respect of which the notice of dissent was sent is abandoned;

(b)

the resolution in respect of which the notice of dissent was sent does not pass;

(c)

the resolution in respect of which the notice of dissent was sent is revoked before the
corporate action approved or authorized by that resolution is taken;

(d)

the notice of dissent was sent in respect of a resolution adopting an amalgamation

agreement and the amalgamation is abandoned or, by the terms of the agreement, will not
proceed;

(e)

the arrangement in respect of which the notice of dissent was sent is abandoned or by its
terms will not proceed;

(f)

a court permanently enjoins or sets aside the corporate action approved or authorized by
the resolution or court order in respect of which the notice of dissent was sent;

(g)

with respect to the notice shares, the dissenter consents to, or votes in favour of, the
resolution in respect of which the notice of dissent was sent;

(h)

the notice of dissent is withdrawn with the written consent of the company;

(i)

the court determines that the dissenter is not entitled to dissent under this Division or that
the dissenter is not entitled to dissent with respect to the notice shares under this Division.

Shareholders entitled to return of shares and rights

247 If, under section 244 (4) or (5), 245 (4) (a) or 246, this Division, other than this section, ceases to
apply to a dissenter with respect to notice shares,
(a)

the company must return to the dissenter each of the applicable share certificates, if any,
sent under section 244 (1) (b) or, if those share certificates are unavailable, replacements
for those share certificates,

(b)

the dissenter regains any ability lost under section 244 (6) to vote, or exercise or assert
any rights of a shareholder, in respect of the notice shares, and

(c)

the dissenter must return any money that the company paid to the dissenter in respect of
the notice shares under, or in purported compliance with, this Division.

A-8 AC/1463772.11

SCHEDULE B
Audited Consolidated Financial Statements for War Eagle Mining Company Inc. for the years
ended March 31, 2011, 2010 and 2009

B-1 AC/1463772.11

WAR EAGLE MINING COMPANY INC.

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011 and 2010

CHARTERED
ACCOUNTANTS
MacKay LLP

1100 1177 West Hastings Street

Vancouver, BC V6E 4T5
Tel: 604-687-4511
Fax: 604-687-5805
Toll Free: 1-800-351-0426
www.MacKayLLP.ca

INDEPENDENT AUDITORS REPORT

To the Shareholders of
War Eagle Mining Company Inc.
We have audited the accompanying consolidated financial statements of War Eagle Mining Company Inc. and its
subsidiaries, which comprise the consolidated balance sheets as at March 31, 2011 and 2010, and the
consolidated statements of comprehensive loss, cash flows, and shareholders equity for the years then ended,
and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with Canadian generally accepted accounting principles, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated
financial position of War Eagle Mining Company Inc. and its subsidiaries as at March 31, 2011 and 2010, and the
results of their operations and their cash flows for the years then ended in accordance with Canadian generally
accepted accounting principles.
Emphasis of matter
Without modifying our opinion, we draw attention to Note 1 to the consolidated financial statements which
describes the material uncertainty that may cast significant doubt about the ability of War Eagle Mining Company
Inc. and its subsidiaries to continue as a going concern.

Vancouver, Canada
July 29, 2011

MacKay LLP
Chartered Accountants

WAR EAGLE MINING COMPANY INC.

Consolidated Balance Sheets
As at March 31,
Note

2011

2010

ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Prepaid expenses and deposits
Total current assets

3b

52,290
38,951
33,791
125,032

6
8

Petroleum interests
Mineral properties

29,314

911,893
16,787
27,621
956,301
1,602
1,648,843

154,346

2,606,746

231,153
231,153

49,976
49,976

LIABILITIES AND SHAREHOLDERS EQUITY

Current liabilities
Accounts payable and accrued liabilities
Total current liabilities

Shareholders' equity (deficiency)

Share capital
Contributed surplus
Deficit

10

38,325,029
3,005,628
(41,407,464)

37,439,113
2,984,858
(37,867,201)

(76,807)

2,556,770

154,346

2,606,746

Basis of presentation and going concern (note 1)

Commitments (note 8)
Subsequent events (note 19)

On behalf of the board of directors:

Terence Schorn
Terence Schorn

Simon Anderson
Simon Anderson

Director

Director

The accompanying notes are an integral part of these consolidated financial statements.

WAR EAGLE MINING COMPANY INC.

Consolidated Statements of Comprehensive Loss
For the Years Ended March 31,
Note
Operating expenses
Consulting fees
Directors fees
Doubtful debt
Insurance
Investor relations and news dissemination
Management fees and salaries
Office and miscellaneous
Professional fees
Property investigation
Rent
Stock-based compensation
Transfer agent and filing fees
Travel

2011

$
9
7

9
11

Loss before other income

Other income (expense)
Property impairment
Investment impairment
Foreign exchange loss
Gain on sale of marketable securities
Lease termination
Interest income

6,8
5

Loss for the year

Other comprehensive income (loss) for the year
Change in unrealized gains or losses on available-for-sale
investments
Reclassification of net realized gains or losses on availablefor-sale investments to earnings

3,050
86,223
31,119
22,873
278,898
12,765
61,556
53,000
29,700
-

2010

8,419
88,508
106,310
39,074
17,494
309,439
18,568
45,039
34,457
21,398
55,000
18,116
8,650

(579,184)

(770,472)

(1,959,771)
(1,000,000)
(3,320)
2,012
(2,961,079)

(500,000)
(5,069)
87,842
(135,597)
3,913
(548,911)

(3,540,263)

(1,319,383)

152,500

(90,625)

61,875

Comprehensive loss for the year

(3,540,263)

(1,257,508)

Basic and diluted loss per common share

(1.08)

(0.49)

Basic and diluted comprehensive loss per common share

(1.08)

(0.49)

Weighted average number of common shares outstanding,

basic and diluted

3,267,616

2,695,520

The accompanying notes are an integral part of these consolidated financial statements.

WAR EAGLE MINING COMPANY INC.

Consolidated Statements of Cash Flows
For the Years Ended March 31,
Note
Operating activities
Loss for the year
Operating items not involving cash
Gain on sale of marketable securities
Stock-based compensation
Unrealized foreign exchange gain
Doubtful debt
Property impairment
Investment impairment

2011

11

6,8
5

Change in non-cash operating working capital

Accounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Net cash used in operating activities
Financing activities
Issuance of common shares, net of issue costs

10

Net cash provided by financing activities

Investing activities
Deferred exploration expenditures
Investments
Proceeds on sale of marketable securities

8
5

Net cash used in investing activities

Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Interest paid
Income taxes
Mineral property related change in accounts payable

(3,540,263)

2010

(1,319,383)

1,959,771
1,000,000
(580,492)

(87,842)
55,000
20,807
106,310
500,000
(725,108)

(22,164)
(6,170)
244,524

1,048
(11,819)
(226,265)

(364,302)

(962,144)

906,686

906,686

(401,987)
(1,000,000)
-

(282,365)
187,843

(1,401,987)

(94,522)

(859,603)

(1,056,666)

911,893

1,968,559

52,290

911,893

2,338

(56,032)

Supplementary cash flow information (note 18)

The accompanying notes are an integral part of these consolidated financial statements.

WAR EAGLE MINING COMPANY INC.

Consolidated Statement of Shareholders Equity (Deficiency)

Note
At March 31, 2009
Expired warrants
Net gain recognized on
disposition of available for
sale investments
Stock-based compensation
Loss for the year

11

At March 31, 2010

Private placement
Share issue costs
Finders fees
Fair value of finders warrants
Loss for the year
At March 31, 2011

10
10
10
10

Number of
common
shares

Common
shares

Accumulated
other
comprehensive
income

Warrants

2,695,522

$ 37,439,113

539,897

Deficit

(61,875)

$ 2,389,961

$ (36,547,818)

$ 3,759,278

(539,897)

539,897

61,875
-

55,000
-

(1,319,383)

61,875
55,000
(1,319,383)

2,695,522

37,439,113

2,984,858

(37,867,201)

2,556,770

786,750
-

944,100
(6,206)
(31,208)
(20,770)
-

20,770
-

(3,540,263)

944,100
(6,206)
(31,208)
(3,540,263)

3,482,272

$ 38,325,029

3,005,628

$ (41,407,464)

$ (76,807)

Contributed
surplus

Total
shareholders
equity
(deficiency)

The accompanying notes are an integral part of these consolidated financial statements.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

1. Basis of Presentation and Going Concern

These financial statements include the accounts of War Eagle Mining Company Inc. (War Eagle) and its
subsidiaries. War Eagle and its subsidiaries are collectively referred to as the Company. Except where
indicated all amounts are expressed in Canadian dollars.
While these consolidated financial statements have been prepared in accordance with Canadian generally
accepted accounting principles (GAAP) and on the basis of accounting principles applicable to a going
concern, which assumes that the Company will be able to continue in operation for the foreseeable future and
will be able to realize its assets and discharge its liabilities in the normal course of business, there are
conditions and events that cast significant doubt about the validity of that assumption.
As at March 31, 2011, the Company had an accumulated deficit of $41,407,464 and the loss for the year
ended March 31, 2011 was $3,540,263. The ability of the Company to continue as a going concern, and
ultimately to recover its investment in its mineral properties and to attain profitable operations, is dependent
upon the discovery, development and sale of mineral resources or the sale of its mineral properties; and the
ability to raise additional debt or equity. The successful outcome of these undertakings cannot be assured
because they are contingent on future matters.
If the going concern assumption were not appropriate for these financial statements, then adjustments could
be necessary to the carrying values of assets and liabilities, the reported expenses and the balance sheet
classifications used. Such adjustments could be material.
In March 2011, the Company entered into a share purchase and sale agreement in which the Company
agreed to sell and transfer the interest in its 99% owned Mexican subsidiary, Minera Aguila Canadiense S.A
de C.V. (Minera Aguila) (note 13).
2. Nature of Operations
The Company is in the exploration stage and is in the process of exploring mineral resource properties and
has not yet determined whether its properties contain ore reserves that are economically recoverable.
3. Significant Accounting Principles
The Company prepares its accounts in accordance with accounting principles generally accepted in Canada.
The following is a summary of significant accounting policies used in the preparation of these financial
statements:
a) Principles of Consolidation
These consolidated financial statements include the accounts of War Eagle Mining Company Inc., its
wholly owned subsidiary, War Eagle Resources Corporation, a U.S. corporation, Tombstone Mining Inc, a
company incorporated in the British Virgin Islands and a 99% interest in Tombstone Exploration de Mexico
S.A. de C.V., a Mexican corporation and Minera Aguila, its 99% owned Mexican subsidiary, until it was
sold on March 11, 2011 (note 13). All significant intercompany transactions have been eliminated.
b) Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments which are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in value. Included in the Companys cash
balance at March 31, 2011, are term deposits totalling $35,312 (2010 -$694,069) bearing interest at a rate
of 1.85% (2010 0.2%) per year.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

3. Significant Accounting Principles (continued)

c) Mineral Properties and Deferred Exploration Expenditures
The cost of mineral properties acquired and related exploration costs are capitalized until the properties to
which they relate are placed into production, sold or abandoned. These costs will be amortized on the unitof-production method following the commencement of production or written off if the properties are sold or
abandoned.
Although the Company has taken steps to verify title to mineral properties in which it has an interest, in
accordance with industry norms for the current stage of exploration of such properties, these procedures
do not guarantee the Companys title. Property may be subject to unregistered prior agreements and noncompliance with regulatory requirements.
From time to time, the Company may grant options on properties it has acquired. Proceeds received are
first applied to property acquisition costs already capitalized, then to deferred exploration costs and the
remaining amount, if any, is recorded as income.
Management reviews capitalized costs on its mineral properties on an annual basis and will recognize
impairment in value based upon current exploration results and upon managements assessment of the
future probability of profitable revenues from the property or sale of the property.
Recorded costs of mineral properties and deferred exploration costs are not intended to reflect present or
future values of mineral properties.
d) Joint Venture Accounting
Where the Companys exploration and development activities are conducted with others, the accounts
reflect only the Companys proportionate interest in such activities.
e) Share Issuance Costs
Commissions and other costs to or on behalf of agents on the issuance of the Companys shares are
charged directly to share capital.
f)

Translation of Foreign Currencies

The Company follows the temporal method of accounting for the translation of foreign currency amounts
into Canadian dollars. Under this method, all monetary assets and liabilities expressed in foreign
currencies are translated at rates of exchange in effect at the period end. All other assets and liabilities are
translated at the rates prevailing at the dates the assets were acquired or liabilities incurred. Revenue and
expense items, except for amortization, are translated at the average rate of exchange for the period.
Amortization is converted using rates prevailing at the date of acquisition. The resulting foreign currency
translation gains and losses are included in the determination of loss for the period.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

3. Significant Accounting Principles (continued)

g) Loss Per Share
Basic loss per share amounts have been calculated based on the weighted average number of common
shares outstanding during the year.
The Company uses the treasury stock method of calculating fully diluted per share amounts whereby any
proceeds from the exercise of stock options or other dilutive instruments are assumed to be used to
purchase common shares at the average market price during the period. The assumed conversion of
outstanding common share options and warrants has an anti-dilutive impact in fiscal 2011 and 2010 so it
is not shown.
h) Financial Instruments
Under Section 3251, Equity, Section 3855, Financial Instruments - Recognition and Measurement and
Sections 3862 and 3863, Financial Instruments - Disclosure and Presentation, all financial instruments
are classified into one of the following five categories: held-for-trading, held-to-maturity investments, loans
and receivables, available-for-sale assets or other financial liabilities. All financial instruments, including
derivatives, are included on the balance sheet and are measured at fair market value upon inception with
the exception of certain related party transactions. Subsequent measurement and recognition of change in
the fair value of financial instruments depends on their initial classification. Held-for-trading financial
instruments are measured at fair value and all gains and losses are included in operations in the period in
which they arise. Available-for-sale financial assets are measured at fair value with revaluation gains and
losses included in other comprehensive income until the asset is removed from the balance sheet. Loans
and receivables, held-to-maturity investments and other financial liabilities are measured at amortized cost
using the effective interest method. Gains and losses upon inception, de-recognition, impairment writedowns and foreign exchange translation adjustments are recognized immediately. Transaction costs
related to financial instruments will be expensed in the period incurred.
The Company has designated its cash and cash equivalents as held-for-trading, which are measured at
fair value. Marketable securities are classified as available-for-sale and are measured at fair value with
changes in fair value recorded in other comprehensive income (loss). Amounts and loans receivable are
classified as loans and receivables, which are measured at amortized cost. Accounts payable and accrued
liabilities, and amounts due to related parties are classified as other financial liabilities, which are
measured at amortized cost.
i)

Estimates
The preparation of financial statements in conformity with Canadian GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

3. Significant Accounting Principles (continued)

j)

Measurement Uncertainty
The future recovery of the recorded cost of the mineral properties is based on estimates. By their nature,
these estimates are subject to measurement uncertainty and the effect on the financial statements is such
that changes in estimates in future periods could be significant.

k) Asset Retirement Obligations

The Company records a liability for an asset retirement obligation in the period in which it is incurred and
when a reasonable estimate of the fair value of the liability can be made. Furthermore, a corresponding
asset retirement cost is recognized by increasing the carrying amount of the related long-lived asset. The
asset retirement cost is allocated in a rational and systematic method over the underlying assets useful
life. The initial fair value of the liability is accreted, by charges to operations, to its estimated future value.
The Company did not have any asset retirement obligations at March 31, 2011 or 2010.
l)

Stock-based Compensation Plan

All stock-based awards are measured and recognized using the fair-value method as determined by the
Black-Scholes option pricing model. Awards that the Company has the ability to settle with stock are
recorded as equity, whereas awards that the Company is required to, or has the practice of settling in cash
are recorded as liabilities. Compensation costs are recorded in the statement of operations over the
vesting period. The fair value of stock options granted to non-employees is re-measured at the earlier of
each financial reporting or vesting date, and any adjustment is charged or credited to operations upon remeasurement. The Company has not incorporated an estimated forfeiture rate for stock options that will
not vest; rather the Company accounts for actual forfeitures as they occur.

m) Flow-through Shares
The Company accounts for flow-through shares in accordance with Abstract EIC 146 of the Canadian
Institute of Chartered Accountants (CICA). The Abstract recommends that upon renunciation to the
shareholders, the Company will reduce share capital and record a temporary future income tax liability for
the amount of the tax deduction renounced to shareholders. In instances where the Company has
sufficient available discretionary deductible differences available to offset the renounced tax deductions,
the realization of these differences will be credited to operations at the date of renunciation.
n) Future Income Taxes
Income taxes are accounted for using the future income tax method. Under this method income taxes are
recognized for the estimated income taxes payable for the current year and future income taxes are
recognized for temporary differences between the tax and accounting bases of assets and liabilities and
for the benefit of losses available to be carried forward for tax purposes that are more likely than not to be
realized. To the extent the Company does not consider it more likely than not that a future tax asset will be
recovered, it provides a valuation allowance against the excess. Future income tax assets and liabilities
are measured using tax rates expected to apply in the years in which the temporary differences are
expected to be recovered or settled.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

3. Significant Accounting Principles (continued)

o) Non-monetary Consideration
In situations where share capital is issued, or received, as non-monetary consideration and the fair value
of the asset received, or given up is not readily determinable, the fair market value (as defined) of the
shares is used to record the transaction. The fair market value of the shares issued, or received, is based
on the trading price of those shares on the appropriate stock exchange on the date of the agreement to
issue or receive shares as determined by the board of directors.
p) Valuation of Equity Units Issued in Private Placements
The Company has adopted a pro rata basis method with respect to the measurement of shares and
warrants issued as private placement units. The pro rata basis method required each component to be
valued at fair value and an allocation of the total proceeds received based on the pro rata relative values
of the components.
The fair value of the common shares is based on the closing quoted bid price on the announcement date
and the fair value of the common share purchase warrants is determined at the announcement date using
the Black- Scholes pricing model. The fair value attributed to the warrants is recorded in warrants.
4. Adoption of New Accounting Pronouncements and Recent Developments
International Financial Reporting Standards (IFRS)
In 2006, the Canadian Accounting Standards Board (AcSB) published a new strategic plan that will
significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines
the convergence of Canadian GAAP with IFRS over an expected five-year transitional period. In February
2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS,
replacing Canadas own GAAP and the date for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2011. The Company will begin reporting under IFRS in the year ended March
31, 2012. The transition date of April 1, 2010 will require the restatement for comparative purposes of amounts
reported by the Company for the year ended March 31, 2011.
While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact of the
transition to IFRS has not been estimated at this time.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

5. Investment
In June and July 2010, the Company paid cash consideration of $1,000,000 to acquire a 17% interest in
Andromeda Resources Inc. (Andromeda). In August 2010, the Company entered into a letter of intent to
undertake an RTO with Andromeda, which was terminated in December 2010. As of March 31, 2011, the
Company has written-off its investment in Andromeda in full.
6. Petroleum Interests
The Company previously held fractional interests in a few oil and gas wells located in the USA. The properties
have ceased generating revenues and accordingly the Company has written off the $1,602 carrying value of
the properties.
7. Loan Receivable
On February 17, 2009, the Company entered into an agreement with another public company that had a
director in common at the time, Pacific Copper Corp. (Pacific Copper). The Company agreed to loan Pacific
Copper up to US$155,000 in exchange for a promissory note with a maturity date of June 30, 2009, bearing
interest at an annual rate of 15%. In fiscal 2009 the Company advanced US$100,000 to Pacific Copper and
has not advanced further funds in the fiscal years 2011 and 2010.
This promissory note is secured by certain of Pacific Coppers mineral properties in South America. In
correspondence to the Company, Pacific Copper has stated that since the entire note was not funded the
amount advanced is unsecured. The Company believes that Pacific Coppers position is without merit.
As at March 31, 2011 and 2010 this promissory note had matured but remains outstanding. The Company has
fully provided for collectability of the outstanding amount in the year ended March 31, 2010:

2011
Balance due
Balance due
Allowance for doubtful collectability
Effect of foreign exchange rate changes
Net book value

10

2010

US$

US$ 105,486

US$

110,697
(106,310)
(4,387)
US$
-

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

8. Mineral Properties
March 31,
2010
Acquisition Costs
Canada:
Antimony Mountain Joint
Venture
Georges Lake

Mexico:
Tres Marias Property
Deferred Exploration
Expenditures
Canada:
Georges Lake
MAC Property
Mexico:
Tres Marias Property

1
316,162
316,163

Additions

Mexico:
Tres Marias Property
Deferred Exploration
Expenditures
Canada:
Georges Lake
MAC Property
Mexico:
Tres Marias Property

(391,162)
(391,162)

March 31,
2011

1
1

772,436
1,088,599

75,000

(772,436)
(1,163,598)

350,370
-

(14,460)
29,313

(335,910)
-

29,313

209,874

248,787

(458,661)

560,244

263,640

(794,571)

29,313

1,648,843

March 31,
2009
Acquisition Costs
Canada:
Antimony Mountain Joint
Venture
Georges Lake
MAC Property

75,000
75,000

Impairment

1
316,162
500,000
816,163

338,640

Additions

(1,958,169)

Impairment

(500,000)
(500,000)

29,314
March 31,
2010

1
316,162
316,163

772,436
1,588,599

(500,000)

772,436
1,088,599

333,911
-

16,459
-

350,370
-

209,874

209,874

333,911

226,333

560,244

1,922,510

11

226,333

(500,000)

1,648,843

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

8. Mineral Properties (continued)

In the year ended March 31, 2011, the Company recorded impairment of $1,231,097 on its Tres Marias
property, as a result of the incomplete transaction with Andromeda and accordingly a reduced prospect of
exploiting the property in the near term. The Company also recorded impairment of $727,072 on its Georges
Lake property as it has no plans for development of this property.
a) Tres Marias
On March 23, 2001, the Company signed a letter agreement with a private mining company to acquire a 100%
interest in the private companys option agreement on the Tres Marias property in Chihuahua, Mexico. Under
the terms of the letter agreement the Company paid $15,712 and issued 10,000 common shares.
The Company has assumed the rights and obligations of the option agreement to acquire a 100% interest in
the Tres Marias property. The terms of the option agreement were amended during the year ended March 31,
2003 in exchange for the Company issuing 26,250 common shares. The option agreement was again
amended during the year ended March 31, 2004, and the new terms of the option agreement call for a 3% net
smelter royalty (NSR) on all production, except for oxide production (where the NSR is 1.5%), and a 1% net
profits royalty all payable to the optionor. The NSR can be bought down to a 0.5% NSR on all production
including oxide production for US$500,000, subject to regulatory approval. If the NSR is bought down to 0.5%
the NSR will cease once NSR payments after the buy down total US$2 million.
With a final payment of $170,970 paid on July 27, 2006, the Company completed its required payments and
expenditures and has satisfied all of its obligations under the purchase option agreement for the Tres Marias
property.
The Company also issued an additional 2.5% NSR to a third party during the year ended March 31, 2004
which was bought down to a 1.5% NSR during the year ended March 31, 2005 for $123,090.
b) Antimony Mountain Joint Venture
The Antimony Mountain prospect is located 65 kilometres northeast of Dawson City, Yukon Territory, Canada.
During the year ended March 31, 2005, the Company and another public company entered into a joint venture
agreement to explore the prospect. The Company then transferred its interest in the project to the other
company in exchange for the optional right to acquire a 100% working interest in the MAC Property (note 8d).
The Company retains a 0.5% net smelter royalty in Antimony Mountain.
c) Georges Lake
During the year ended March 31, 2006 the Company acquired a 90% interest in the Georges Lake gold
property located northwest of La Ronge, Saskatchewan, Canada by paying the optioner $75,000 and issuing
25,000 common shares. The Company then had the option to acquire an additional 5% property interest
anytime by paying $2,000,000. There is a 0.5% NSR on the property, which the Company can purchase
anytime for a cash payment of $250,000.
During the year ended March 31, 2007 the Company signed an option agreement with another public
company whereby the other public company may acquire up to a 70% property interest in the Georges Lake
gold property by incurring exploration expenditures of $1 million by December 31, 2008. During the year ended
March 31, 2009, it was determined that the optionee would not be going forward with the letter of intent and a
total of $198,447 in exploration payments previously recorded as a loan receivable was expensed.
In February 2010, the Company entered into an agreement to purchase the remaining 10% interest in the
Georges Lake property for cash consideration of $75,000 and completed the purchase in April 2010.
The Company does not have any plans to develop this property and accordingly, the Company has provided
for a full impairment of its carrying value.

12

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

8. Mineral Properties (continued)

d) MAC Property
On February 23, 2001, the Company signed an option agreement, with another public company, to purchase a
50% interest in the MAC property located in the south western Northwest Territories, Canada.
During the year ended March 31, 2005 the Company transferred its interest in the Antimony Mountain Joint
Venture (note 8b) to the other company and was granted the optional right to acquire a 100% interest in the
MAC property, subject to a 2% NSR payable to the other company, for cash payments of $22,000 by February
28, 2005 (paid), cash of $100,000 or common shares of equivalent value by February 14, 2006 (issued) and
$100,000 by February 14, 2007 (paid). Upon meeting the payment terms the Company had the right to
purchase 1% of the other companys NSR for $1 million until February 14, 2010, but this right has now lapsed.
In June 2007, the Company entered into an option agreement with Eagle Hill Exploration Corporation (Eagle
Hill) whereby Eagle Hill had the right to earn up to a 70% interest in the property by spending a minimum of
$2,800,000 over a period ending on December 31, 2011. In July 2009, the Company entered into a mutual
release agreement with Eagle Hill whereby the MAC property option agreement was terminated. Under the
terms of the mutual release agreement Eagle Hill will maintain a 3.5% interest in the MAC property.
In August 2009, the Company entered into option agreement with VM Exploration Ltd. (VM Exploration).
Under the option agreement, VM Exploration has the option to earn up to an 80% interest in the Companys
MAC property in consideration of incurring expenditures of $2 million payable over a three-year period. In June
2010, the Company and VM Exploration terminated the option agreement. The Company did not have any
plans to develop this property in 2010 and accordingly, the Company provided for a full impairment of its
carrying value in 2010.
In 2012, the Company intends to take the MAC claims 1-7 to lease and, to do so, it is required to submit a
survey of the claims by November 30, 2011. The Company has contracted a surveyor to complete the work,
which is estimated to cost approximately $100,000, of which, the Company incurred $29,313 as of March 31,
2011.

13

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

9. Related Party Transactions

The Company entered into the following transactions with related parties not disclosed elsewhere in these
consolidated financial statements as follows:
March 31, 2011
Terence Schorn 1
S2 Management Inc. 2
Donald Padgett 3
Anthony Dutton 4
IBC Advanced Alloys Corp. 5
Koios Corporate Financial Services Ltd.6

March 31, 2010

Terence Schorn 1
S2 Management Inc. 2
Donald Padgett 3
Anthony Dutton 4
IBC Advanced Alloys Corp. 5
Monita Faris 7
Tarbo Resources 8
Bob Faris 9

Director or
Officer
Compensation
$
60,000
60,000
42,000
42,000
15,194
$
219,194
Director or
Officer
Compensation
$

60,000
60,000
42,000
42,000
9,250
9,000
10,000
232,250

Consulting
Fees
$

23,550
23,550

Rent

Consulting
Fees

16,702
16,702

18,000
18,000

Total

Rent

18,000
18,000

60,000
83,550
42,000
42,000
18,000
15,194
260,744
Total

60,000
76,702
42,000
42,000
18,000
9,250
9,000
10,000
266,952

Mr. Schorn is a director and the secretary of the Company and was an officer of the Company in the
comparative period.
Beneficially owned by Simon Anderson, the Companys president and a director. Consulting fees are
2
for administrative and secretarial services.
3
Mr. Padgett is a director of the Company.
4
Mr. Dutton is a director of the Company.
5
A company with a significant shareholder and two directors or officers in common with the Company.
6
Beneficially owned by Salil Dhaumya, the Companys CFO.
7
Ms. Faris is the former secretary of the Company.
8
A company beneficially owned by Mr. Schorn.
9
Mr. Faris is the former vice president corporate communications of the Company.
Related party balances are due on demand, bear no interest, are unsecured and have no fixed payment
terms.
1

As at March 31, 2011, $85,000 (March 31, 2010 - $1,197) is owing to an officer and directors for services,
$1,680 (March 31, 2010 - $nil) is owing to company, owned by an officer of the Company, for services, $526
(March 31, 2010 - $nil) is owing to a company, owned by an officer and director of the Company, for
contracted administrative services and $3,360 (March 31, 2010 - $nil) is owing to a company with an officer
and a director in common with the Company for rent. These amounts owing have been included in accounts
payable and accrued liabilities.
The above transactions are in the normal course of operations and are measured at the exchange amount,
which is the amount of consideration established and agreed to by the related parties.

14

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

10. Share Capital

Authorized capital
Unlimited common shares, without par value.
Issued capital
Subsequent to year end, the Company effected a consolidation of its share capital on a 20 for 1 basis,
consolidating its 69,645,394 currently outstanding common shares to 3,482,272 common shares (note 19). All
references to common stock in the financial statements have been changed to reflect the reverse stock split.
Non-brokered private placement
In June and July 2010, the Company undertook a private placement and issued 786,750 units for gross
proceeds of $944,100. Each unit was priced at $1.20 with each unit consisting of one common share of the
Company and one-half common share purchase warrant exercisable at $3.00. Each full warrant, which is
subject to an acceleration provision, entitles the holder to purchase one common share of the Company for a
period of 18 months following the date of closing of the offering.
In connection with the private placement, the Company incurred cash issue costs of $6,206, paid aggregate
cash finders fees of $31,208 and issued 26,007 finders warrants with a fair value of $20,770. The finders
warrants are exercisable on the same terms of the financing warrants, except that they are not transferable.
Net proceeds of the offering were used to acquire a minority interest in Andromeda (note 5).
11. Stock Options
On September 30, 2008, the shareholders of the Company approved an incentive stock option plan (the
Plan) which provides that the aggregate number of common shares of the Companys capital stock issuable
pursuant to options granted may not exceed 404,328. Options granted under the Plan may have a maximum
term of five years and the exercise price of options granted will not be less than the discounted market price of
the common shares as of the award date. The board of directors has the authority to set the vesting terms of
options granted, subject to the rules of the TSX Venture Exchange (the Exchange) regarding options granted
for investor relations services.
A summary of stock option changes during the year ended March 31, 2011 is as follows:

Options outstanding, beginning of year

Granted
Expired
Options outstanding, end of year

Year Ended
March 31, 2011
Shares
Weighted
Average
Exercise
Price
235,750
$3.80
(22,500)
$11.20
213,250
$3.00

15

Year Ended
March 31, 2010
Shares
Weighted
Average
Exercise
Price
69,917
$7.20
183,250
$3.00
(17,417)
$9.80
235,750
$3.80

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

11. Stock Options (continued)

As at March 31, 2011 the following stock options were outstanding and exercisable:
Expiry Date

Exercise
Price

Remaining
Life (Years)

March 31, 2012

January 7, 2014
April 28, 2014

$ 3.00
$ 3.00
$ 3.00

1.00
2.77
3.08
2.22

Number of Options
Outstanding
83,250
30,000
100,000
213,250

Number of Options
Exercisable
83,250
30,000
100,000
213,250

The Company did not issue stock options in the year ended March 31, 2011. In the comparative period, the
weighted average grant-date fair value of each option granted was $0.30 for an aggregate value of $55,000.
The fair values of options granted in 2010 was determined using the Black-Scholes option pricing model with
the following weighted average assumptions:

2010
Expected annual volatility
Risk-free interest rate
Expected life
Expected dividend yield

73%
1.7%
4.1 years
0%

16

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

12. Warrants
Financing Warrants
Warrants
Outstanding
At March 31, 2010 and 2009
Issued
At March 31, 2011

Finders Warrants

Weighted
Warrants
Average
Outstanding
Exercise Price

393,375
393,375

$3.00
$3.00

26,007
26,007

Weighted
Average
Exercise Price
$3.00
$3.00

As at March 31, 2011 the following stock purchase warrants were outstanding and exercisable:
Expiry Date

Exercise Price

December 29, 2011

January 20, 2012
January 30, 2012

Number of Financing
Warrants

$ 3.00
$ 3.00
$ 3.00

239,417
100,208
53,750
393,375

Number of Finders
Warrants
1,373
16,034
8,600
26,007

The fair values of finders warrants granted was determined using the Black-Scholes warrant pricing model
with the following weighted average assumptions:
2011
Expected annual volatility
Risk-free interest rate
Expected life
Expected dividend yield

173%
1.4%
1.5 years
0%

13. Sale of Subsidiary

On March 11, 2011, the Company entered into a share purchase and sale agreement in which the Company
agreed to sell and transfer its interest in its 99% owned Mexican subsidiary, Minera Aguila. Minera Aguila did
not have any balances outstanding as of the date of the sale. The consideration received by the Company for
the sale of Minera Aguila was immaterial. No gain or loss on sale has been recorded in these financial
statements.

17

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

14. Capital Management

The Companys policy is to maintain a strong capital base to maintain financial flexibility and to sustain the
future development of the business. The Company considers its capital structure to include shareholders
equity and working capital. In order to maintain financial flexibility, the Company may from time to time issue
shares and adjust its spending to manage current and projected capital levels. To assess capital and operating
efficiency and financial strength, the Company continually monitors its working capital which is calculated as
follows:
Current assets
Current liabilities
Working capital

March 31, 2011

$
125,032
231,153
$
(106,121)

March 31, 2010

$
956,301
49,976
$
906,325

The Company is an exploration stage company. The Company monitors its forecasted working capital
requirements on a quarterly basis. The Company prepares expenditure budgets, which are updated as
necessary depending on varying factors including current and forecast prices, successful capital deployment
and general industry conditions. The Companys board of directors approves annual budgets.
The Company is not subject to external restrictions. The Company has not paid or declared any dividends
since the date of incorporation, nor are any contemplated in the foreseeable future. There were no changes to
the Companys approach to capital management during the year ended March 31, 2011.
15. Segment Information
The Companys activities are all in one industry segment of resource property acquisition and exploration. The
resource properties are segmented by geographic location as disclosed in note 8. Substantially all
administrative expenses are incurred in Canada.
16. Income Taxes
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
2011
Loss before income taxes

2010

(3,540,263)

(1,319,383)

Statutory Canadian corporate tax rate

28.00%

29.63%

Income tax recovery at statutory rates

Effect of tax rate changes
Non-deductible items for tax purposes
Non-capital losses expired
Tax benefits not recognized

(1,003,635)
69,120
48
934,467

(390,760)
146,584
29,305
68,863
146,008

Income tax recovery

18

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010

16. Income Taxes (continued)

The significant components of the Company's future income tax assets and liabilities are as follows:
2011
Future income tax assets relating to:
Mineral properties
Share issuance costs
Cumulative eligible costs
Net capital losses available
Non-capital losses available for future periods
Marketable securities

2010

1,678,123
20,847
4,734
1,193
2,403,666
250,000
4,358,563
(4,358,563)

1,138,937
26,728
4,734
1,193
2,243,152
3,414,744
(3,414,744)

Valuation allowance

The Company has provided a valuation allowance as it does not consider more likely than not that the future
tax assets will be recovered.
At March 31, 2011, the Company has tax losses of approximately $6,096,000 available for carry-forward. If
unused, the losses will expire as follows:
Expiry Date
2031
2030
2029
2028
2027
2026
2015
2014

Canada
636,000
938,000
1,583,000
1,386,000
625,000
439,000
266,000
223,000
6,096,000

The Company also has available mineral resource related expenditure pools totaling approximately
$6,332,000 which may be deducted against future taxable income on a discretionary basis.

19

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010
17. Financial Instruments
The Company has exposure to credit, liquidity and market risks from its use of financial instruments. This note
provides information about the Company's exposure to each of these risks, and the Company's objectives,
policies and processes for measuring and managing such risks. The board of directors has overall
responsibility for the establishment and oversight of the Company's risk management framework.
Market risk
The Companys profitability and long-term viability will depend, in large part, on the market price of zinc,
copper and lead. The market prices for metals can be volatile and are affected by numerous factors beyond
the Companys control, including: global or regional consumption patterns; the supply of, and demand for,
these metals; speculative activities; the availability and costs of metal substitutes; expectations for inflation;
and political and economic conditions, including interest rates and currency values. The Company cannot
predict the effect of these factors on metal prices.
The market price of these minerals and metals may not remain at current levels. In particular, an increase in
worldwide supply and consequent downward pressure on prices may result over the longer term from
increased zinc and lead production from mines developed or expanded as a result of current metal price
levels.
Foreign currency exchange rate risk
The Company is exposed to foreign currency fluctuations as it has cash, denominated in Canadian dollars and
a significant portion of the Company's investing activities are conducted in US dollars and Mexican pesos.
There are no exchange rate contracts in place. A change in the US dollar or Mexican peso would not have a
material effect on the Companys loss.
Financial instruments denominated in foreign currencies are:
At March 31, 2011

US Dollars

Cash and cash equivalents

Accounts payable and accrued liabilities
Exchange rate - $1.00 =
At March 31, 2010

10,294
37,959

13,576
-

1.03

12.26

US Dollars

Cash and cash equivalents

Receivables
Accounts payable and accrued liabilities
Exchange rate - $1.00 =

Mexican
Pesos

Mexican
Pesos

9,547
5,524

30,096
121,889
-

0.98

12.19

Interest rate risk

The Companys interest rate risk mainly arises from the interest rate impact on cash and cash equivalents,
which receive interest based on market interest rates. As at March 31, 2011, with other variables unchanged,
a 1% increase in the interest rate would decrease the Companys loss by approximately $522.

20

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended March 31, 2011 and 2010
17. Financial Instruments (continued)
Fair Value
At March 31, 2011, the fair value of the Company's financial instruments, including cash and cash equivalents,
accounts receivable, and accounts payable and accrued liabilities approximate their carrying values due to
their short terms to maturity. Cash and cash equivalents are valued using level 1 inputs; the investment in
Andromeda is valued using level 2 inputs.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in paying obligations as they come due. The
Company's financial liabilities consist of accounts payable and accrued liabilities. Accounts payable consists of
invoices payable to trade suppliers for capital expenditures, field operating activities, and general corporate
expenses. The Company processes invoices within a normal payment period.
The Company prepares operation and capital expenditure budgets, which are regularly monitored and
updated. As well, the Company utilizes authorizations for expenditures on both operated and non-operated
projects to further manage capital expenditures.
18. Non Cash Transactions
The following non-cash transactions were recorded during the year ended March 31:

2011

Financing activities
Fair value of finders warrants

20,770

2010
$

19. Subsequent Events

In July 2011, the Company effected a consolidation of its share capital on a 20 for 1 basis, consolidating its
69,645,394 currently outstanding common shares to 3,482,272 common shares. Shareholder authorization to
effect the share consolidation was approved at the Company's annual and special general meeting held on
February 28, 2011.

21

WAR EAGLE MINING COMPANY INC.

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010 and 2009

CHARTERED
ACCOUNTANTS
MacKay LLP

1100 1177 West Hastings Street

Vancouver, BC V6E 4T5
Tel: 604-687-4511
Fax: 604-687-5805
Toll Free: 1-800-351-0426
www.mackay.ca

AUDITORS REPORT
To the Shareholders of
War Eagle Mining Company Inc.

We have audited the consolidated balance sheets of War Eagle Mining Company Inc. as at
March 31, 2010 and 2009, and the consolidated statements of operations and deficit,
comprehensive loss, accumulated other comprehensive income and cash flows for the years then
ended. These financial statements are the responsibility of the companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosure in these financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the
financial position of the company as at March 31, 2010 and 2009, and the results of its operations
and its cash flows for the years then ended in accordance with Canadian generally accepted
accounting principles.

Vancouver, Canada
June 22, 2010, except for note 19
which is dated July 16, 2010

MacKay LLP
Chartered Accountants

WAR EAGLE MINING COMPANY INC.

Consolidated Balance Sheets
For the Years Ended March 31
2010

2009

ASSETS
Current assets
Cash and cash equivalents (note 3b)
Accounts receivable
Marketable securities (note 5)
Prepaid expenses and deposits
Total current assets

911,893
16,787
27,621
956,301

1,602
1,648,843

Loan receivable (note 6)

Petroleum interests (note 7)
Mineral properties (note 8)

1,968,559
17,835
38,126
15,802
2,040,322
127,117
1,602
1,922,510

2,606,746

4,091,551

49,976
49,976

332,273
332,273

LIABILITIES AND SHAREHOLDERS EQUITY

Current liabilities
Accounts payable and accrued liabilities (note 9)
Total current liabilities
Shareholders' equity
Share capital (note 10)
Warrants (note 12)
Contributed surplus
Accumulated other comprehensive (loss) income
Deficit

37,439,113
2,984,858
(37,867,201)

37,439,113
539,897
2,389,961
(61,875)
(36,547,818)

2,556,770

3,759,278

2,606,746

4,091,551

Basis of presentation and going concern (note 1)

Commitments (note 8)
Contingency (note 13)
Subsequent events (note 19)

On behalf of the board of directors:

Terence Schorn
Terence Schorn

Simon Anderson
Simon Anderson

Director

Director

The accompanying notes are an integral part of these consolidated financial statements.

WAR EAGLE MINING COMPANY INC.

Consolidated Statements of Comprehensive Loss
For the Years Ended March 31
2010
Operating expenses
Consulting
Directors fees
Bad debt expense
Insurance
Investor relations and news dissemination
Management fees and salaries (note 9)
Office and miscellaneous
Professional fees
Property investigation
Rent
Stock-based compensation (note 11)
Transfer agent and filing fees
Travel

Loss before other items

Other income (expense)
Foreign exchange loss
Gain on sale of marketable securities (note 5)
Lease termination
Interest income
Mineral property write-down (note 8)

Loss for the year

Other comprehensive income (loss) for the year
Change in unrealized gains or losses on available-for-sale investments
Reclassification of net realized (gains) losses on available-for-sale
investments to earnings

8,419
88,508
106,310
39,074
17,494
309,439
18,568
45,039
34,457
21,398
55,000
18,116
8,650

2009

(770,472)

103,716
60,000
18,188
143,577
401,272
49,645
43,475
478,169
39,500
186,320
20,452
53,731
(1,598,045)

(5,069)
87,842
(135,597)
3,913
(500,000)
(548,911)

(91,407)
78,465
(10,523,913)
(10,536,855)

(1,319,383)

(12,134,900)

152,500

(61,875)

(90,625)

61,875

(61,875)

Comprehensive loss for the year

(1,257,508)

(12,196,775)

Basic and diluted loss per common share

(0.02)

(0.23)

Basic and diluted comprehensive loss per common share

(0.02)

(0.23)

Weighted average number of common shares outstanding,

basic and diluted

53,910,392

53,910,392

The accompanying notes are an integral part of these consolidated financial statements.

WAR EAGLE MINING COMPANY INC.

Consolidated Statements of Cash Flows
For the Year Ended March 31
2010

Operating activities
Loss for the year
Operating items not involving cash
Gain on sale of marketable securities
Stock-based compensation
Unrealized foreign exchange gain (loss)
Bad debt expense
Mineral property write-down

2009

(1,319,383)

(12,134,900)

(87,842)
55,000
20,807
106,310
500,000
(725,108)

186,320
(20,305)
10,523,913
(1,444,972)

Change in non-cash operating working capital

Accounts receivable
Prepaid expenses
Accounts payable

1,048
(11,819)
(226,265)

51,358
11,026
(22,972)

Net cash used in operating activities

(962,144)

(1,405,560)

(1,089)

(1,089)

(282,365)
187,843

(1,799,106)
(106,812)
-

(94,522)

(1,905,918)

(1,056,666)

(3,312,567)

1,968,559

5,281,126

Financing activities
Related party repayments
Net cash used in financing activities
Investing activities
Deferred exploration expenditures
Loan advanced to related party
Proceeds from sale of marketable securities
Net cash used in investing activities
Net decrease in cash
Cash and cash equivalents, beginning of year
$

Cash and cash equivalents, end of year

911,893

1,968,559

Supplementary cash flow information (note 16)

The accompanying notes are an integral part of these consolidated financial statements.

WAR EAGLE MINING COMPANY INC.

Consolidated Statement of Shareholders Equity

Number of
common
shares
At March 31, 2008
Unrealized loss on available-for-sale
investments
Stock-based compensation
Loss for the year
At March 31, 2009
Expired warrants
Net gain recognized on disposition of
available for sale investments
Stock-based compensation
Loss for the year
At March 31, 2010

Common
shares

Warrants
$

539,897

Accumulated
other
comprehensive
income

Contributed
surplus

Deficit

Total
shareholders
equity

101,250

$ 2,203,641

$ (24,412,918)

$ 15,870,983

53,910,392

$ 37,439,113

(163,125)
-

186,320
-

(12,134,900)

(163,125)
186,320
(12,134,900)

53,910,392

37,439,113

539,897

(61,875)

2,389,961

(36,547,818)

3,759,278

(539,897)

539,897

61,875
-

55,000
-

(1,319,383)

61,875
55,000
(1,319,383)

53,910,392

$ 37,439,113

2,984,858

$ (37,867,201)

$ 2,556,770

The accompanying notes are an integral part of these consolidated financial statements.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

1. Basis of Presentation and Going Concern

These financial statements include the accounts of War Eagle Mining Company Inc. (War Eagle) and its
subsidiaries. War Eagle and its subsidiaries are collectively referred to as the Company. Except where
indicated all amounts are expressed in Canadian dollars.
While these consolidated financial statements have been prepared in accordance with Canadian Generally
Accepted Accounting Principles (GAAP) and on the basis of accounting principles applicable to a going
concern, which assumes that the Company will be able to continue in operation for the foreseeable future and
will be able to realize its assets and discharge its liabilities in the normal course of business, there are
conditions and events that cast significant doubt about the validity of that assumption.
As at March 31, 2010, the Company had an accumulated deficit of $37,867,201 and the loss for the year
ended March 31, 2010 was $1,319,383. The ability of the Company to continue as a going concern, and
ultimately to recover its investment in its mineral properties and to attain profitable operations, is dependent
upon the discovery, development and sale of mineral resources or the sale of its mineral properties; and the
ability to raise additional debt or equity. The successful outcome of these undertakings cannot be assured
because they are contingent on future matters.
If the going concern assumption were not appropriate for these financial statements, then adjustments could
be necessary to the carrying values of assets and liabilities, the reported expenses and the balance sheet
classifications used. Such adjustments could be material.
Certain prior period balances have been reclassified to conform to the presentation used in the current period.
2. Nature of Operations
The Company is in the exploration stage, directly and through joint ventures, and is in the process of exploring
mineral resource properties and has not yet determined whether the properties contain ore reserves that are
economically recoverable.
3. Significant Accounting Principles
The Company prepares its accounts in accordance with accounting principles generally accepted in Canada.
The following is a summary of significant accounting policies used in the preparation of these financial
statements:
a) Principles of Consolidation
These consolidated financial statements include the accounts of War Eagle Mining Company Inc., its
wholly owned subsidiary, War Eagle Resources Corporation, a U.S. corporation, Tombstone Mining Inc, a
company incorporated in the British Virgin Islands, a 99% interest in Minera Aguila Canadiense S.A de
C.V., a Mexican corporation and a 99% interest in Tombstone Exploration de Mexico S.A. de C.V., a
Mexican corporation. All significant intercompany transactions have been eliminated.
b) Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments which are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in value. Included in the Companys cash
balance at March 31, 2010, are term deposits totalling $694,069 (2009 -$1,500,653) bearing interest at a
rate of 0.2% (2009 1.27%) per year.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

3. Significant Accounting Principles (continued)

c) Mineral Properties and Deferred Exploration Expenditures
The cost of resource properties acquired and related exploration costs are capitalized until the properties
to which they relate are placed into production, sold or abandoned. These costs will be amortized on the
unit-of-production method following the commencement of production or written off if the properties are
sold or abandoned.
Although the Company has taken steps to verify title to resource properties in which it has an interest, in
accordance with industry norms for the current stage of exploration of such properties, these procedures
do not guarantee the Companys title. Property may be subject to unregistered prior agreements and noncompliance with regulatory requirements.
From time to time, the Company may grant options on properties it has acquired. Proceeds received are
first applied to property acquisition costs already capitalized, then to deferred exploration costs and the
remaining amount, if any, is recorded as income.
Management reviews capitalized costs on its resource properties on an annual basis and will recognize
impairment in value based upon current exploration results and upon managements assessment of the
future probability of profitable revenues from the property or sale of the property.
Recorded costs of resource properties and deferred exploration costs are not intended to reflect present or
future values of resource properties.
Expenditures on properties not acquired are recorded as reconnaissance expense. During fiscal 2008, the
Company entered into a letter of intent with a Spanish power generation company to begin testing fly ash
for germanium and gallium. This letter of intent, as amended, expired in 2009. Costs related to this project
are included in property investigation.
d) Joint Venture Accounting
Where the Companys exploration and development activities are conducted with others, the accounts
reflect only the Companys proportionate interest in such activities.
e) Share Issuance Costs
Commissions and other costs to or on behalf of agents on the issuance of the Companys shares are
charged directly to share capital.
f)

Translation of Foreign Currencies

The Company follows the temporal method of accounting for the translation of foreign currency amounts
into Canadian dollars. Under this method, all monetary assets and liabilities expressed in foreign
currencies are translated at rates of exchange in effect at the period end. All other assets and liabilities are
translated at the rates prevailing at the dates the assets were acquired or liabilities incurred. Revenue and
expense items, except for amortization, are translated at the average rate of exchange for the period.
Amortization is converted using rates prevailing at the date of acquisition. The resulting foreign currency
translation gains and losses are included in the determination of loss for the period.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

3. Significant Accounting Principles (continued)

g) Loss Per Share
Basic loss per share amounts have been calculated based on the weighted average number of common
shares outstanding during the year.
The Company uses the treasury stock method of calculating fully diluted per share amounts whereby any
proceeds from the exercise of stock options or other dilutive instruments are assumed to be used to
purchase common shares at the average market price during the period. The assumed conversion of
outstanding common share options and warrants has an anti-dilutive impact in fiscal 2010 and 2009 so it
is not shown.
h) Financial Instruments
Under Section 3251, Equity, Section 3855, Financial Instruments - Recognition and Measurement and
Sections 3862 and 3863, Financial Instruments - Disclosure and Presentation, all financial instruments
are classified into one of the following five categories: held-for-trading, held-to-maturity investments, loans
and receivables, available-for-sale assets or other financial liabilities. All financial instruments, including
derivatives, are included on the balance sheet and are measured at fair market value upon inception with
the exception of certain related party transactions. Subsequent measurement and recognition of change in
the fair value of financial instruments depends on their initial classification. Held-for-trading financial
investments are measured at fair value and all gains and losses are included in operations in the period in
which they arise. Available-for-sale financial instruments are measured at fair value with revaluation gains
and losses included in other comprehensive income until the asset is removed from the balance sheet.
Loans and receivables, held to maturity investments and other financial liabilities are measured at
amortized cost using the effective interest method. Gains and losses upon inception, de-recognition,
impairment write-downs and foreign exchange translation adjustments are recognized immediately.
Transaction costs related to financial instruments will be expensed in the period incurred.
The Company has designated its cash and cash equivalents as held-for-trading, which are measured at
fair value. Marketable securities are classified as available-for-sale and are measured at fair value with
changes in fair value recorded in other comprehensive income (loss). Amounts and loans receivable are
classified as loans and receivables, which are measured at amortized cost. Accounts payable and accrued
liabilities, and amounts due to related parties are classified as other financial liabilities, which are
measured at amortized cost.
i)

Estimates
The preparation of financial statements in conformity with Canadian GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

3. Significant Accounting Principles (continued)

j)

Measurement Uncertainty
The amounts recorded for petroleum interests and the future recovery of the recorded cost of the mineral
properties are based on estimates. By their nature, these estimates are subject to measurement
uncertainty and the effect on the financial statements is such that changes in estimates in future periods
could be significant.

k) Asset Retirement Obligations

The Company records a liability for an asset retirement obligation in the period in which it is incurred and
when a reasonable estimate of the fair value of the liability can be made. Furthermore, a corresponding
asset retirement cost is recognized by increasing the carrying amount of the related long-lived asset. The
asset retirement cost is allocated in a rational and systematic method over the underlying assets useful
life. The initial fair value of the liability is accreted, by charges to operations, to its estimated future value.
The Company did not have any asset retirement obligations at March 31, 2010 or 2009.
l)

Stock-based Compensation Plan

All stock-based awards are measured and recognized using the fair-value method as determined by the
Black-Scholes option pricing model. Awards that the Company has the ability to settle with stock are
recorded as equity, whereas awards that the Company is required to, or has the practice of settling in cash
are recorded as liabilities. Compensation costs are recorded in the statement of operations over the
vesting period. The fair value of stock options granted to non-employees is re-measured at the earlier of
each financial reporting or vesting date, and any adjustment is charged or credited to operations upon remeasurement. The Company has not incorporated an estimated forfeiture rate for stock options that will
not vest; rather the Company accounts for actual forfeitures as they occur.

m) Flow-through Shares
The Company accounts for flow-through shares in accordance with Abstract EIC 146 of the Canadian
Institute of Chartered Accountants (CICA). The Abstract recommends that upon renunciation to the
shareholders, the Company will reduce share capital and record a temporary future income tax liability for
the amount of the tax deduction renounced to shareholders. In instances where the Company has
sufficient available discretionary deductible differences available to offset the renounced tax deductions,
the realization of these differences will be credited to operations at the date of renunciation.
n) Future Income Taxes
Income taxes are accounted for using the future income tax method. Under this method income taxes are
recognized for the estimated income taxes payable for the current year and future income taxes are
recognized for temporary differences between the tax and accounting bases of assets and liabilities and
for the benefit of losses available to be carried forward for tax purposes that are more likely than not to be
realized. To the extent the Company does not consider it more likely than not that a future tax asset will be
recovered, it provides a valuation allowance against the excess. Future income taxes assets and liabilities
are measured using tax rates expected to apply in the years in which the temporary differences are
expected to be recovered or settled.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

3. Significant Accounting Principles (continued)

o) Non-monetary Consideration
In situations where share capital is issued, or received, as non-monetary consideration and the fair value
of the asset received, or given up is not readily determinable, the fair market value (as defined) of the
shares is used to record the transaction. The fair market value of the shares issued, or received, is based
on the trading price of those shares on the appropriate stock exchange on the date of the agreement to
issue or receive shares as determined by the board of directors.
p) Valuation of Equity Units Issued in Private Placements
The Company has adopted a pro rata basis method with respect to the measurement of shares and
warrants issued as private placement units. The pro rata basis method required each component to be
valued at fair value and an allocation of the total proceeds received based on the pro rata relative values
of the components.
The fair value of the common shares is based on the closing quoted bid price on the announcement date
and the fair value of the common share purchase warrants is determined at the announcement date using
the Black- Scholes pricing model. The fair value attributed to the warrants is recorded in warrants.
4. Adoption of New Accounting Pronouncements and Recent Developments
International Financial Reporting Standards (IFRS)
In 2006, the Canadian Accounting Standards Board (AcSB) published a new strategic plan that will
significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines
the convergence of Canadian GAAP with IFRS over an expected five-year transitional period. In February
2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS,
replacing Canadas own GAAP and the date for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2011. The Company will begin reporting under IFRS in the year ended March
31, 2012. The transition date of April 1, 2011 will require the restatement for comparative purposes of amounts
reported by the Company for the year ended March 31, 2011.
While the Company has begun assessing the adoption of IFRS for fiscal 2012, the Company has not yet
prepared a complete IFRS changeover plan (the IFRS Plan), but has completed a high-level scoping study to
consider the potential impact of the implementation of IFRS on the Companys financial reporting. The
Company believes that the primary impact of IFRS will be:
IFRS 1 First-time adoption of IFRS
IFRS 2 Share Based Payments
IFRS 6 Exploration and evaluation of mineral resources
IAS 16 Property, plant and equipment
IAS 36 Impairment of Assets
IFRS will not only impact the presentation and disclosure of items in the financial statements but also the
determination of future net income or loss and the measurement of balance sheet items.

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

4. Adoption of New Accounting Pronouncements and Recent Developments (continued)

Adopted Effective April 1, 2009
Section 3064, Goodwill and Intangible Assets. This section replaces Section 3062, Goodwill and Other
Intangible Assets and Section 3450, Research and Development Costs. Various changes have been made
to other sections of the Canadian Institute of Chartered Accountants (CICA) Handbook for consistency
purposes. Section 3064 establishes standards for the recognition, measurement, presentation and disclosure
of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises.
Standards concerning goodwill are unchanged from the standards included in the previous Section 3062.
Adoption of this standard did not have a material effect on the Companys financial statements.
The CICA has amended Handbook Section 1000, Financial Statement Concepts, to clarify the criteria for
recognition of an asset, reinforcing the distinction between costs that should be expensed and those that
should be capitalized. Adoption of this standard did not have a material effect on the Companys financial
statements.
CICA Handbook Section 3862, Financial Instruments Disclosures was amended in June 2009. It
establishes revised standards for the disclosure of financial instruments. The new standard established a
three-tier hierarchy as a framework for disclosing fair value of financial instruments based on inputs used to
value the Companys investments. The hierarchy of inputs and description of inputs is described as follows:

Level 1 fair values are based on quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 fair values are based on inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); or
Level 3 fair values are based on inputs for the asset or liability that are not based on observable
market data, which are unobservable inputs.

Changes in valuation methods may result in transfers into or out of an investments assigned level. During the
year ended March 31, 2010, there were no significant transfers between level 1 and 2. The required
disclosures are included in note 18.
To be Adopted in Future Fiscal Years
CICA Handbook Section 1582, "Business Combinations", establishes standards for the accounting of business
combinations, and states that all assets and liabilities of an acquired business will be recorded at fair value.
Obligations for contingent considerations and contingencies will also be recorded at acquisition date fair value.
The standard also states that acquisition-related costs will be expensed as incurred and that restructuring
charges will be expensed in the periods after the acquisition date. This standard is equivalent to the IFRS on
business combinations. The Company will be required to adopt this standard prospectively for business
combinations with acquisition dates on or after April 1, 2011, but may adopt the standard sooner.
CICA Handbook Section 1601 establishes standards for the preparation of consolidated financial statements.
CICA Handbook Section 1602 establishes standards for accounting for a non-controlling interest in a
subsidiary in the preparation of consolidated financial statements subsequent to a business combination. It is
equivalent to the corresponding provisions of IFRS IAS 27, Consolidated and Separate Financial Statements
(January 2008).
CICA Handbook Section 1601 and Section 1602 apply to interim and annual consolidated financial statements
relating to fiscal years beginning on or after January 1, 2011. Earlier adoption of these sections is permitted as
of the beginning of a fiscal year, but all three sections must be adopted concurrently. The Company does not
expect to adopt these standards before adopting IFRS and therefore they are not expected to have a material
effect on the Companys financial statements.

10

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

5. Marketable Securities

Great Western Minerals Group Ltd.

Vaaldiam Resources Ltd.

March 31, 2010

Number of
Shares
Market Value
- $
- $
-

March 31, 2009

Market Value
$
32,500
5,626
$
38,126

Under Canadian GAAP available-to-sale securities are to be recorded at fair value (marked to market) at the
balance sheet date and the resulting unrealized gains or losses are to be included in comprehensive loss until
the securities are disposed of. The initial value attributed to these shares was $100,000 ($50,000 Great
Western Minerals Group Ltd. and $50,000 Vaaldiam Resources Ltd.)
In fiscal 2010, the Company sold all of its shares of Great Western Mineral Group Ltd. and Vaaldiam
Resources Ltd. and recorded a gain on sale of $87,842.
6. Loan Receivable
On February 17, 2009, the Company entered into an agreement with another public company that had a
director in common at the time, Pacific Copper Corp. (Pacific Copper). The Company agreed to loan Pacific
Copper up to US$155,000 in exchange for a promissory note with a maturity date of June 30, 2009, bearing
interest at an annual rate of 15%. In fiscal 2009 the Company advanced US$100,000 to Pacific Copper and
has not advanced further funds in the current fiscal year.
This promissory note is secured by certain of Pacific Coppers mineral properties in South America. In
correspondence to the Company, Pacific Copper has stated that since the entire note was not funded the
amount advanced is unsecured. The Company believes that Pacific Coppers position is without merit.
As at March 31, 2010 this promissory note has matured but remains outstanding. The Company has fully
provided for collectability of the outstanding amount:
Balance due
Balance due
Allowance for doubtful collectability
Effect of foreign exchange rate changes
Net book value

2010

2009

US$ 105,486

US$ 101,726

$ 110,697
(106,310)
(4,387)
$
-

$ 127,117
$ 127,117

7. Petroleum Interests
The Company holds fractional interests in a few oil and gas wells located in the USA. Revenue from the oil
and gas wells is not material to the operations of the Company and is recorded on a cash basis. The carrying
values of the properties have been written down to a nominal value and will be written off when they stop
producing revenue or are sold or abandoned.

11

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

8. Mineral Properties
March 31,
2009
Acquisition Costs
Canada:
Antimony Mountain Joint
Venture
Georges Lake
MAC Property

Mexico:
Tres Marias Property
Deferred Exploration
Expenditures
Canada:
Georges Lake
MAC Property
Mexico:
Tres Marias Property

1
316,162
500,000
816,163

Additions

Mexico:
Tres Marias Property
Deferred Exploration
Expenditures
Canada:
Georges Lake
MAC Property
Mexico:
Tres Marias Property

(500,000)
(500,000)

March 31,
2010

1
316,162
316,163

772,436
1,588,599

(500,000)

772,436
1,088,599

333,911
-

16,459
-

350,370
-

209,874

209,874

333,911

226,333

560,244

1,922,510

March 31,
2008
Acquisition Costs
Canada:
Antimony Mountain Joint
Venture
Georges Lake
MAC Property

Impairment

1
316,162
556,179
872,342

226,333

Additions

(500,000)

Impairment

(56,179)
(56,179)

1,648,843
March 31,
2009

1
316,162
500,000
816,163

772,436
1,644,778

(56,179)

772,436
1,588,599

135,464
1,563,227
1,698,691

198,447
198,447

(1,563,227)
(1,563,227)

333,911
333,911

6,984,038

1,920,469

(8,904,507)

8,682,729
10,327,507

12

2,118,916
2,118,916

(10,467,734)
(10,523,913)

333,911
1,922,510

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

8. Mineral Properties (continued)

a) Tres Marias
On March 23, 2001, the Company signed a letter agreement with a private mining company to acquire a 100%
interest in the private companys option agreement on the Tres Marias property in Chihuahua, Mexico. Under
the terms of the letter agreement the Company paid $15,712 and issued 200,000 common shares.
The Company has assumed the rights and obligations of the option agreement to acquire a 100% interest in
the Tres Marias property. The terms of the option agreement were amended during the year ended March 31,
2003 in exchange for the Company issuing 525,000 common shares. The option agreement was again
amended during the year ended March 31, 2004, and the new terms of the option agreement call for a 3% net
smelter royalty (NSR) on all production, except for oxide production (where the NSR is 1.5%), and a 1% net
profits royalty all payable to the optionor. The NSR can be bought down to a 0.5% NSR on all production
including oxide production for US$500,000, subject to regulatory approval. If the NSR is bought down to 0.5%
the NSR will cease once NSR payments after the buy down total US$2.0 million.
With a final payment of $170,970 paid on July 27, 2006, the Company completed its required payments and
expenditures and has satisfied all of its obligations under the purchase option agreement for the Tres Marias
property.
The Company also issued an additional 2.5% NSR to a third party during the year ended March 31, 2004
which was bought down to a 1.5% NSR during the year ended March 31, 2005 for $123,090.
b) Antimony Mountain Joint Venture
The Antimony Mountain prospect is located 65 kilometres northeast of Dawson City, Yukon Territory, Canada.
During the year ended March 31, 2005, the Company and another public company entered into a joint venture
agreement to explore the prospect. The Company then transferred its interest in the project to the other
company in exchange for the optional right to acquire a 100% working interest in the MAC Property (note 8d).
The Company retains a 0.5% net smelter royalty in Antimony Mountain.
c) Georges Lake
During the year ended March 31, 2006 the Company acquired a 90% interest in the Georges Lake gold
property located northwest of La Ronge, Saskatchewan, Canada by paying the optioner $75,000 and issuing
500,000 common shares. The Company then had the option to acquire an additional 5% property interest
anytime by paying $2,000,000. There is a 0.5% NSR on the property, which the Company can purchase
anytime for a cash payment of $250,000.
During the year ended March 31, 2007 the Company signed an option agreement with another public
company whereby the other public company may acquire up to a 70% property interest in the Georges Lake
gold property by incurring exploration expenditures of $1 million by December 31, 2008. During the year ended
March 31, 2009, it was determined that the optionee would not be going forward with the letter of intent and a
total of $198,447 in exploration payments previously recorded as a loan receivable was expensed.
In February 2010, the Company entered into an agreement to purchase the remaining 10% interest in the
Georges Lake property for cash consideration of $75,000 and completed the purchase in April 2010.

13

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

8. Mineral Properties (continued)

d) MAC Property
On February 23, 2001, the Company signed an option agreement, with another public company, to purchase a
50% interest in the MAC property located in the south western Northwest Territories, Canada.
During the year ended March 31, 2005 the Company transferred its interest in the Antimony Mountain Joint
Venture (note 8b) to the other company and was granted the optional right to acquire a 100% interest in the
MAC property, subject to a 2% NSR payable to the other company, for cash payments of $22,000 by February
28, 2005 (paid), cash of $100,000 or common shares of equivalent value by February 14, 2006 (issued) and
$100,000 by February 14, 2007 (paid). Upon meeting the payment terms the Company had the right to
purchase 1% of the other companys NSR for $1 million until February 14, 2010, but this right has now lapsed.
In June 2007, the Company entered into an option agreement with Eagle Hill Exploration Corporation (Eagle
Hill) whereby Eagle Hill had the right to earn up to a 70% interest in the property by spending a minimum of
$2,800,000 over a period ending on December 31, 2011. In July 2009, the Company entered into a mutual
release agreement with Eagle Hill whereby the MAC property option agreement was terminated. Under the
terms of the mutual release agreement Eagle Hill will maintain a 3.5% interest in the MAC property.
In August 2009, the Company entered into option agreement with VM Exploration Ltd. (VM Exploration).
Under the option agreement, VM Exploration has the option to earn up to an 80% interest in the Companys
MAC property in consideration of incurring expenditures of $2,000,000 payable over a three-year period. In
June 2010, the Company and VM Exploration terminated the option agreement (note 19). The Company does
not have any plans to develop this property and has not allocated any of its fiscal 2011 exploration budget to
this property. Accordingly, the Company has provided for a full impairment of its carrying value.

14

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

9. Related Party Transactions

Related party transactions for the years ending March 31, 2010 and 2009 not already disclosed in these
financial statements are as follows:
March 31, 2010
Monita Faris 1
Terence Schorn 2
S2 Management Inc. 3
Donald Padgett 4
Anthony Dutton 5
IBC Advanced Alloys Corp. 6
Tarbo Resources 7
Bob Faris 8

March 31, 2009

Monita Faris 1
Tarbo Resources 7
0783101 BC Limited 9
Tim Brock 10
Sweetwater Capital 11
George Orr 12

Director or
Officer
Compensation
$
9,250
60,000
60,000
42,000
42,000
9,000
10,000
$ 232,250

Consulting
Fees

Director or
Officer
Compensation
$
14,000
94,500
30,000
60,000
176,000
39,500
$
414,000

Consulting
Fees

Rent

16,702
16,702

18,000
18,000

Total

Rent and
Finders Fees
-

30,000
30,000

9,250
60,000
76,702
42,000
42,000
18,000
9,000
10,000
266,952
Total

14,000
94,500
30,000
60,000
206,000
39,500
444,000

Ms. Faris is the former secretary of the Company

Mr. Schorn is a director of the Company and was an officer of the Company in the comparative period.
Beneficially owned by Simon Anderson, the Companys president, CFO and a director. Consulting fees
3
are for administrative and secretarial services.
4
Mr. Padgett is a director of the Company.
5
Mr. Dutton is a director of the Company.
6
A company with a significant shareholder and two directors or officers in common with the Company.
7
Beneficially owned by Terence Schorn, a director of the Company.
8
Mr. Faris is former vice president corporate communications of the Company.
9
Beneficially owned by Mr. Faris
10
Mr. Brock is a former director of the Company.
11
Beneficially owned by Mr. Brock, a former director of the Company.
12
Mr. Orr is the former CFO of the Company.
Related party balances are due on demand, bear no interest, are unsecured and have no fixed payment
terms.
2

As at March 31, 2010, $1,197 (March 31, 2009 - $6,102) is owing to directors and officers for services.
The above transactions are in the normal course of operations and are measured at the exchange amount,
which is the amount of consideration established and agreed to by the related parties.

15

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

10. Share Capital

Authorized capital
Unlimited common shares, without par value.
Issued capital
The Company did not issue any shares during the year ended March 31, 2010 and 2009.
11. Stock Options
On September 30, 2008, the shareholders of the Company approved an incentive stock option plan (the 2008
Plan) which provides that the aggregate number of common shares of the Companys capital stock issuable
pursuant to options granted may not exceed 8,086,559. Options granted under the 2008 Plan may have a
maximum term of five years and the exercise price of options granted will not be less than the discounted
market price of the common shares as of the award date. The board of directors has the authority to set the
vesting terms of options granted, subject to the rules of the TSX Venture Exchange (the Exchange) regarding
options granted for investor relations services.
On September 29, 2009, the Company held its annual general meeting. The voting shareholders of the
Company did not approve the 2009 amended stock option plan. Until the shareholders approve the 2009
amended stock option plan, the Company cannot grant additional stock options.
A summary of stock option changes during the year ended March 31, 2010 is as follows:

Options outstanding, beginning of year

Granted
Exercised
Expired
Options outstanding, end of year

Year Ended
March 31, 2010
Shares
Weighted
Average
Exercise
Price
1,398,333
$0.36
3,665,000
$0.15
(348,333)
$0.48
4,715,000
$0.19

Year Ended
March 31, 2009
Shares
Weighted
Average
Exercise
Price
4,635,000
$0.60
700,000
0.17
(3,936,667)
0.65
1,398,333
$0.36

During the year ended March 31, 2010, the Company granted options to purchase a total of 3,665,000
common shares. The weighted average grant-date fair value of each option granted was $0.015 (2009
$0.067) for an aggregate value of $55,000 (2009 $46,617).

16

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

11. Stock Options (continued)

As at March 31, 2010 the following stock options were outstanding and exercisable:
Expiry Date

May 29, 2010

October 4, 2010
January 7, 2014
March 31, 2012
April 28, 2014

Exercise
Price
$
$
$
$
$

0.58
0.56
0.15
0.15
0.15

Remaining
Life (Years)

Number of Options
Outstanding

0.16
0.51
3.77
2.00
4.08
2.96

Number of Options
Exercisable

50,000
400,000
600,000
1,665,000
2,000,000
4,715,000

50,000
400,000
600,000
1,665,000
2,000,000
4,715,000

The fair values of options granted was determined using the Black-Scholes option pricing model with the
following weighted average assumptions:
Expected annual volatility
Risk-free interest rate
Expected life
Expected dividend yield

2010

2009

73%
1.7%
4.1 years
0%

75%
2.0%
3.0 years
0%

12. Warrants
Year Ended
March 31, 2010
Warrants
Weighted
Exercise
Average Price
Warrants outstanding, beginning of year
Issued
Exercised
Expired
Warrants outstanding, end of year

4,463,525
(4,463,525)
-

$0.75
$0.75
-

Year Ended
March 31, 2009
Warrants
Weighted
Average
Exercise Price
4,463,525
4,463,525

$0.75
$0.75

13. Contingency
The Company has been informed that its 99% owned Mexican subsidiary, Minera Aguila Canadiense S.A. de
C.V., has a potential liability of up to US$560,000 for unpaid surface area taxes on various lapsed and
dropped claims. Management is of the opinion that these taxes will not be paid as the claims have been
abandoned. No liability has been recorded in these financial statements.

17

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

14. Capital Management

The Companys policy is to maintain a strong capital base to maintain financial flexibility and to sustain the
future development of the business. The Company considers its capital structure to include shareholders
equity and working capital. In order to maintain financial flexibility, the Company may from time to time issue
shares and adjust its spending to manage current and projected capital levels. To assess capital and operating
efficiency and financial strength, the Company continually monitors its working capital which is calculated as
follows:
Current assets
Current liabilities
Working capital

March 31, 2010

$
956,301
49,976
$
906,325

March 31, 2009

$
2,040,322
332,273
$
1,708,049

The Company is an exploration stage company. The Company monitors its forecasted working capital
requirements on a quarterly basis. The Company prepares expenditure budgets, which are updated as
necessary depending on varying factors including current and forecast prices, successful capital deployment
and general industry conditions. The Companys board of directors approves annual budgets.
The Company is not subject to external restrictions. The Company has not paid or declared any dividends
since the date of incorporation, nor are any contemplated in the foreseeable future. There were no changes to
the Companys approach to capital management during the year ended March 31, 2010.
15. Segment Information
The Companys activities are all in one industry segment of resource property acquisition and exploration. The
resource properties are segmented by geographic location as disclosed in note 8. Substantially all
administrative expenses are incurred in Canada.
16. Supplementary Cash Flow Information
March 31, 2010

Mineral property related change in

accounts payable

(56,032)

18

March 31, 2009

127,401

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

17. Income Taxes

A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
2010
Loss before income taxes

2009

(1,319,383)

$ (12,134,900)

Statutory Canadian corporate tax rate

29.63%

30.63%

Income tax recovery at statutory rates

Effect of tax rate changes
Non-deductible items for tax purposes
Non-capital losses expired
Tax benefits not recognized

(390,760)
132,999
29,305
68,863
159,592

(3,563,571)
194,175
57,061
95,473
3,216,862

Income tax recovery

The significant components of the Company's future income tax assets and liabilities are as follows:
2010
Future income tax assets relating to:
Mineral properties
Share issuance costs
Cumulative eligible costs
Net capital losses available
Non-capital losses available for future periods
Future income tax asset (liability) marketable securities

Valuation allowance
$

19

799,314
26,728
4,734
1,193
2,243,152
3,075,121
(3,075,121)

2009
$

772,336
65,994
4,923
1,241
2,048,455
8,044
2,900,993
(2,900,993)

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

18. Financial Instruments

The Company has exposure to credit, liquidity and market risks from its use of financial instruments. This note
provides information about the Company's exposure to each of these risks, and the Company's objectives,
policies and processes for measuring and managing such risks. The board of directors has overall
responsibility for the establishment and oversight of the Company's risk management framework.
Market risk
The Companys profitability and long-term viability will depend, in large part, on the market price of zinc and
lead. The market prices for metals can be volatile and are affected by numerous factors beyond the
Companys control, including: global or regional consumption patterns; the supply of, and demand for, these
metals; speculative activities; the availability and costs of metal substitutes; expectations for inflation; and
political and economic conditions, including interest rates and currency values. The Company cannot predict
the effect of these factors on metal prices.
The market price of these minerals and metals may not remain at current levels. In particular, an increase in
worldwide supply and consequent downward pressure on prices may result over the longer term from
increased zinc and lead production from mines developed or expanded as a result of current metal price
levels.
Foreign currency exchange rate risk
The Company is exposed to foreign currency fluctuations as it has cash, denominated in Canadian dollars and
a significant portion of the Company's investing activities are conducted in US dollars and Mexican pesos.
There are no exchange rate contracts in place. A change in the US dollar or Mexican peso would not have a
material effect on the Companys loss.
Financial instruments denominated in foreign currencies are:
At March 31, 2010

US Dollars

Cash and cash equivalents

Receivables
Accounts payable and accrued liabilities
At March 31, 2009

9,547
5,524
US Dollars

Cash and cash equivalents

Receivables
Loan receivable
Accounts payable and accrued liabilities

73,657
101,726
63,086

Mexican
Pesos

Euro

30,096
121,889
Mexican
Pesos
684,537
122,331
-

Euro
111,272

Interest rate risk

The Companys interest rate risk mainly arises from the interest rate impact on cash and cash equivalents,
which receive interest based on market interest rates. As at March 31, 2010, with other variables unchanged,
a 1% increase in the interest rate would decrease the Companys loss by approximately $9,000.

20

WAR EAGLE MINING COMPANY INC.

Notes to the Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years ended March 31, 2010 and 2009

18.Financial Risk Management (continued)

Fair Value
At March 31, 2010, the fair value of the Company's financial instruments, including cash and cash equivalents,
accounts receivable, loan receivable, and accounts payable and accrued liabilities approximate their carrying
values due to their short terms to maturity. Cash and cash equivalents are valued using level 1 inputs.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in paying obligations as they come due. The
Company's financial liabilities consist of accounts payable and accrued liabilities. Accounts payable consists of
invoices payable to trade suppliers for capital expenditures, field operating activities, and general corporate
expenses. The Company processes invoices within a normal payment period.
The Company prepares operation and capital expenditure budgets, which are regularly monitored and
updated. As well, the Company utilizes authorizations for expenditures on both operated and non-operated
projects to further manage capital expenditures.
19. Subsequent Events
a) In April 2010, the Company completed the acquisition of the remaining 10% interest in the Georges Lake
property for cash consideration of $75,000.
b) In June 2010, the Company and VM Exploration terminated the letter of intent by which VM Exploration
Inc. could earn an interest in the MAC property (note 8).
c) In June 2010, the Company announced a private placement to raise up to $1,200,000. The offering is
priced at $0.06 per unit with each unit consisting of one common share of the Company and one-half
common share purchase warrant exercisable at $0.15. Each full warrant, which is subject to an
acceleration provision, entitles the holder to purchase one common share of the Company for a period of
18 months following the date of closing of the offering. The offering is subject to certain conditions
including, but not limited to, the receipt of all necessary corporate and regulatory approvals, including
acceptance of the Exchange. In June 2010, the Company closed the first tranche of the private placement
and issued 9,576,668 units at a price of $0.06 per unit for gross proceeds of $574,600. In July 2010, the
Company closed the second tranche of the private placement and issued 4,008,334 common shares for
gross proceeds of $240,500. The Company paid cash finders fees of $20,888 and issued 348,133 finders
warrants exercisable on the same terms as the financing warrants, except that they are not transferrable.
Net proceeds of the offering have been used to acquire a minority interest in a private company.
d) In June 2010 and July 2010, the Company paid cash consideration of $1,000,000 to acquire a 17%
interest in Andromeda Resources Inc., a private company that holds an option to acquire the Chihuahua,
Mexico-based Terrazas zinc-copper property. Terrazas was previously optioned to Constellation Copper
Corporation and is at the development stage.

21

SCHEDULE C
Annual Management Discussion and Analysis of War Eagle Mining Company Inc. for the Financial
Years ended March 31, 2011, 2010 and 2009

C-1 AC/1463772.11

WAR EAGLE MINING COMPANY INC.

Form 51-102F1

MANAGEMENTS DISCUSSION AND ANALYSIS

MARCH 31, 2011

Table of Contents
War Eagles Business ................................................................................................................ 1
Incorporation and Organization of the Company ........................................................................ 1
Corporate Developments ........................................................................................................... 2
Year Ended March 31, 2011 ................................................................................................... 2
Subsequent to March 31, 2011 ............................................................................................... 2
Andromeda Resources Inc. ........................................................................................................ 2
Private Placement ...................................................................................................................... 2
Mineral Properties ...................................................................................................................... 3
Tres Marias ............................................................................................................................ 3
Mac Property .......................................................................................................................... 8
Georges Lake .......................................................................................................................12
Other Mineral Property Interests ............................................................................................13
Financial ...................................................................................................................................13
Consolidated Financial Information ........................................................................................13
Selected Annual and Quarterly Information ...........................................................................14
Results of Operations For the Year Ended March 31, 2011 ...................................................15
Exploration Expenditures .......................................................................................................16
Liquidity and Capital Resources ............................................................................................16
Share Consolidation ..............................................................................................................18
Related Party Transactions ...................................................................................................18
Stock Options Granted ..........................................................................................................18
Changes in Accounting Policies .............................................................................................18
International Financial Reporting Standards ..........................................................................18
Financial Instruments and Other Instruments ........................................................................18
Risks .........................................................................................................................................18
Outstanding Share Data............................................................................................................19

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
The following is managements discussion and analysis (MD&A) of War Eagle Mining
Company Inc. (War Eagle or the Company), prepared as of July 29, 2011. This MD&A
should be read together with the audited consolidated financial statements for the year ended
March 31, 2011 and related notes, which are prepared in accordance with Canadian generally
accepted accounting principles (Canadian GAAP). Financial amounts are expressed in
Canadian dollars unless otherwise specified.
Certain information included in this MD&A may constitute forward-looking statements.
Statements in this report that are not historical facts are forward-looking statements involving
known and unknown risks and uncertainties, which could cause actual results to vary
considerably from these statements. Readers are cautioned not to put undue reliance on
forward-looking statements. Forward looking statements include references to joint venture
opportunities and potential production at the Companys Tres Marias property.
Additional information related to War Eagle is available on the Companys website
www.wareaglemining.com or for view on SEDAR at www.sedar.com.
WAR EAGLES BUSINESS
The Company is involved in the acquisition, exploration and, if warranted, development of
mineral resource properties. In fiscal 2011, the Companys primary focus was on its 100%
interest in the Tres Marias zinc / lead / germanium property located in Chihuahua, Mexico. The
Company does not expect to develop the Tres Marias property in the coming year but continues
to look for complementary properties. The Company expects to continue investigating the
feasibility of developing its Mac Property.
INCORPORATION AND ORGANIZATION OF THE COMPANY
The Company was incorporated under the laws of British Columbia on March 6, 1984 as
275210 BC Ltd. The Company changed its name to War Eagle Resources Ltd. on April 10,
1984 and then changed its name from War Eagle Resources Ltd. to War Eagle Mining
Company Inc. on May 25, 1987.
The Companys head office is located at Suite 906 595 Howe Street, Vancouver, British
Columbia, Canada, V6C 2T5 and its registered office is located at Suite 700 - 595 Burrard
Street, Vancouver, British Columbia, Canada, V7X 1S8.
The Company has three subsidiaries: War Eagle Resources Corporation, a wholly owned Idaho
corporation; Tombstone Mining Inc. (Tombstone Mining), a company incorporated in the
British Virgin Islands; and Tombstone Exploration de Mexico S.A. de C.V. (Tombstone
Mexico), a 99% owned Mexican corporation. Of these companies, only Tombstone Mexico is
active.
In March 2011, the Company entered into a share purchase and sale agreement in which the
Company agreed to sell and transfer the interest in its 99% owned Mexican subsidiary, Minera
Aguila Canadiense S.A de C.V. (Minera Aguila)
In July 2011, the Company effected a consolidation of its share capital on a 20 for 1 basis,
consolidating its 69,645,394 currently outstanding common shares to 3,482,272 common
shares. Shareholder authorization to effect the share consolidation was approved at the
Company's annual and special general meeting held on February 28, 2011.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
CORPORATE DEVELOPMENTS
YEAR ENDED MARCH 31, 2011
In June and July 2010, the Company acquired a 17% interest in Andromeda
Resources Inc. (Andromeda), a company that has negotiated the acquisition of the
Terrazas zinc-copper property ("Terrazas") located in Chihuahua, Mexico. See
Andromeda Resources Inc. below. In August 2010, the Company entered into a
letter of intent with Andromeda to complete a reverse takeover (RTO) of the
Company, which was terminated by Andromeda in December 2010.
In December 2010, the Companys shares were reinstated for trading on the TSX
Venture Exchange (Exchange), following termination of the Andromeda transaction.
SUBSEQUENT TO MARCH 31, 2011
In July 2011, the Company effected a consolidation of its share capital on a 20 for 1
basis, consolidating its 69,645,394 currently outstanding common shares to
3,482,272 common shares. See Financial below.
ANDROMEDA RESOURCES INC.
The Company acquired a 17% minority interest in Andromeda by purchasing 350,000 common
shares in June 2010 and 150,000 common shares in July 2010 for total cash consideration of
$1,000,000. The Companys investment in Andromeda will be diluted if Andromeda raises
money from other sources.
In August 2010, the Company entered into a letter of intent with Andromeda, pursuant to which
the shareholders of Andromeda would exchange all of the issued and outstanding common
shares of Andromeda for common shares of the Company, such that the current shareholders
of the Company would own approximately 39% of the outstanding shares of the combined
company resulting from the RTO (the "Resulting Issuer") and shareholders of Andromeda would
own the remaining 61% of the Resulting Issuer.
War Eagle principals were instrumental in arranging for a financing of Andromeda, which was a
provision for completing the RTO, but the proposed financing terms were unfavourable to the
shareholders of War Eagle and the Companys board of directors concluded that the proposed
financing was not in the best interests of shareholders. The Company communicated this
conclusion to Andromeda and subsequently the Company received notice from Andromeda
terminating the letter of intent.
The Company has continued to discuss the possibility of entering into a transaction with
Andromeda on revised terms but has not yet reached a mutually acceptable agreement. The
Company is working on a coordinated financing and development plan that will allow it to
maximize its investment in Andromeda. In view of the limited progress to date, the Company
has however concluded that outlook was uncertain at March 31, 2011 and accordingly has
provided for a full impairment of its investment.
PRIVATE PLACEMENT
In June and July 2010, the Company completed a private placement, issuing an aggregate
786,750 units for gross proceeds of $944,100. The offering was priced at $1.20 per unit with
each unit consisting of one common share of the Company and one-half common share
purchase warrant exercisable at $3.00. If the closing price of the Company's common shares is
$6.00 or more for 20 consecutive trading days on the Exchange, or an equivalent stock
2

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
exchange, (the "Accelerating Event") the exercise period of the warrants may be reduced to
expire on the date that is 30 days following the Company's notice to the warrant holders of the
Accelerating Event. All securities issued pursuant to this private placement are subject to a four
month and one day hold period. The final hold period expired December 1, 2010.
In aggregate, the Company incurred cash issue costs of $6,206, paid finders fees of $31,208
and issued 26,007 finders warrants, which have the same terms as the financing warrants
except they are non-transferable. The Company used the net proceeds of the private placement
plus approximately $87,000 of its cash on hand to acquire a 17% interest (at the date of closing)
in Andromeda, as described above.
MINERAL PROPERTIES
TRES MARIAS
In March 2001, the Company entered into a letter agreement (the HTMC Agreement) with
High Tech Metals Corp. (HTMC), whereby the Company acquired a 100% interest in HTMCs
option to acquire a 100% interest in the Tres Marias property. Under the HTMC Agreement, the
Company paid HTMC $15,712 and issued 10,000 shares to HTMC.
In order to acquire a 100% interest in the property, the Company issued a total of 26,250
common shares to Tombstone Aruba A.V.V. and made property payments totalling $315,000. In
addition, the Company made total exploration expenditures of US$500,000 on this property. The
Company completed the acquisition of this property, subject to royalties, in fiscal 2007. The Tres
Marias property is subject to a 3% net smelter royalty (NSR) on all production, except for oxide
production (for which the NSR is 1.5%), and a 1% net profits royalty. The NSR can be bought
down to a 0.5% NSR on all production including oxide production for US$500,000, subject to
regulatory approval. If the NSR is bought down to 0.5%, the NSR will cease once NSR
payments after the buy down totals US$2,000,000. The Company is also committed to an
additional 1.5% NSR to a third party.
In early 2009, the Company suspended exploration activities pending development of a work
program that is in accordance with the Companys resources and ability to raise money. In late
2009, the Company commenced an assay program, which is discussed in further detail below.
The assay results were very favourable and suggest that it may be possible to establish
economically feasible mining operations sooner than expected. Accordingly, the Company is
currently assessing the viability of a limited mining program and is formulating a mining plan and
investigating processing options. The Company is aware of processing mills in the Tres Marias
area, but has not quantified the cost of processing ore. The flow sheets will likely have to be
adjusted to suit the Tres Marias type of sulphide ore and any oxide ore may need to be treated
by a leaching process.
The Company also plans to develop the next steps of its exploration plan as it seeks to better
understand the nature of the mineral structures before moving ahead with a National Instrument
43-101(NI 43-101) technical report. The objective of the program will be to determine if the
high-grade mineralization that was recently outlined by the drill core sampling program can be
reached from a short, accessible adit and decline, rather than hoisting the material to surface
through the present shaft facilities. As part of this program, the Company commissioned a
metallurgy report. See DICOMI Metallurgy Report below.
The extent of mineralization identified at Tres Marias does not justify construction of a
processing plant. Accordingly, the Company intends to seek partners with which it can combine
development of Tres Marias and similar properties with a view to spreading costs over a
broader base of activity. Following the termination of the Andromeda letter of intent (see
3

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
Andromeda Resources Inc. above) the Company believes that it is unlikely to develop the Tres
Marias property in the short term and accordingly provided for a full impairment of value at
March 31, 2011.
Property Description
The following description of the property is taken from the technical report on the Tres Marias
project prepared for the Company by Dr. Peter Megaw, a qualified person, dated September 4,
2001 and revised July 11, 2002, a copy of which can be found under the Companys corporate
profile on www.sedar.com.
The Tres Marias property is located in the northeast corner of Chihuahua State, Mexico and
consists of nine exploration concessions covering a total of 2,831 hectares. The Company is in
the process of dropping its Tres Marias 2 claims which cover 993 hectares.
Claim Name

Type

Title

File

Hectares

Lajitas Uno

Exploitation

186430

1/122

112

Celia

Exploitation

169682

16/3563

31

A. Dos Marias

Exploitation

169681

16/3343

16

Las Dos Marias

Exploitation

169684

16/3818

Maria

Exploitation

169683

16/3641

14

Cassiopea

Exploitation

169685

16/4093

10

La Osa

Exploitation

209806

1/1.3/945

24

Tres Marias

Exploration

204384

1/2.4/566

1,622

Tres Marias 2

Exploration

208814

1/2.4/569

Total

1,838

In fiscal 2009, the Company filed for and was awarded an amendment to its current exploration
permit, in order to drill on the following five targets within the concession, which may be
described as follows:
Molino Truebe
Located in Mining Lote Tres Marias 2, the target is a northeast (NE) southwest (SW)
structure associated with a geochemical anomaly with breccias, offset Del Rio shale and
iron oxides hosted in Santa Elena limestone.
El Graven
The El Graven target is located in Mining Lote Tres Marias, and is described as the graben
boundary faults that run northwest (NW) southeast (SE) with associated breccias and iron
oxides.
El Tanque
Located between Mining Lotes Maria, Celia and Tres Marias, the El Tanque target is a
structural intercept between two faults that run NW SE and NE SW consecutively, with
associated breccias and iron oxides. The historic Tres Marias mine is about 500 metres
south of this target. The approximate area of interest is 300 metres by 300 metres.
4

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011

La Blanca
The La Blanca target is located 600 metres south of the mine, characterized by a strong NE
- SW trending structure and is regarded as separate from the original Tres Marias deposit.
This is the first of the outlying geological areas of interest to be drill tested. GO-31
commenced drilling in 2008. Zinc-germanium mineralization has been located in this area by
drilling and surface sampling of old pits.
La Blanca Sur
The La Blanca Sur target is located between Mining Lotes Lajitas Uno and Celia, and is at
the structural intersection of a NE SW fault that is cut by a NW SE fault with associated
breccias, calcite veining and iron oxides. The principal structure is parallel to La Blanca.
Previous Exploration
Exploration at the Tres Marias property continued through to February 2009. Parallel drill
programs were conducted underground within the historic mine workings and on the surface.
Underground: 2,396.46 metres in total were drilled during fiscal 2009. Since TE-1
commenced in August 2006, 3,624.51 metres in total have been drilled. 10 holes
were completed during the fourth quarter of fiscal 2009.
Surface: 3,248.04 metres in total were drilled during fiscal 2009. Since GO-1
commenced in February 2007, 4,670.82 metres in total have been drilled. Eight holes
were completed during the fourth quarter of fiscal 2009.
Seven of these holes were located on surface in the mine-yard and were drilled into
the Mina Vieja Sur block by way of a dual approach.
In February 2009 the Company announced a suspension of drilling operations at the Tres
Marias property during the economic downturn in light of the state of the financial markets and
the significant decrease in zinc prices over 2008 and 2009. In fiscal 2009, the Company took a
write-down of $8,905,000 in exploration expenditures with respect to the Tres Marias property.
The Company has placed its equipment in storage while it develops a suitable exploration plan
and assesses how best to proceed with the Tres Marias property.
The Company did no drilling on the Tres Marias property in the year ended March 31, 2010 or in
the current fiscal year but retained two geologists to oversee sampling and analysis work. The
assay program focused on mineralized drill intercepts in two areas of the Tres Marias property
that had been recognized but not sampled due to the suspension of exploration activities in
February 2009. Previous drilling was done in the general mine area located south and west to
the former mine workings.
The Company had planned on developing Tres Marias in connection with the proposed
transaction with Andromeda. As a result of the incomplete transaction, the Company took a
write-down of $1,232,000 on its Tres Marias property, as it plans to seek alternative
development opportunities.
The GO-series holes were drilled from the mine-yard on surface down into the historic mine
area during the fourth quarter of 2008. The mineralization that was intersected by the surface
GO drill holes is a new zone that is located above the fifth level to the west of the former mine
workings.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
Table 1 - Drill Results for GO-32 to GO-38
Borehole ID
GO-32
GO-32
GO-33
GO-33
GO-33
GO-34
GO-35
GO-36
GO-36
GO-36
GO-36
GO-37
GO-37
GO-37
GO-37
GO-38
GO-38
GO-38

From
56.22
62.28
58.07
77.05
89.74
76.50
53.43
58.90
71.40
76.67
85.94
58.85
69.78
75.70
89.60
54.42
67.38
89.40

To
75.89
75.89
61.32
79.67
98.84
92.52
59.26
60.20
74.26
81.60
90.14
61.54
72.00
86.15
97.87
56.15
86.76
90.90

Intercept in
metres
19.67
13.61
3.25
2.62
9.10
16.02
5.83
1.30
2.86
4.93
4.20
2.69
2.22
10.45
8.27
1.73
19.38
1.50

Germanium
ppm
103
111
165
107
390
391
84
216
261
154
380
154
303
140
198
172
221
209

Zinc %
6.98
8.06
11.04
9.40
16.54
28.77
6.75
15.00
17.38
10.98
21.89
11.62
15.52
19.31
14.85
18.00
15.93
15.00

Lead %
2.61
2.50
1.76
0.87
1.20
1.89
9.07
0.91
2.10
0.82
2.72
1.17
3.05
0.65
1.35
9.58
1.61
1.61

Iron %
2.17
2.88
1.62
20.00
3.50
4.36
2.78
8.80
10.79
2.90
7.64
7.64
11.85
2.32
1.94
2.18
6.20
9.32

The TE-series holes were drilled underground within the old workings of the historic Tres
Marias mine during the second half of 2008. The mineralization intersected by the TE
underground drill holes is additional zones located beyond the former mine workings to the
south.
Table 2 - Drill Results for TE-086 to TE-108
Borehole ID
TE-086
TE-087
TE-090
TE-092
TE-092
TE-092
TE-093A
TE-096
TE-097
TE-097
TE-098
TE-098
TE-098
TE-099

From
16.80
0.00
0.00
0.00
37.45
44.00
19.20
0.00
6.30
22.50
12.70
22.65
36.70
5.85

To
20.10
8.90
11.70
6.00
40.27
45.00
21.93
4.60
8.25
41.25
16.70
35.00
42.40
9.40

Intercept in
metres
3.30
8.90
11.70
6.00
2.82
1.00
2.73
4.60
1.95
18.75
4.00
12.35
5.70
3.55

Germanium
ppm
41
20
139
68
427
423
24
232
410
246
65
147
285
201

Zinc %
37.67
47.50
11.27
33.64
14.59
27.43
18.43
6.22
39.86
19.24
8.09
12.50
21.41
18.03

Lead %
0.15
0.04
1.25
0.16
2.56
3.71
0.12
1.55
3.36
2.73
0.81
1.96
3.04
1.87

Iron %
2.50
0.57
1.48
2.14
3.94
2.83
1.30
2.35
3.69
3.76
13.40
3.37
15.24
3.73

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
Borehole ID
TE-099
TE-099
TE-100
TE-100
TE-100
TE-100
TE-101
TE-101
TE-101
TE-102
TE-102
TE-105
TE-105
TE-106
TE-106
TE-107
TE-107
TE-107
TE-107
TE-108
TE-108

From
16.70
34.90
0.00
11.20
29.30
44.90
18.45
24.30
29.60
3.80
8.15
32.09
37.61
11.27
16.17
8.10
11.43
18.27
29.69
10.67
15.22

To
28.80
36.60
1.40
26.05
34.35
49.40
21.50
29.10
30.00
6.80
9.04
34.82
39.00
13.04
17.27
10.50
13.36
19.35
34.93
13.23
19.74

Intercept in
metres
12.10
1.70
1.40
14.85
5.05
4.50
3.05
4.80
0.40
3.00
0.89
2.73
1.39
1.77
1.10
2.40
1.93
1.08
5.24
2.56
4.52

Germanium
ppm
291
11
35
147
166
n/a
138
335
290
424
400
518
5
196
179
570
72
452
400
356
404

Zinc %
21.67
5.02
5.24
19.64
16.03
18.03
9.21
19.33
19.10
34.50
38.06
37.99
27.62
1.00
1.00
41.08
23.00
36.70
20.31
32.87
35.34

Lead %
3.06
0.51
0.61
1.79
2.18
0.07
0.86
2.39
2.29
10.92
3.84
12.93
0.16
1.57
4.02
1.80
0.23
2.85
3.33
1.70
6.32

Iron %
11.67
12.07
2.51
9.71
10.08
0.40
1.27
3.36
2.85
2.89
2.64
3.82
0.16
4.50
9.75
3.52
0.54
9.58
3.22
4.61
11.27

The assay results were completed by Inspectorate in Durango, Texas using four-acid digest and
AA finish; SGS Lakefield processed the check assays.
As is normal, the Company undertook an assay program with blanks and check assays. The
Qualified Person, as defined below, reported that the blanks lined up perfectly and the check
assays were all acceptable.
The program was supervised by Mr. Alistair Logan, BSc., a qualified geologist, reporting to Mr.
Terry Schorn, P. Geo, the Qualified Person for the Company, pursuant to NI 43-101, and who
has reviewed and approved the disclosure above.
DICOMI Metallurgy Report
In September 2010, the Company retained DICOMI (Diseo, Construccion y Mantenimiento
Industrial) of Torreon, Mexico to conduct metallurgical tests on mineralized samples taken from
historic underground workings of the Tres Marias mine. The Company submitted two samples of
20 kilograms each: one of sulphides and the other oxides. The general scope of work was to
establish ore benefication characteristics for the sulphides and oxides with emphasis on
germanium, zinc and lead. DICOMI delivered a technical report to the Company in November
2010 and subsequently delivered a supplemental report addressing the recovery of germanium
from the ore.
Preliminary findings indicate that favourable recoveries of germanium, zinc and lead may be
obtained for both sulphides and oxides. DICOMI undertook analysis of five mesh sizes (-60
+100; 100 + 150; 150 + 200; -200 + 250; and -250) leading to the following conclusions:
Sulphides
7

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011

Grinding tests show that the mineralization, marmatitic sphalerite, may be easily milled
due to the soft and friable nature of the ore.
Experiments using the flotation method demonstrate that a zinc concentrate may be
obtained with projected recoveries in the order of 80 to 90%.
Micro probe tests show that the germanium, 15 to 30 micrometres, is encapsulated
within the sphalerite. It is expected that the germanium would concentrate in a ratio of
approximately 2.5:1. Further tests are currently in progress to measure the distribution
of germanium values in the different size fractions from the head sample to the
concentrate.

Oxides

Germanium values in the oxides are erratic compared to the sulphides. The principal
zinc mineral is smithsonite, a carbonate of zinc.

Grinding tests indicate 90% liberation of zinc to the size fraction of -200 + 250 mesh.

Proposed options to process this material include acid leaching with electrolysis or
reduction using an oven.
Germanium

A zinc concentrate was produced from the sulphide sample taken from the optimum
grind of -200 to +250 mesh (Tyler) with values:
2 ppm Ag, 5.17 % Pb, 18 ppm Cu, 56.70 % Zn, 9.3 % Fe, 720 ppm Ge

The resulting value of 720 ppm Ge associated with 56.70% Zn in the concentrate, which
demonstrates that the germanium will go into the zinc concentrate using the flotation
method. The approximate order of concentration from the head value is expected to be
2.5:1.

Of further interest, it is reported that the mineral Germanita (Spanish name)

Cu6FeGeS8 contained within the concentrate; 45% is free and 55% encapsulated within
the sphalerite. In theory, this may lead to the possibility of producing a partial
germanium concentrate by mechanical means.
In December 2010, three technical representatives from DICOMI visited the Tres Marias
property. They will prepare proposals to the Company: (1) addressing cost estimates for mine
rehabilitation and conceptual operating costs; and (2) defining a metallurgical balance with a
view to plant design; one each for sulphides and oxides, realizing the limited mineralization that
has been defined at the Tres Marias property. The Company will need to seek input from
potential customers to complete its feasibility assessment.
Considering that a remnant resource has been quantified within the old workings not NI 43101 compliant the Company is progressing to determine the feasibility of conducting a bulk
sampling exercise. In the case of the sulphides, the aim would be to produce a germanium-zinc
concentrate using a ball mill and bank of flotation cells. Options to process the oxides include
experimentation using submerged combustion melter technology.
MAC PROPERTY
In February 2001, the Company decided to expand its exploration focus to include rare earth
minerals and entered into an option to acquire a rare minerals property known as the MAC
property located in the Northwest Territories, Canada.
The Company exercised its option to purchase the MAC tantalum, tin and lithium property by
paying $100,000 to Strategic Metals Ltd. (Strategic) on February 14, 2007, which gave War
Eagle 100% ownership in the MAC property subject to a 2.0% NSR. The Company had the right

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
to purchase 1% of Strategics net smelter royalty for $1,000,000 until February 14, 2010, but did
not exercise this option.
In June 2007, the Company received final approval from the Exchange, and in December 2007,
Eagle Hill Exploration Corporation (Eagle Hill) received its final approval, for an option
agreement whereby Eagle Hill had the right to earn up to a 70% interest in the MAC property by
spending a minimum of $2,800,000 over a period ending on December 31, 2011.
In July 2009, the Company entered into a mutual release agreement with Eagle Hill whereby the
MAC property option agreement was terminated. Under the terms of the mutual release
agreement Eagle Hill maintains a 3.5% interest in the MAC property.
In August 2009, the Company entered into an option agreement with VM Exploration Ltd. (VM
Exploration), a private company based in Vancouver, British Columbia. A letter of intent was
previously signed in May 2009. Under the agreement, VM Exploration had the option to earn up
to an 80% interest in the MAC property in consideration of VM Exploration incurring
expenditures of up to a total of $2,000,000 in accordance with a definitive agreement executed
in August 2009. In June 2010, the Company and VM Exploration terminated the option
agreement and the Company recorded a full impairment of its investment in the MAC property.
In April 2010, the Company filed for an extension of a land use permit on the MAC property,
extending the expiry date of the permit for another two years to continue exploration if
warranted.
Based on review of drill results and modelling work performed over time, the Company believes
that the MAC property has potential but that a relationship with a processor or consumer will be
required to justify development.
Property Description
The MAC property is located in the southwest Northwest Territories, approximately 250
kilometres by air north of Watson Lake, at latitude 6211N and longitude 12554W on NTS
1051/2 and comprised of ten contiguous claims covering 15,015 hectares, which were staked
between August 2000 and September 2001 and in July 2007.
Several of these claims expired in September 2010; however, the Company submitted the lease
application documents and associated rental fees and was granted an extension to lease these
properties, as indicated below:
Claim

Grant No.

Acres

Expiry Date

Extension Granted

MAC 1

F65138

1,219

September 19, 2010 *

November 30, 2011

MAC 2

F65139

1,807

September 19, 2010 *

November 30, 2011

MAC 3

F65140

2,066

September 19, 2010 *

November 30, 2011

MAC 4

F36511

1,807

September 19, 2010 *

November 30, 2011

MAC 5

F36512

826

September 19, 2010 *

November 30, 2011

MAC 6

F66407

1,807

March 27, 2011

November 30, 2011

MAC 7

F36513

1,446

November 11, 2011

November 30, 2011

MAC 8

K07610

1,239

July 17, 2017

MAC 9

K07611

1,535

July 17, 2017

9

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
MAC 10

K07612

1,188

July 17, 2017

Although the claims have expired, the Company is still able to convert these claims to lease until the extension
dates indicated above.

The Company has also applied to take MAC claims 6 and 7 to lease which are scheduled to
expire in 2011. The Company intends to submit the application for lease for seven of the MAC
claims by the November 30, 2011 deadline.
The MAC property also includes certain claims located in Yukon, as follows:
Claim

Grant No.

Expiry

Selwyn 1

YC71589

June 26, 2013

Selwyn 2

YC71590

June 26, 2013

Selwyn 3

YC71591

June 26, 2013

Selwyn 4

YC71592

June 26, 2013

Selwyn 5

YC71593

June 26, 2013

Selwyn 6

YC71594

June 26, 2013

Selwyn 7

YC71595

June 26, 2013

Selwyn 8

YC71596

June 26, 2013

Selwyn 9

YC71597

June 26, 2013

Selwyn 10

YC71598

June 26, 2013

Road access to within 20 kilometres of the property is possible from Watson Lake by way of the
Robert Campbell Highway and Nahanni Range Road, a total distance of 300 kilometres. From
this point an abandoned winter road runs northwest to the Howards Pass lead-zinc deposit,
passing within two kilometres of the northern end of the MAC claim block. A bulldozer trail (also
to Howards Pass) runs within one kilometre of the southern part of the property. The closest
lake suitable for floatplane access is Moose Lake, which is one kilometre east of the claim
block.
The claims lie within the Selwyn Mountains. The north-western edge of the claim block roughly
parallels a relatively flat topped ridge ranging in elevation between 2,000 to 2,100 metres.
Bedrock exposure is excellent and north-facing slopes have moderate to steep relief and were
cut by Late Pleistocene glaciers to form numerous cirques and secondary ridges. Southern
exposures exhibit moderate to gentle talus slopes incised by glacial valleys. Elevations range
from 1,200 metres near Moose Lake to 2,100 metres atop the main ridge. The tree line is about
1,500 metres and below this elevation glacial till and moraines predominate.
Exploration
In fiscal 2008, the Company carried out a soil geochemical sampling program over the claim
area. The results of this sampling suggest that the dykes continue for at least one kilometre
north and two kilometres south of known exposures.

10

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
A diamond drilling program was also carried out in fiscal 2008 and consisted of eight holes
totalling approximately 1,798 metres (5,900 feet). This is the first drilling that has been done on
the property and provides the following information with regard to the extent and geometry of
the mineralized dyke swarms.
The drill holes MAC001, MAC006, and MAC007 show the most promising results. The further
five drill holes show continuation of the pegmatite system to depth. In six of the eight holes,
pegmatite was encountered within the last ~10 metres of the drill holes.
All drill holes intersected the pegmatite dikes including a ~25.4 metre section from MAC006
(from 165.9 metres to 191.33 metres) that was sampled continuously to include the host rock
(metasediments) of the pegmatite. The continuously sampled section indicates mineralization
beyond the margin of the pegmatite and into the host rock. Lithium diffuses the most (up to
1,070 parts per million ~1.2 metres away from the contact), then tantalum (up to 102.5 parts per
million ~ 0.5 metres away from the contact) and tin (up to 236 parts per million 0.5 metres away
from the contact).
The grades of the 2007 geochemical sampling from the diamond drilling program correlate well
with the previous surficial specimen, channel and chip sampling. Thus, the results from the
diamond drilling, coupled with historical surface sampling programs, confirm not only the large
aerial extent of the mineralized system but also the continuation of the system to depths in the
order of 1,000 metres (plateau height to valley bottom). Tables 1a and 1b below show the
normalized grade highlights as indicated from multi-element evaluation of lithium, tantalum and
tin.
Table 1a. Selected "individual" intercepts with minimum mineable width of 2.5 metres
applied
DDH
Hole

From
To
(metres) (metres)

Collective
Total
Pegmatite
Width
Width
(metres)
(metres)

Lithium
(ppm)

Lithium
Oxide
(%)

%
Spodumene

Tantalum
Oxide
(g/t)

Tin
Oxide
(g/t)

MAC001

62.5

63.6

2.5

1.1

98

0.02

0.26

317.46 307.34

MAC001

68.8

70.1

2.5

1.3

609

0.13

1.64

84.25 250.19

MAC001

86

89.2

3.2

2.1

2497

0.54

6.74

76.92 384.81

MAC001

102.8

105.94

3.14

1.74

2910

0.63

7.86

140.42 189.23

MAC006

61.88

66.86

4.98

2.18

1186

0.26

3.2

76.92 231.14

MAC006

85.6

87

2.5

1.4

1703

0.37

4.6

177.05 298.45

MAC006

172.37

190.64

18.27

13

4294

0.92

11.59

32.97 149.86

MAC007

30.22

33.62

3.4

0.98

911

0.2

2.46

57.39 171.45

MAC007

105.84

116.78

10.94

9.86

5581

1.2

15.07

35.41 219.71

MAC007

143.73

149.2

5.47

1.69

1536

0.33

4.15

26.86 104.14

MAC008

37.58

38.73

2.5

1.15

1243

0.27

3.36

79.37

241.3

MAC008

153.93

158.45

4.52

2.02

898

0.19

2.42

35.41

82.55

11

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
Table 1b. Selected "bulk" intercepts with widths larger than 50 metres

DDH
Hole

From
To
(metres) (metres)

Collective
Total
Pegmatite
Width
Width
(metres)
(metres)

Lithium
(ppm)

Lithium
Tin
%
Tantalum
Oxide
Oxide
Spodumene Oxide (g/t)
(%)
(g/t)

MAC001

62.5

122.1

59.6

8.93

345

0.07

0.93

39.07 68.58

MAC006

61.88

190.64

128.76

30.16

735

0.16

1.98

13.43 40.64

MAC007

100.85

179.1

78.25

15.25

977

0.21

2.64

9.77 54.61

Lithium assays are received in ppm, however, product is typically delivered as a lithium bearing
silicate mixture (i.e., spodumene) with a minimum Li2O content reported in per cent. Tantalum
and tin assays are also received in ppm but often reported in oxide form (Ta2O5 and SnO2,
respectively) and reported in grams per tonne (g/t).
Ivan Young, P Geo., is the qualified person under NI 43-101 who supervised the exploration
program on the MAC property. All analytical work was completed by ALS Chemex Laboratories
Ltd. of North Vancouver, BC, using standard assay procedures that included analysis of Li via
method MEMS61 (four-acid "near total" digestion), while all other elements were obtained via
method MEMS81 (a more robust technique using sample fusion in lithium borate).
The Company did not carry out any work on the MAC property in fiscal 2009 or fiscal 2010 prior
to the option agreement with VM Exploration; however Eagle Hill expended $62,110 in fiscal
2009, which was comprised primarily of clean-up and post repair of the property. The scope of
exploration work was such that there was little disturbance of the land and asset retirement
obligations, if any, are minimal. In fiscal 2011, the Company has undertaken modelling work to
better demonstrate the mineral structures and to perform internal estimates of ore volumes and
economics.
GEORGES LAKE
War Eagle earned a 90% property interest in the Georges Lake gold property, located
approximately 135 kilometres northeast of La Ronge, Saskatchewan. In February 2010 the
Company signed an agreement with Bullion Fund Inc. (Bullion) to acquire the remaining 10%
interest of the Georges Lake property for a cash payment of $75,000 and completed the
acquisition in June 2010. The Company now owns an undivided 100% working interest in
Georges Lake.
The Company is seeking to sell or option the Georges Lake gold property and currently does
not have any immediate plans to develop this property. Accordingly, the Company recorded an
impairment of $727,072 on its Georges Lake property in the fiscal year ended March 31, 2011.

12

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
The Company submitted the necessary assessment application and is in good standing for all
claims on the Georges Lake property, as indicated below:
Claim Number
S-111184
S-111185
S-111186
S-111400
S-111401
S-111402
S-111403
S-111404

Expiry
November 18, 2011
November 18, 2011
November 18, 2011
July 8, 2012
July 8, 2012
July 8, 2012
July 8, 2012
July 8, 2012

Property Description
The Georges Lake property was optioned during fiscal 2006 at a cost of $145,000. Initial 2006
work consisted of geological mapping and sampling along with geophysical surveys at a cost of
$42,000.
A showing, referred to as the VG showing, appears to be the most economically significant
known showing on the Georges Lake property. The mineralization is exposed in a 17 x 27
metre area (A) and in an adjacent 8 x 10 metre area (B). A series of volcanics and sediments
are cut by a thick quartz vein that is folded and plunges at a shallow angle to the southwest. The
chip sampling of the area (A) returned an average of 7.8 g/t (0.25 oz/t) gold (uncut) from all 43
samples. An average of 15.3 g/t (0.50 oz/t) gold (uncut) was obtained from 21 samples that
represents the western half of the area. The chip sampling of area (B) returned an average of
1.7 g/t (0.06 oz/ton) gold (uncut) from all 18 samples. An average of 3.2 g/t (0.10 oz/t) gold
(uncut) was obtained from nine samples that represent the eastern half of the area.
In December 2007, Fugro Airborne Surveys Corp. carried out an 852-line kilometre airborne
magnetic and electromagnetic survey over the property, with positive results. The dominant
feature seen in the magnetic field data is a strong, north-south trending contact/fault running
along the eastern edge of the block. Several strong, highly faulted and deformed bodies lie
within the central part of the block. The Seabee gold mine is located about 15 kilometres
northwest of the block and could possibly correlate with the magnetic and electromagnetic
anomalies located by the survey.
The Company did not work on the Georges Lake property in the year ended March 31, 2011
and is seeking to option it to a third party.
OTHER MINERAL PROPERTY INTERESTS
The Company also owns the rights to a 1.5% royalty on gross revenues from the Candle Lake
diamond property, located in central Saskatchewan and a 0.5% net smelter royalty from the
Antimony Mountain gold property, located in Yukon.
FINANCIAL
CONSOLIDATED FINANCIAL INFORMATION
In the following discussion, financial amounts other than per-share amounts have been rounded
to the nearest thousand dollars.
13

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
The following is a summary of certain selected financial information that is qualified by the more
detailed information appearing in the financial statements of the Company.
SELECTED ANNUAL AND QUARTERLY INFORMATION
The Companys fiscal period ends on March 31 of each year. The following is a summary of
certain selected audited consolidated financial information for the Companys three most
recently completed fiscal years ended, March 31, 2011, 2010 and 2009:

Net loss
Net loss per share
Total assets
Total long-term debt
Cash dividends

2011
3,540,263
(1.08)
154,346
-

March 31
2010
$ 1,319,383
(0.49)
2,606,746
$
-

2009
$ 12,134,900
(4.60)
4,091,551
$
-

The following is a summary of the eight mostly recently completed quarters:

Quarter ended

June 30, 2009

September 30, 2009
December 31, 2009
March 31, 2010
June 30, 2010
September 30, 2010
December 31, 2010
March 31, 2011

Resource
property
write-down

Loss for the

period

- $
(500,000)
(923,313)
(1,034,856) $

(323,133) $
(298,499)
(31,040)
(666,711)
(117,378)
(148,892)
(1,129,166)
(2,144,827) $

Loss per
share*

(0.12) $
(0.11)
(0.01)
(0.25)
(0.04)
(0.04)
(0.32)
(0.62) $

Total assets

3,863,218
3,785,409
3,267,643
2,606,746
3,150,470
3,263,188
2,228,667
154,346

During this period, the Company did not generate any revenues or have discontinued
operations or extraordinary items. Apart from mineral property write-downs (discussed below)
the main factors contributing to variations in the quarterly loss were stock-based compensation
awards, reconnaissance activities and foreign exchange gains and losses.
The loss for the June 30, 2009 quarter decreased as the Company cut its expenses as part of a
program to focus its activities. In the quarter ended September 30, 2009, the loss again
decreased, reflecting a lower level of activity while the Company reassessed its corporate
position. The loss for the quarter ended December 31, 2009 significantly decreased as the
Company continued to operate with minimal activity and generated income from the sale of
marketable securities. The loss for the quarter ended March 31, 2010 increased as a result of
the write-down on the MAC property of $500,000.
The loss for the quarters ended June 30, 2010 and September 30, 2010 reflected customary
administrative expenses. The December 31, 2010 quarter included property impairment of
$923,000, lease obligation costs and expenses incurred regarding the aborted Andromeda
transaction. The loss for the quarter ended March 31, 2011 increased as a result of property
14

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
impairment $1,035,000 on its Tres Marias and Georges Lake properties and a write-down of
$1,000,000 in regards to the Companys investment in Andromeda.
RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2011
The Company incurred a net loss before and after tax of $3,540,000 or $1.08 per share, for the
year ended March 31, 2011, which included a write-down of $1,960,000 with respect to the Tres
Marias and Georges Lake properties. During the year ended March 31, 2010, the Company
incurred a loss before and after tax of $1,319,000 or $0.49 per share, which included a writedown of $500,000 in acquisition costs with respect to the MAC property.
The Company reduced its expenses significantly in the first part of fiscal 2010, with minimal
operating expenses as it evaluated potential opportunities for its projects. In the comparative
period, the Company was in a transitional period, resulting in lower operating expenses, offset
by a gain on sale of securities.
This following section discusses significant operating expenses for the year ended March 31,
2011 as compared to the year ended March 31, 2010, unless discussed elsewhere:
Consulting fees These fees are paid to consultants not acting in a management or
staff capacity. The Company incurred minimal consulting fees in the current period.
Director fees Since April 1, 2009, the Company has paid its two independent
directors $3,500 per month each. As of December 2010, each director agreed to
forgo payment of their director fees until the Companys financial position improves,
although the expense is being accrued.
Doubtful debt The Company has provided for sales tax refunds due in Mexico.
While such amounts are properly due, the Company has not received refunds for
several months and cannot determine when the amounts will be collected.
Insurance The Company maintains liability and related insurance in respect of its
Canadian and Mexican offices. It also has a directors and officers policy.
Investor relations and news dissemination In view of poor capital markets and few
corporate developments, the Company limited investor relations activities to a
minimum. During the current period, there have been several financing and
transaction related events that have necessitated providing shareholders with
additional information, resulting in an increase in expenses.
Management fees and salaries The Company has reduced ongoing management
fees and salaries. In the comparative year, management fees and salaries included a
non-recurring $25,000 fee paid in respect of work undertaken to reorganize the affairs
of the Company in April 2009 and $24,000 paid to former officers and employees as
they worked through their severance periods. The non-recurring costs were all
incurred in first quarter of fiscal 2010.
Professional fees, comprising audit and legal fees, were higher than normal for the
year ended March 31, 2011 due to preparatory work for the proposed Andromeda
transaction.
Rent Rent expense comprises the cost of the Companys Vancouver office. In the
comparative period it also included the cost of the Companys Tucson office. The
current period charge includes a $35,000 expense for a sublease. Unknown to
current management, the Company had subleased certain office space in 2006 with
all rental payments made by the subtenants. The subtenants defaulted on their
obligations in 2010 and the landlord is now seeking recovery from the Company. The
15

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
Company has issued demand letters to the subtenants under a guarantee that they
provided to the Company, but the ability to realize on these guarantees is unknown.
Interest income The lower balance of cash resulted in a decline in interest income
compared to the comparative period.
EXPLORATION EXPENDITURES
Deferred exploration expenditures and acquisition costs in the year ended March 31, 2011
comprised:
Georges
Lake

Tres
Marias
At March 31, 2010

Additions
Accounting
Administration
Assays
Consulting
Labour
Legal
License and lease
Permits
Regulatory
Supplies
Travel
Acquisition
Additions in the
period
Impairment
At March 31, 2011

982,310

666,532

Antimony
Mountain

MAC
$

Total
$

1,648,843

13,466
8,326
5,151
130,520
14,270
4,078
32,935
1,463
10,706
17,827
10,045

(14,460)
-

18,021
11,292
-

13,466
8,326
5,151
148,541
14,270
4,078
44,227
(12,997)
10,706
17,827
10,045

75,000

75,000

248,787

60,540

29,313

338,640

(1,231,097)

(727,072)

(1,958,169)

29,313

29,314

Expenditures on Tres Marias relate to maintenance and the assessment of economic feasibility.
The Company increased its interest in Georges Lake at a cost of $75,000 and generated a
refund of bonds. Expenditures on the MAC property relate to geological structure modelling and
payments related to taking the property to lease. The Company took a property write-down of
$1,960,000, on its Tres Marias and Georges Lake properties, as it defers any immediate
development plans on these properties while it focuses on seeking joint venture opportunities.
LIQUIDITY AND CAPITAL RESOURCES
The Company has not paid any dividends since incorporation and it has no plans to pay
dividends in the immediate future. The Company expects to retain its earnings, if any, to finance
further growth. The directors of the Company will determine if and when dividends should be
declared and paid in the future based on the Companys financial position at the relevant time.
All of the common shares of the Company are entitled to an equal share in any dividends
declared and paid.
The Company has a history of losses. The Company had current liabilities in excess of current
assets in the amount of $106,000 at March 31, 2011 and its ability to continue as a going
concern is dependent upon the discovery of economically recoverable mineral reserves,
16

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
confirmation of the Companys interest in the underlying mineral claims, the ability of the
Company to obtain necessary financing to complete their development, and future profitable
production or proceeds from the sale of the property. The significant factors that affect the
Companys liquidity over the next few months are:

The Company began to evaluate the feasibility of limited-scale production at its Tres
Marias property. Such production would require that the Company purchase equipment,
increase its investment in non-cash working capital and expand the scope of its
operations, increasing expenses.

The Company plans to bring certain of its MAC claims to lease, which will require
payment of fees and a survey of the property in the next year at an estimated aggregate
cost of $100,000.

Given the limited cash resources of the Company, directors and the Companys CEO
have agreed to forgo payment of fees until the Company is on a more secure financial
footing.

Other factors affecting liquidity include

The Company intends to dispose of its investment in Andromeda or otherwise enter into
a transaction with Andromeda. The timing and quantum of any realization are unknown
at this time. As at March 31, 2011, the Company has written off its investment in
Andromeda due to the uncertain outlook for this investment.

The Company is owed US$100,000 (approximately $104,000) plus accrued interest by

Pacific Copper Corp. which debt is secured by a claim over certain of Pacific Copper
Corp.s properties. Pacific Copper Corp.s filings with the US Securities and Exchange
Commission, state that in February 2009, War Eagle notified Pacific Copper that it
would not fund the full amounts contemplated in the War Eagle Note, funding shortfall of
US$55,000. Pacific Copper has notified War Eagle that it considers this failure to fully
fund the War Eagle Note to be a breach, has denied the security interest, and has
reserved all of its legal rights. The Company believes that Pacific Copper Corp.s
assertion that the Company had an obligation to fund a further US$55,000 is incorrect
and believes that its security interest is still effective. The Company believes that it may
ultimately collect the amount due, but has fully provided for the outstanding balance of
the promissory note and accrued interest.

The Companys Mexican subsidiary, Minera Aguila, held a Mexican property that has
been abandoned. The Company had been advised that Minera Aguila has a potential
liability dating from many years ago for unpaid surface area taxes on various lapsed and
dropped claims. The Company believes that the liability is limited due to a statute of
limitations on such claims but cannot verify this with certainty. On March 11, 2011, the
Company entered into a share purchase and sale agreement in which the Company sold
its interest in Minera Aguila.

At the date of this MD&A, the Company has cash of $5,000 which is not sufficient to fund its
current expenditures. The Company is considering certain financing options to raise sufficient
capital to maintain its properties, investigate new opportunities and for general operating
purposes.
The Companys board and management has assessed the Companys business plan, with a
view to disposing of certain assets that are better held by someone else and joint venturing on
other assets. The Company does not expect to generate significant proceeds from the disposal
or optioning of any properties.
17

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011
SHARE CONSOLIDATION
In July 2011, the Company effected a consolidation of its share capital on a 20 for 1 basis,
consolidating its 69,645,394 currently outstanding common shares to 3,482,272 common
shares. Shareholder authorization to effect the share consolidation was approved at the
Company's annual and special general meeting held on February 28, 2011.
The consolidation will provide the Company with increased flexibility when negotiating potential
financing opportunities and allow it to consider joint venture or acquisition proposals with fewer
material limitations.
RELATED PARTY TRANSACTIONS
Particulars of transactions with related parties are disclosed in note 9 of the Companys March
31, 2011 financial statements. The Company does not have any contractual commitments to
related parties.
STOCK OPTIONS GRANTED
The Company did not grant any stock options in the year ended March 31, 2011. The Company
had previously reported that it was unable to grant options since the stock option plan had not
been approved at the 2009 annual general meeting. On review by counsel, it was determined
that approval was not required and so the Company may grant stock options.
CHANGES IN ACCOUNTING POLICIES
The Company adopted new accounting policies as described in note 4 of the March 31, 2011
consolidated financial statements.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
In 2006, the Canadian Accounting Standards Board (AcSB) published a new strategic plan
that will significantly affect financial reporting requirements for Canadian companies. The AcSB
strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected fiveyear transitional period. In February 2008, the AcSB announced that 2011 is the changeover
date for publicly-listed companies to use IFRS, replacing Canadas own GAAP and the date for
interim and annual financial statements relating to fiscal years beginning on or after January 1,
2011. The Company will begin reporting under IFRS in the year ended March 31, 2012. The
transition date of April 1, 2010 will require the restatement for comparative purposes of amounts
reported by the Company for the year ended March 31, 2011.
While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting
impact of the transition to IFRS has not been estimated at this time.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
Information about financial instruments is disclosed in note 17 of the financial statements.
RISKS

The Company has substantially exhausted its cash reserves.

The Company continues to seek complementary joint venture opportunities for its
projects and requires additional financing to fund its plans and any possible
transactions.

18

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2011

The Company will require additional investment to fund its plans to place Tres Marias in
production or to take the MAC property to lease; it may not be possible to obtain such
investment.

Although the Company hopes to generate revenues from the sale of resources from its
Tres Marias property, it will incur significant operating losses for the foreseeable future.

Although there is mineralization at the Tres Marias property, the Company does not
have quantified mineral resources at its Tres Marias property.

If the Company identifies economic resources at Tres Maris, it will need to identify or
develop processing facilities to process ore or concentrate.

The Companys success is dependent on future resource prices.

In order to develop its mineral properties, the Company will need to add experienced
senior management, personnel and consultants. Furthermore, it will be substantially
dependent upon the services of a few key individuals for the successful operation of its
business.

The development of mines is subject to extensive laws and regulations by various

government agencies that may make mine development uneconomic or impossible.

There can be significant political risk to operating in foreign jurisdictions and northern
Mexico has been adversely affected by drug wars.

OUTSTANDING SHARE DATA

As at the date of this MD&A, the Company had:
3,482,272 common shares issued and outstanding.
393,375 warrants to purchase common shares
26,007 finders warrants to purchase common shares
Stock options to purchase 213,250 common shares to directors, officers, employees,
investor relations providers and consultants.
The maximum number of shares potentially issuable is therefore 4,114,904.

19

WAR EAGLE MINING COMPANY INC.

Form 51-102F1

MANAGEMENTS DISCUSSION AND ANALYSIS

MARCH 31, 2010

Table of Contents
War Eagles Business ................................................................................................................ 1
Incorporation and Organization of the Company ........................................................................ 1
Corporate Developments ........................................................................................................... 1
Year Ended March 31, 2010 ................................................................................................... 1
Subsequent to March 31, 2010 ............................................................................................... 2
Andromeda Resources Inc. ........................................................................................................ 2
Private Placement ...................................................................................................................... 3
Mineral Properties ...................................................................................................................... 3
Tres Marias ............................................................................................................................ 3
Mac Property .......................................................................................................................... 8
Georges Lake .......................................................................................................................11
Other Mineral Property Interests ............................................................................................11
Fly Ash Metal Recovery Project ................................................................................................11
Financial ...................................................................................................................................11
Consolidated Financial Information ........................................................................................11
Selected Annual and Quarterly Information ...........................................................................12
Results of Operations for the Year Ended March 31, 2010 ....................................................12
Results of Operations for the Fourth Quarter .........................................................................14
Exploration Expenditures .......................................................................................................14
Liquidity and Capital Resources ............................................................................................14
Related Party Transactions ...................................................................................................16
Stock Options Granted ..........................................................................................................16
Changes in Accounting Policies .............................................................................................16
International Financial Reporting Standards ..........................................................................16
Financial Instruments and Other Instruments ........................................................................17
Risks .........................................................................................................................................17
Outstanding Share Data............................................................................................................17

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
The following is a managements discussion and analysis (MD&A) of War Eagle Mining
Company Inc. (War Eagle or the Company), prepared as of July 22, 2010. This MD&A
should be read together with the audited consolidated financial statements for the year ended
March 31, 2010 and related notes, which are prepared in accordance with Canadian generally
accepted accounting principles (Canadian GAAP). Financial amounts are expressed in
Canadian dollars unless otherwise specified.
Certain information included in this MD&A may constitute forward-looking statements.
Statements in this report that are not historical facts are forward-looking statements involving
known and unknown risks and uncertainties, which could cause actual results to vary
considerably from these statements. Readers are cautioned not to put undue reliance on
forward-looking statements.
Additional information related to War Eagle is available
www.wareaglemining.com or for view on SEDAR at www.sedar.com.

on

our

website

WAR EAGLES BUSINESS

The Company is involved in the acquisition, exploration and, if warranted, development of
mineral resource properties. The Companys primary focus is its 100% interest in the Tres
Marias zinc / lead / germanium property located in Chihuahua, Mexico. It has recently acquired
an interest in a company that has a zinc / copper property also near Chihuahua, Mexico. The
Company continues to look for complementary properties.
The Company has other mineral property interests and was investigating the feasibility of
recovering germanium (Ge) and gallium (Ga) from fly ash. The Company is not devoting
significant funds or management effort on these other initiatives but is working to secure a
return on investments previously made by partnering with third parties.
INCORPORATION AND ORGANIZATION OF THE COMPANY
The Company was incorporated under the laws of British Columbia on March 6, 1984 as
275210 BC Ltd.. The Company changed its name to War Eagle Resources Ltd. on April 10,
1984 and then changed its name from War Eagle Resources Ltd. to War Eagle Mining
Company Inc. on May 25, 1987.
The Companys head office is located at Suite 906 595 Howe Street, Vancouver, British
Columbia, Canada, V6C 2T5 and its registered office is located at Suite 700 - 595 Burrard
Street, Vancouver, British Columbia Canada, V7X 1S8.
The Company has four subsidiaries: War Eagle Resources Corporation, a wholly owned Idaho
corporation; Tombstone Mining Inc. (Tombstone Mining), a company incorporated in the
British Virgin Islands; Minera Aguila Canadiense, S.A. de C.V. (Minera Aguila), a 99% owned
Mexican corporation; and Tombstone Exploration de Mexico S.A. de C.V. (Tombstone
Mexico), a 99% owned Mexican corporation.
CORPORATE DEVELOPMENTS
YEAR ENDED MARCH 31, 2010
In February 2010 the Company signed an agreement with Bullion Fund Inc. (Bullion)
to acquire the remaining 10% interest of the Georges Lake property, located in
Saskatchewan for a cash payment of $75,000 and completed the acquisition in June
2010. The Company now owns an undivided 100% working interest in Georges
Lake.
1

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
In February 2010, the Company completed an analysis of assay results on drill core
from its 2008 / 2009 drill program on its Tres Marias property. These are discussed in
further detail below.
In November 2009, the Company reached a lease termination settlement with its
Tucson landlord for payment of US$125,000.
In August 2009, the Company entered into a definitive option agreement with VM
Exploration Ltd. (VM Exploration) who have the option to earn up to an 80% interest
in the Companys MAC property located in the Northwest Territories. The Company
and VM Exploration subsequently terminated the option agreement.
In April 2009, the Company granted 3,665,000 incentive stock options to directors,
officers and consultants of the Company. The stock options have an exercise price of
$0.15 with 1,665,000 options expiring March 31, 2012 and 2,000,000 options expiring
April 28, 2014.
In April 2009, the Company suspended work on its fly ash project.
SUBSEQUENT TO MARCH 31, 2010
In June and July 2010, the Company acquired a 17% interest in Andromeda
Resources Inc. (Andromeda), a private company that has negotiated the acquisition
of a Chihuahua, Mexico-based mineral property. See Andromeda Resources Inc.
below.
In June and July 2010, the Company closed the first and second tranches of a private
placement and issued an aggregate of 13,585,002 units at a price of $0.06 per unit
for gross proceeds of $815,100. See Private Placement below.
ANDROMEDA RESOURCES INC.
The Company has acquired a minority interest in Andromeda by purchasing 350,000 common
shares on June 29, 2010 and 150,000 common shares on July 7, 2010 for total cash
consideration of $1,000,000. Following these transactions, the Company owns 17% of
Andromeda, which is at arms length to the Company. Andromeda has negotiated to purchase
the Terrazas zinc-copper property (Terrazas) for cash consideration of US$5,000,000 payable
in installments over two years and a 2.0% NSR, sliding up to 3.0% at $2.00/lb zinc. The
Terrazas zinc-copper property is located near Chihuahua City in Mexico.
The Terrazas property was previously optioned to Constellation Copper Corporation
(Constellation), but ownership reverted to the underlying owner in 2008. The following
summary about Terrazas is based on information obtained from Constellations public filings,
which are available at www.sedar.com under Constellations profile. The Company cautions that
it has not verified the information contained in these filings and the information in such filings is
noted for reference only.
Over an eight-year period, Constellation expanded and improved the categorization of the
geologic resource and in 2005 published an National Instrument 43-101 (NI 43-101) technical
report that defined an overall resource consisting of measured and indicated resources of 85.6
million tonnes at 1.24 % zinc and 0.32% Cu. More significantly, the technical report identified a
discrete high grade zone, known as Cerro Verde within that resource that consists of measured
and indicated resources of 24.6 million tonnes at 2.97% zinc and 0.28% Cu; an inferred
resource of 3.5 million tonnes of 5.0% zinc underlies the Cerro Verde high grade zone. All
resources are almost entirely comprised of oxide minerals of zinc and copper.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
Andromeda plans to expand on Constellations work, which Andromeda considers to be of high
quality. Andromeda expects, over a period of two to four years, to generate a feasibility study
and to advance the project toward production. In addition to the resource at Terrazas, there are
several oxide zinc and smelter slag resources in Chihuahua and neighbouring states that could
benefit from the presence of a treatment plant at Terrazas, including the Companys Tres
Marias project. Compatibility of other ores with the proposed process at Terrazas has not yet
been examined. The project site, close to the city of Chihuahua, has extensive infrastructure in
place including railway, power, water and a nearby four lane-highway. It is expected that this will
allow for the low cost transport to site of other ores and slags together with the raw materials for
the possible manufacture of low cost acid on site.
The Companys investment of 17% in Andromeda may be diluted if Andromeda raises money
from other sources. Readers are cautioned that there is considerable risk associated with the
investment in Andromeda and Andromedas plans to finance and construct a processing plant at
the Terrazas project.
Mr. Terry Schorn, P. Geo, the Qualified Person for the Company, pursuant to NI 43-101, has
reviewed and approved the disclosure above.
PRIVATE PLACEMENT
In June 2010, the Company announced a non-brokered private placement to raise up to
$1,200,000. The offering was priced at $0.06 per unit with each unit consisting of one common
share of the Company and one-half common share purchase warrant exercisable at $0.15. If
the closing price of the Company's common shares is $0.30 or more for 20 consecutive trading
days on the TSX Venture Exchange, or an equivalent stock exchange, (the "Accelerating
Event") the exercise period of the warrants may be reduced to expire on the date that is 30 days
following the Company's notice to the warrantholders of the Accelerating Event.
In June 2010, the Company closed the first tranche of a private placement and issued an
aggregate of 9,576,668 units at a price of $0.06 per unit for gross proceeds of $574,600. In July
2010, the Company closed the second tranche of the private placement and issued a further
4,008,334 units at a price of $0.06 per unit for gross proceeds of $815,100. In aggregate, the
Company paid finders fees of $20,888 and issued 348,133 finders warrants, which have the
same terms as the financing warrants except they are non-transferable. The Company used the
net proceeds of the private placement plus approximately $206,000 of its cash on hand to
acquire a 17% interest (at the date of closing) in Andromeda (See Andromeda Resources Inc.
above).
All securities issued pursuant to this private placement are subject to a four month and one day
hold period.
MINERAL PROPERTIES
TRES MARIAS
In March 2001, the Company entered into a letter agreement (the HTMC Agreement) with
High Tech Metals Corp. (HTMC), whereby the Company acquired a 100% interest in HTMCs
option to acquire a 100% interest in the Tres Marias property. Under the HTMC Agreement, the
Company paid HTMC $15,712 and issued 200,000 shares to HTMC.
In order to acquire a 100% interest in the property, the Company issued a total of 525,000
common shares to Tombstone Aruba A.V.V. and made property payments totalling $315,000. In
addition, the Company made total exploration expenditures of US$500,000 on this property. The
Company completed the acquisition of this property, subject to royalties, in fiscal 2007. The Tres
3

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
Marias property is subject to a 3% net smelter royalty (NSR) on all production, except for oxide
production (for which the NSR is 1.5%), and a 1% net profits royalty. The NSR can be bought
down to a 0.5% NSR on all production including oxide production for US$500,000, subject to
regulatory approval. If the NSR is bought down to 0.5% the NSR will cease once NSR payments
after the buy down total US$2.0 million. The Company is also committed to an additional 1.5%
NSR to a third party.
In early 2009, the Company suspended exploration activities pending development of a work
program that is in accordance with the Companys resources and ability to raise money. In late
2009, the Company commenced an assay program, which is discussed in further detail below.
The assay results were very favourable and suggest that it may be possible to establish
economically feasible mining operations sooner than expected. Accordingly, the Company is
currently assessing the viability of a limited mining program and is formulating a mining plan and
investigating processing options. The Company is aware of processing mills in the Tres Marias
area, but has not quantified the cost of processing ore. The flow sheets will likely have to be
adjusted to suit the Tres Marias type of sulphide ore and any oxide ore may need to be treated
by a leaching process.
The Company also plans to develop the next steps of its exploration plan as it seeks to better
understand the nature of the mineral structures before moving ahead with a NI 43-101 technical
report. The objective of the program will be to determine if the high-grade mineralization that
was recently outlined by the drill core sampling program can be reached from a short,
accessible adit and decline, rather than hoisting the material to surface through the present
shaft facilities.
The Company is actively seeking zinc-lead resources that it can operate in conjunction with
Tres Marias with a view to spreading costs over a broader base of activity and, ideally, sharing
processing facilities. The investment in Andromeda is part of this plan and the development of
Tres Marias may be coordinated with that of Andromedas optioned Terrazas property.
Property Description
The following description of the property is taken from the technical report on the Tres Marias
Zinc/Germanium Project prepared for the Company by Dr. Peter Megaw, a qualified person,
dated September 4, 2001 and revised July 11, 2002, a copy of which can be found under the
Companys corporate profile on www.sedar.com.
The Tres Marias property is located in the northeast corner of Chihuahua State, Mexico and
consists of nine exploration concessions covering a total of 2,831 hectares.
Claim Name

Type

Title

File

Hectares

Lajitas Uno

Exploitation

186430

1/122

112

Celia

Exploitation

169682

16/3563

31

A. Dos Marias

Exploitation

169681

16/3343

16

Las Dos Marias

Exploitation

169684

16/3818

Maria

Exploitation

169683

16/3641

14

Cassiopea

Exploitation

169685

16/4093

10

La Osa

Exploitation

209806

1/1.3/945

24

Tres Marias

Exploration

204384

1/2.4/566

1,622

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
Claim Name
Tres Marias 2

Type
Exploration

Total

Title

File

208814

1/2.4/569

Hectares
993
2,831

Exploration
Exploration at the Tres Marias property continued through to February 2009. Parallel drill
programs were conducted underground within the historic mine workings and on the surface.
Underground: 2,396.46 metres in total were drilled during fiscal 2009. Since TE-1
commenced in August 2006, 3,624.51 metres in total have been drilled. 10 holes
were completed during the fourth quarter of fiscal 2009.
Surface: 3,248.04 metres in total were drilled during fiscal 2009. Since GO-1
commenced in February 2007, 4670.82 metres in total have been drilled. Eight holes
were completed during the fourth quarter of fiscal 2009.
Seven of these holes were located on surface in the mine-yard and were drilled into
the Mina Vieja Sur block by way of a dual approach.
In fiscal 2009, the Company filed for and was awarded an amendment to its current exploration
permit, in order to drill on the following five targets within the concession, which may be
described as follows:
Molino Truebe
Located in Mining Lote Tres Marias 2, the target is a northeast (NE) southwest (SW)
structure associated with a geochemical anomaly with breccias, offset Del Rio shale and
iron oxides hosted in Santa Elena limestone.
El Graven
The El Graven target is located in Mining Lote Tres Marias, and is described as the graben
boundary faults that run northwest (NW) southeast (SE) with associated breccias and iron
oxides.
El Tanque
Located between Mining Lotes Maria, Celia and Tres Marias, the El Tanque target is a
structural intercept between two faults that run NW SE and NE SW consecutively, with
associated breccias and iron oxides. The historic Tres Marias mine is about 500 metres
south of this target. The approximate area of interest is 300 metres by 300 metres.
La Blanca
The La Blanca target is located 600 metres south of the mine, characterized by a strong NE
- SW trending structure and is regarded as separate from the original Tres Marias deposit.
This is the first of the outlying geological areas of interest to be drill tested. GO-31
commenced drilling in 2008. Zinc-germanium mineralization has been located in this area by
drilling and surface sampling of old pits.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
La Blanca Sur
The La Blanca Sur target is located between Mining Lotes Lajitas 1 and Celia, and is at the
structural intersection of a NE SW fault that is cut by a NW SE fault with associated
breccias, calcite veining and iron oxides. The principal structure is parallel to La Blanca.
Current Exploration
In February 2009 the Company announced a suspension of drilling operations at the Tres
Marias property during the economic downturn in light of current financial markets and the
significant decrease in zinc prices over the past year. In fiscal 2009, the Company took a writedown of $8,905,000 in exploration expenditures with respect to the Tres Marias property. The
Company has placed its equipment in storage while it develops a suitable exploration plan and
assesses how best to proceed with the Tres Marias property.
The Company did no drilling on the Tres Marias property in the year ended March 31, 2010 but
retained two geologists to oversee sampling and analysis work. The assay program focused on
mineralized drill intercepts in two areas of the Tres Marias property that had been recognized
but not sampled due to the suspension of exploration activities in February 2009. Previous
drilling was done in the general mine area located south and west to the former mine workings.
The GO-series holes were drilled from the mine-yard on surface down into the historic mine
area during the fourth quarter of 2008. The mineralization that was intersected by the surface
GO drill holes is a new zone that is located above the fifth level to the west of the former mine
workings.
Table 1 - Drill Results for GO-32 to GO-38
Borehole ID
GO-32
GO-32
GO-33
GO-33
GO-33
GO-34
GO-35
GO-36
GO-36
GO-36
GO-36
GO-37
GO-37
GO-37
GO-37
GO-38
GO-38
GO-38

From
56.22
62.28
58.07
77.05
89.74
76.50
53.43
58.90
71.40
76.67
85.94
58.85
69.78
75.70
89.60
54.42
67.38
89.40

To
75.89
75.89
61.32
79.67
98.84
92.52
59.26
60.20
74.26
81.60
90.14
61.54
72.00
86.15
97.87
56.15
86.76
90.90

Intercept in
metres
19.67
13.61
3.25
2.62
9.10
16.02
5.83
1.30
2.86
4.93
4.20
2.69
2.22
10.45
8.27
1.73
19.38
1.50

Germanium
ppm
103
111
165
107
390
391
84
216
261
154
380
154
303
140
198
172
221
209

Zinc %
6.98
8.06
11.04
9.40
16.54
28.77
6.75
15.00
17.38
10.98
21.89
11.62
15.52
19.31
14.85
18.00
15.93
15.00

Lead %
2.61
2.50
1.76
0.87
1.20
1.89
9.07
0.91
2.10
0.82
2.72
1.17
3.05
0.65
1.35
9.58
1.61
1.61

Iron %
2.17
2.88
1.62
20.00
3.50
4.36
2.78
8.80
10.79
2.90
7.64
7.64
11.85
2.32
1.94
2.18
6.20
9.32

The TE-series holes were drilled underground within the old workings of the historic Tres
Marias mine during the second half of 2008. The mineralization intersected by the TE
6

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
underground drill holes is additional zones located beyond the former mine workings to the
south.
Table 2 - Drill Results for TE-086 to TE-108
Borehole ID
TE-086
TE-087
TE-090
TE-092
TE-092
TE-092
TE-093A
TE-096
TE-097
TE-097
TE-098
TE-098
TE-098
TE-099
TE-099
TE-099
TE-100
TE-100
TE-100
TE-100
TE-101
TE-101
TE-101
TE-102
TE-102
TE-105
TE-105
TE-106
TE-106
TE-107
TE-107
TE-107
TE-107
TE-108
TE-108

From
16.80
0.00
0.00
0.00
37.45
44.00
19.20
0.00
6.30
22.50
12.70
22.65
36.70
5.85
16.70
34.90
0.00
11.20
29.30
44.90
18.45
24.30
29.60
3.80
8.15
32.09
37.61
11.27
16.17
8.10
11.43
18.27
29.69
10.67
15.22

To
20.10
8.90
11.70
6.00
40.27
45.00
21.93
4.60
8.25
41.25
16.70
35.00
42.40
9.40
28.80
36.60
1.40
26.05
34.35
49.40
21.50
29.10
30.00
6.80
9.04
34.82
39.00
13.04
17.27
10.50
13.36
19.35
34.93
13.23
19.74

Intercept in
metres
3.30
8.90
11.70
6.00
2.82
1.00
2.73
4.60
1.95
18.75
4.00
12.35
5.70
3.55
12.10
1.70
1.40
14.85
5.05
4.50
3.05
4.80
0.40
3.00
0.89
2.73
1.39
1.77
1.10
2.40
1.93
1.08
5.24
2.56
4.52

Germanium
ppm
41
20
139
68
427
423
24
232
410
246
65
147
285
201
291
11
35
147
166
n/a
138
335
290
424
400
518
5
196
179
570
72
452
400
356
404

Zinc %
37.67
47.50
11.27
33.64
14.59
27.43
18.43
6.22
39.86
19.24
8.09
12.50
21.41
18.03
21.67
5.02
5.24
19.64
16.03
18.03
9.21
19.33
19.10
34.50
38.06
37.99
27.62
1.00
1.00
41.08
23.00
36.70
20.31
32.87
35.34

Lead %
0.15
0.04
1.25
0.16
2.56
3.71
0.12
1.55
3.36
2.73
0.81
1.96
3.04
1.87
3.06
0.51
0.61
1.79
2.18
0.07
0.86
2.39
2.29
10.92
3.84
12.93
0.16
1.57
4.02
1.80
0.23
2.85
3.33
1.70
6.32

Iron %
2.50
0.57
1.48
2.14
3.94
2.83
1.30
2.35
3.69
3.76
13.40
3.37
15.24
3.73
11.67
12.07
2.51
9.71
10.08
0.40
1.27
3.36
2.85
2.89
2.64
3.82
0.16
4.50
9.75
3.52
0.54
9.58
3.22
4.61
11.27

The assay results were completed by Inspectorate in Durango, Texas using four-acid digest and
AA finish; SGS Lakefield processed the check assays.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
As is normal, the Company undertook an assay program with blanks and check assays. The
Qualified Person, as defined below, reported that the blanks lined up perfectly and the check
assays were all acceptable.
The program was supervised by Mr. Alistair Logan, BSc., a qualified geologist, reporting to Mr.
Terry Schorn, P. Geo, the Qualified Person for the Company, pursuant to NI 43-101, and who
has reviewed and approved the disclosure above.
MAC PROPERTY
In February 2001, the Company decided to expand its exploration focus to include rare earth
minerals and entered into an option to acquire a rare minerals property known as the MAC
property located in the Northwest Territories, Canada.
The Company exercised its option to purchase the MAC tantalum, tin and lithium property by
paying $100,000 to Strategic Metals Ltd. (Strategic) on February 14, 2007, which gave War
Eagle 100% ownership in the MAC property subject to a 2.0% NSR. The Company had the right
to purchase 1% of Strategics net smelter royalty for $1,000,000 until February 14, 2010, but did
not exercise this option.
In June 2007, the Company received final approval from the Exchange, and in December 2007,
Eagle Hill Exploration Corporation (Eagle Hill) received its final approval, for an option
agreement whereby Eagle Hill had the right to earn up to a 70% interest in the MAC property by
spending a minimum of $2,800,000 over a period ending on December 31, 2011.
In July 2009, the Company entered into a mutual release agreement with Eagle Hill whereby the
MAC property option agreement was terminated. Under the terms of the mutual release
agreement Eagle Hill maintains a 3.5% interest in the MAC property.
In August 2009, the Company entered into an option agreement with VM Exploration, a private
company based in Vancouver, British Columbia. A letter of intent was previously signed in May
2009. Under the agreement, VM Exploration had the option to earn up to an 80% interest in the
MAC property in consideration of VM Exploration incurring expenditures of up to a total of
$2,000,000 in accordance with the definitive agreement executed on August 17, 2009. In June
2010, the Company and VM Exploration terminated the option agreement and the Company
recorded a full impairment of its investment in the MAC property.
In April 2010, the Company filed for an extension of a land use permit on the MAC property,
extending the expiry date of the permit for another two years to continue exploration if
warranted.
Property Description
The MAC property is located in the southwest Northwest Territories, approximately 250
kilometres by air north of Watson Lake, at latitude 6211N and longitude 12554W on NTS
1051/2 and comprised of seven contiguous claims covering 4,473 hectares, which were staked
between August 2000 and September 2001.
Claim

Grant No.

Expiry

MAC 1

F65138

September 19, 2010

MAC 2

F65139

September 19, 2010

MAC 3

F65140

September 19, 2010

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
MAC 4

F36511

September 19, 2010

MAC 5

F36512

September 19, 2010

MAC 6

F66407

March 27, 2011

MAC 7

F36513

November 11, 2010

Road access to within 20 kilometres of the property is possible from Watson Lake by way of the
Robert Campbell Highway and Nahanni Range Road, a total distance of 300 kilometres. From
this point an abandoned winter road runs northwest to the Howards Pass lead-zinc deposit,
passing within two kilometres of the northern end of the MAC claim block. A bulldozer trail (also
to Howards Pass) runs within one kilometre of the southern part of the property. The closest
lake suitable for floatplane access is Moose Lake, which is one kilometre east of the claim
block.
The claims lie within the Selwyn Mountains. The north-western edge of the claim block roughly
parallels a relatively flat topped ridge ranging in elevation between 2,000 to 2,100 metres.
Bedrock exposure is excellent and north-facing slopes have moderate to steep relief and were
cut by Late Pleistocene glaciers to form numerous cirques and secondary ridges. Southern
exposures exhibit moderate to gentle talus slopes incised by glacial valleys. Elevations range
from 1,200 metres near Moose Lake to 2,100 metres atop the main ridge. The tree line is about
1,500 metres and below this elevation glacial till and moraines predominate.
Exploration
In fiscal 2008, the Company carried out a soil geochemical sampling program over the claim
area. The results of this sampling suggest that the dykes continue for at least one kilometre
north and two kilometres south of known exposures.
A diamond drilling program was also carried out in fiscal 2008 and consisted of eight holes
totalling approximately 1,798 metres (5,900 feet). This is the first drilling that has been done on
the property and provides the following information with regard to the extent and geometry of
the mineralized dyke swarms.
The drill holes MAC001, MAC006, and MAC007 show the most promising results. The further
five drill holes show continuation of the pegmatite system to depth. In six of the eight holes,
pegmatite was encountered within the last ~10 metres of the drill holes.
All drill holes intersected the pegmatite dikes including a ~25.4 metre section from MAC006
(from 165.9 metres to 191.33 metres) that was sampled continuously to include the host rock
(metasediments) of the pegmatite. The continuously sampled section indicates mineralization
beyond the margin of the pegmatite and into the host rock. Lithium diffuses the most (up to 1070
parts per million ~1.2 metres away from the contact), then tantalum (up to 102.5 parts per
million 0.5 metres away from the contact) and tin (up to 236 parts per million 0.5 metres away
from the contact).
The grades of the 2007 geochemical sampling from the diamond drilling program correlate well
with the previous surficial specimen, channel and chip sampling. Thus, the results from the
diamond drilling, coupled with historical surface sampling programs, confirm not only the large
aerial extent of the mineralized system but also the continuation of the system to depths in the
order of 1,000 metres (plateau height to valley bottom). Tables 1a and 1b below show the
normalized grade highlights as indicated from multi-element evaluation of lithium, tantalum and
tin.
9

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
Table 1a. Selected "individual" intercepts with minimum mineable width of 2.5 metres
applied
DDH
Hole

From
To
(metres) (metres)

Collective
Total
Pegmatite
Width
Width
(metres)
(metres)

Lithium
(ppm)

Lithium
Oxide
(%)

%
Spodumene

Tantalum
Oxide
(g/t)

Tin
Oxide
(g/t)

MAC001

62.5

63.6

2.5

1.1

98

0.02

0.26

317.46 307.34

MAC001

68.8

70.1

2.5

1.3

609

0.13

1.64

84.25 250.19

MAC001

86

89.2

3.2

2.1

2497

0.54

6.74

76.92 384.81

MAC001

102.8

105.94

3.14

1.74

2910

0.63

7.86

140.42 189.23

MAC006

61.88

66.86

4.98

2.18

1186

0.26

3.2

76.92 231.14

MAC006

85.6

87

2.5

1.4

1703

0.37

4.6

177.05 298.45

MAC006

172.37

190.64

18.27

13

4294

0.92

11.59

32.97 149.86

MAC007

30.22

33.62

3.4

0.98

911

0.2

2.46

57.39 171.45

MAC007

105.84

116.78

10.94

9.86

5581

1.2

15.07

35.41 219.71

MAC007

143.73

149.2

5.47

1.69

1536

0.33

4.15

26.86 104.14

MAC008

37.58

38.73

2.5

1.15

1243

0.27

3.36

79.37

241.3

MAC008

153.93

158.45

4.52

2.02

898

0.19

2.42

35.41

82.55

Table 1b. Selected "bulk" intercepts with widths larger than 50 metres

DDH
Hole

From
To
(metres) (metres)

Collective
Total
Pegmatite
Width
Width
(metres)
(metres)

Lithium
(ppm)

Lithium
Tin
%
Tantalum
Oxide
Oxide
Spodumene Oxide (g/t)
(%)
(g/t)

MAC001

62.5

122.1

59.6

8.93

345

0.07

0.93

39.07 68.58

MAC006

61.88

190.64

128.76

30.16

735

0.16

1.98

13.43 40.64

MAC007

100.85

179.1

78.25

15.25

977

0.21

2.64

9.77 54.61

Lithium assays are received in ppm, however, product is typically delivered as a lithium bearing
silicate mixture (i.e., spodumene) with a minimum Li2O content reported in per cent. Tantalum
and tin assays are also received in ppm but often reported in oxide form (Ta2O5 and SnO2,
respectively) and reported in grams per tonne (g/t).
Ivan Young, P Geo., is the qualified person under NI 43-101 who supervised the exploration
program on the MAC property. All analytical work was completed by ALS Chemex Laboratories
Ltd. of North Vancouver, BC, using standard assay procedures that included analysis of Li via
method MEMS61 (four-acid "near total" digestion), while all other elements were obtained via
method MEMS81 (a more robust technique using sample fusion in lithium borate).
No work was carried out by the Company in fiscal 2009 or fiscal 2010 prior to the option
agreement with VM Exploration; however Eagle Hill expended $62,110, which was comprised
primarily of clean-up and post repair of the property. The scope of exploration work was such
that there was little disturbance of the land and asset retirement obligations, if any, are minimal.

10

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
GEORGES LAKE
War Eagle earned a 90% property interest the Georges Lake gold property, located
approximately 135 kilometres northeast of La Ronge, Saskatchewan. In February 2010 the
Company signed an agreement with Bullion to acquire the remaining 10% interest for a cash
payment of $75,000 and completed the transaction in June 2010.
Property Description
The Georges Lake property was optioned during fiscal 2006 at a cost of $145,000. Initial 2006
work consisted of geological mapping and sampling along with geophysical surveys at a cost of
$42,000.
A showing, referred to as the VG showing, appears to be the most economically significant
known showing on the Georges Lake property. The mineralization is exposed in a 17 x 27
metre area (A) and in an adjacent 8 x 10 metre area (B). A series of volcanics and sediments
are cut by a thick quartz vein that is folded and plunges at a shallow angle to the southwest. The
chip sampling of the area (A) returned an average of 7.8 g/t (0.25 oz/t) gold (uncut) from all 43
samples. An average of 15.3 g/t (0.50 oz/t) gold (uncut) was obtained from 21 samples that
represents the western half of the area. The chip sampling of area (B) returned an average of
1.7 g/t (0.06 oz/ton) gold (uncut) from all 18 samples. An average of 3.2 g/t (0.10 oz/t) gold
(uncut) was obtained from nine samples that represent the eastern half of the area.
In December 2007, Fugro Airborne Surveys Corp. carried out an 852-line kilometre airborne
magnetic and electromagnetic survey over the property, with positive results. The dominant
feature seen in the magnetic field data is a strong, north-south trending contact/fault running
along the eastern edge of the block. Several strong, highly faulted and deformed bodies lie
within the central part of the block. The Seabee gold mine is located about 15 kilometres
northwest of the block and could possibly correlate with the magnetic and electromagnetic
anomalies located by the survey.
The Company did not work on the Georges Lake property in the year ended March 31, 2010,
but has met its obligations to hold the property for at least 12 months.
OTHER MINERAL PROPERTY INTERESTS
The Company also has a 1.5% royalty on gross revenues from the Candle Lake diamond
property, located in central Saskatchewan and a 0.5% net smelter royalty from the Antimony
Mountain gold property.
FLY ASH METAL RECOVERY PROJECT
In November 2007, the Company signed a letter of intent with ELCOGAS, a Spain-based power
generation company, to begin testing fly ash from one of its largest power plants for contents of
Ge and Ga. The letter of intent expired on November 17, 2009.
FINANCIAL
CONSOLIDATED FINANCIAL INFORMATION
In the following discussion, financial amounts other than per-share amounts have been rounded
to the nearest thousand dollars.
The following is a summary of certain selected financial information that is qualified by the more
detailed information appearing in the financial statements of the Company.
11

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
SELECTED ANNUAL AND QUARTERLY INFORMATION
The Companys fiscal period ends on March 31 of each year. The following is a summary of
certain selected audited consolidated financial information for the Companys three most
recently completed fiscal years ended, March 31, 2010, 2009 and 2008:

2010
$ 1,319,383
(0.02)
2,606,746
$
-

Net loss
Net loss per share
Total assets
Total long-term debt
Cash dividends

March 31
2009
$ 12,134,900
(0.23)
4,091,551
$
-

2008
$ 1,538,129
(0.03)
16,099,916
$
-

The following is a summary of the eight mostly recently completed quarters:

Quarter ended

June 30, 2008

September 30, 2008
December 31, 2008
March 31, 2009
June 30, 2009
September 30, 2009
December 31, 2009
March 31, 2010

Resource
property
write-down

Loss for the

period

- $
(5,316,422)
(5,207,471)
(500,000) $

(408,571) $
(315,506)
(5,727,660)
(5,683,163)
(323,133)
(298,499)
(31,040)
(666,711) $

Loss per
share

(0.01) $
(0.01)
(0.11)
(0.11)
(0.01)
(0.01)
(0.00)
(0.01) $

Total assets

15,558,018
15,146,623
9,479,110
4,091,551
3,863,218
3,785,409
3,267,643
2,606,746

During this period, the Company did not generate any revenues or have discontinued
operations or extraordinary items. Apart from mineral property write-downs (discussed below)
the main factors contributing to variations in the quarterly loss were stock-based compensation
awards, reconnaissance activities and foreign exchange gains and losses.
The loss for the December 31, 2008 quarter increased because of the write-down on the Tres
Marias property. Without this write-down, the loss would have been $411,000. Similarly, in the
quarter ended March 31, 2009, the loss excluding the mineral property write-down was
$546,000 which is comparable to preceding quarters. The loss for the June 30, 2009 quarter
decreased as the Company cut its expenses as part of a program to focus its activities. In the
quarter ended September 30, 2009, the loss again decreased, reflecting a lower level of activity
while the Company reassessed its corporate position. The loss for the quarter ended December
31, 2009 significantly decreased as the Company continued to operate with minimal activity and
generated income from the sale of marketable securities. The loss for the quarter ended March
31, 2010 increased as a result of the write-down on the MAC property of $500,000.
RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2010
The Company incurred a net loss before and after tax of $1,319,000, or $0.02 per share, for the
year ended March 31, 2010, which included a write-down of $500,000 in acquisition costs with
12

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
respect to the MAC property. During the year ended March 31, 2009, the Company incurred a
loss before and after tax of $12,135,000 or $0.23 per share, which included a write-down of
$10,524,000 in exploration expenditures with respect to the Tres Marias and MAC properties.
While the Company has reduced its expenses significantly since the beginning of the current
fiscal year, the year ended March 31, 2010 included approximately $120,000 of non-recurring
expenses that related to employees working through their severance period, reorganization
costs or expenses relating to abandoned initiatives. A further $136,000 relates to the nonrecurring cost of settling a lease obligation for an office that was not being used. This is
described in further detail below.
During the year ended March 31, 2010, the Company invested $226,000 on the maintenance of
mineral properties as compared to exploration expenditures of $2,597,000 for the year ended
March 31, 2009. Fiscal 2010 expenditures related to maintenance costs for the Georges Lake
and Tres Marias properties and the assay program at Tres Marias.
This following section discusses significant operating expenses for the year ended March 31,
2010 as compared to the year ended March 31, 2009, unless discussed elsewhere:
Consulting fees These fees are paid to consultants not acting in a management or
staff capacity. The reduced level of activity in the current year was reflected in a lower
expense.
Bad debt The Company advanced funds to a company formerly related by having a
director in common (see note 6 of the March 31, 2010 financial statements) which
were to be repaid on June 30, 2009. The amount was not repaid on June 30, 2009
and the Company has fully provided for the outstanding balance.
Director fees Since April 1, 2009, the Company has paid its two independent
directors $3,500 per month each.
Insurance The Company maintains liability and related insurance in respect of its
Canadian and Mexican offices. It also has a directors and officers policy.
Investor relations In view of poor capital markets and few corporate developments,
the Company limited investor relations activities to a minimum and accordingly
reduced the related expense considerably compared to the prior year.
Management fees and salaries Management fees and salaries included a nonrecurring $25,000 fee paid in respect of work undertaken to reorganize the affairs of
the Company in April 2009 and $24,000 paid to former officers and employees as
they worked through their severance periods. The non-recurring costs were all
incurred in first quarter of fiscal 2010. The Company reduced ongoing management
fees and salaries effective April 1, 2009.
Property investigation This expense includes expenditures in the fly ash research
initiative. The expense recovery in the current year reflects a reversal of an $18,000
over-accrual of costs in fiscal 2009.
Rent In the current year rent expense comprises the cost of the Companys
Vancouver office. In the prior period rent expense also included the cost of the
Companys office space in Tucson, Arizona, which has since been terminated.
Stock-based compensation In April 2009, the Company issued 1,665,000 stock
options with a life of three years and 2,000,000 stock options with a life of five years.
The fair value of these options calculated using the Black Scholes option pricing
model was $55,000.

13

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
Travel The greatly reduced level of activity resulted in less travel and a
corresponding lower travel expense.
Interest income The lower balance of cash and reduced investment yields resulted
in a sharp decline in interest income compared to the comparative period.
Gain on securities sale The Company sold shares of publicly traded companies and
generated a gain on sale. This is a non-recurring gain.
Lease termination cost In November 2006, the Company entered into a lease for
office space in Tucson, Arizona that was used by the Companys US subsidiary and
by an affiliated company. The Company has not used the premises since March 31,
2009 and, in November 2009, terminated the lease with effect from March 31, 2009 in
consideration of payment of US$125,000.
RESULTS OF OPERATIONS FOR THE FOURTH QUARTER
The net loss for the quarter ended March 31, 2010 was $667,000
compared with a loss of $653,000 in the third quarter ended December
for the quarter ended March 31, 2009 of $5,683,000. The loss for
generally comparable to that of other quarters in the current fiscal
mineral property write downs (March 31, 2010 quarter-end - $500,000;
end - $5,207,000) and non-recurring reorganization costs.

or $0.01 per share as

31, 2009 and a net loss
the fourth quarter was
year, after segregating
March 31, 2009 quarter

EXPLORATION EXPENDITURES
Deferred exploration expenditures and acquisition costs in the year ended March 31, 2010
comprised:
Georges
Lake

Tres
Marias
At March 31, 2009

Additions
Accounting
Administration
Assays
Consulting
Labour
Legal
Licenses
Permits
Regulatory
Supplies
Travel

11,021
11,511
13,113
82,786
18,593
6,901
16,616
11,334
12,638
24,536
825
209,874
-

Impairment
At March 31, 2010

772,436

982,310

650,073

14,459
2,000
16,459
$

666,532

Antimony
Mountain

MAC
500,000

(500,000)
$

Total
$

1,922,510

11,021
11,511
13,113
82,786
18,593
6,901
16,616
25,793
14,638
24,536
825
226,333
(500,000)
$

1,648,843

LIQUIDITY AND CAPITAL RESOURCES

The Company has not paid any dividends since incorporation and it has no plans to pay
dividends in the immediate future. The Company expects to retain its earnings, if any, to finance
further growth. The directors of the Company will determine if and when dividends should be
14

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
declared and paid in the future based on the Companys financial position at the relevant time.
All of the common shares of the Company are entitled to an equal share in any dividends
declared and paid.
The Company has a history of losses. While the Company had current assets in excess of
current liabilities in the amount of $906,000 at March 31, 2010, its ability to continue as a going
concern is dependent upon the discovery of economically recoverable mineral reserves,
confirmation of the Companys interest in the underlying mineral claims, the ability of the
Company to obtain necessary financing to complete their development, and future profitable
production or proceeds from the sale of the property. The significant factors that affect the
Companys liquidity over the next few months are:

The Company raised gross proceeds of $815,100 through a private placement but has
invested $1,000,000 in Andromeda, as described above.

The Company began to evaluate the feasibility of limited-scale production at its Tres
Marias property. Such production would require that the Company purchase equipment,
increase its investment in non-cash working capital and expand the scope of its
operations, increasing expenses.

Other factors affecting liquidity include

The Company is owed US$100,000 (approximately $104,000) plus accrued interest by

Pacific Copper Corp. which debt is secured by a claim over certain of Pacific Copper
Corp.s properties. Pacific Copper Corp.s filings with the US Securities and Exchange
Commission, state that in February 2009, War Eagle notified Pacific Copper that it
would not fund the full amounts contemplated in the War Eagle Note, funding shortfall of
US$55,000. Pacific Copper has notified War Eagle that it considers this failure to fully
fund the War Eagle Note to be a breach, has denied the security interest, and has
reserved all of its legal rights. The Company believes that Pacific Copper Corp.
assertion that the Company had an obligation to fund a further US$55,000 is incorrect
and believes that its security interest is still effective. The Company believes that it will
ultimately collect the amount due, but has fully provided for the outstanding balance of
the promissory note and accrued interest.

The Companys Mexican subsidiary, Minera Aguila, held a Mexican property that has
been abandoned. The Company has been advised that Minera Aguila has a potential
liability dating from many years ago of up to US$560,000 for unpaid surface area taxes
on various lapsed and dropped claims. The Company has not received any formal
notification of liability and believes that these taxes will not be paid. No liability has been
recorded in its financial statements and Minera Aguila does not have any assets.

At the date of this MD&A, the Company has cash of $410,000. This is not sufficient to maintain
the Companys assets for a period of 12 months assuming that the Company undertakes
production at Tres Marias. This cash is capable of supporting operations if the Company
maintains its property without significant exploration activity.
As discussed above, the Companys board and management has assessed the Companys
business plan, with a view to disposing of certain assets that are better held by someone else
and joint venturing on other assets. The Company does not expect to generate significant
proceeds from the disposal or optioning of any properties.

15

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
RELATED PARTY TRANSACTIONS
Particulars of transactions with related parties are disclosed in note 9 of the Companys March
31, 2010 financial statements. The Company does not have any contractual commitments to
related parties.
STOCK OPTIONS GRANTED
In April 2009, the Company granted incentive stock options to directors, officers and consultants
of the Company, for the purchase of an aggregate of 3,665,000 common shares of the
Company, at an exercise price of $0.15, with 1,665,000 options expiring March 31, 2012 and
2,000,000 options expiring April 28, 2014. Of this grant, 450,000 of the options expiring March
31, 2012 were awarded to a director of the Company and 1,500,000 of the options expiring April
28, 2014 were awarded to individuals who are a director or a director and an officer of the
Company.
The options were granted pursuant to the terms of the Company's 2008 stock option plan.
On September 29, 2009, the Company held its annual general meeting to approve an amended
stock option plan. The voting shareholders of the Company did not approve the proposed stock
option plan at the meeting and the Company may not award options until the option plan is
approved by shareholders.
CHANGES IN ACCOUNTING POLICIES
The Company adopted new accounting policies as described in note 4 of the March 31, 2010
audited financial statements.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
As required, the Company will convert its reporting from Canadian GAAP to International
Financial Reporting Standards (IFRS) in its 2012 fiscal year. The Company has not yet
prepared a complete IFRS changeover plan (the IFRS Plan), but has completed a high-level
scoping study to consider the potential impact of the implementation of IFRS on the Companys
financial reporting. IFRS will not only impact the presentation and disclosure of items in the
financial statements but also the determination of future net income or loss and the
measurement of balance sheet items. The next stage will be to develop a detailed IFRS Plan.
The Companys IFRS Plan will include modelling the impact of individual IFRS standards and
related interpretations on our financial statements. As part of the IFRS Plan, it will be required to
prepare a transition balance sheet as at March 31, 2010 (to be representative of the opening
April 1, 2010 balance sheet) in accordance with IFRS. This opening balance sheet will form the
opening position of the Companys comparative financial statements when reporting under
IFRS. Based on the high-level scoping study, the following IFRS standards are expected to
have the most significant impact on us.

IFRS 1 First-time adoption of IFRS

IFRS 2 Share Based Payments
IFRS 6 Exploration and evaluation of mineral resources
IAS 16 Property, plant and equipment
IAS 36 Impairment of Assets

Once the detailed IFRS Plan is complete, the Company will begin to design and build an IFRS
framework, which includes decisions on available accounting policy choices, formulate policy
positions and execution and roll-out of communications strategy. Once the design and build
16

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Year Ended March 31, 2010
phase is complete the Company will move to the implement and review phase which includes,
preparation of an IFRS opening balance sheet, compilation of comparative data, preparation of
quarterly financial statements and disclosures, preparation of annual financial statements and
disclosures, monitoring how IFRS evolves, conducting post implementation review and
communicating ongoing requirements.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
Information about financial instruments is disclosed in note 18 of the financial statements.
RISKS

The Company will require additional investment to fund its plans to place Tres Marias in
production and it may not be possible to obtain such investment.

Although the Company hopes to generate revenues from the sale of resources from its
Tres Marias property, it will incur significant operating losses for the foreseeable future.

Although there is mineralization at the Tres Marias property, the Company does not
have quantified mineral resources at its Tres Marias property.

If the Company identifies economic resources at Tres Maris, it will need to identify or
develop processing facilities to process ore or concentrate.

The Companys success is dependent on future resource prices.

In order to develop its mineral properties, the Company will need to add experienced
senior management, personnel and consultants. Furthermore, it will be substantially
dependent upon the services of a few key individuals for the successful operation of its
business.

The development of mines is subject to extensive laws and regulations by various

government agencies that may make mine development uneconomic or impossible.

There can be significant political risk to operating in foreign jurisdictions and northern
Mexico has been adversely affected by drug wars.

OUTSTANDING SHARE DATA

As at the date of this MD&A, the Company had:
67,495,394 common shares issued and outstanding.
6,792,501 warrants to purchase common shares
348,133 finders warrants to purchase common shares
Stock options to purchase 4,715,000 common shares to directors, officers,
employees, investor relations providers and consultants.
The maximum number of shares potentially issuable is therefore 79,351,028.

17

WAR EAGLE MINING COMPANY INC.

Form 51-102F1

MANAGEMENTS DISCUSSION AND ANALYSIS

MARCH 31, 2009

Table of Contents
Incorporation and Organization of the Company ........................................................................ 1
Description of Business.............................................................................................................. 1
Corporate Developments ........................................................................................................... 2
Highlights for the Fourth Quarter Ended March 31, 2009........................................................ 2
Highlights Subsequent to March 31, 2009 .............................................................................. 2
Mineral Properties...................................................................................................................... 3
Tres Marias ............................................................................................................................ 3
Mac Property .......................................................................................................................... 5
Antimony Mountain................................................................................................................. 8
Georges Lake......................................................................................................................... 8
Fly Ash Metal Recovery Project ................................................................................................. 9
Financial ...................................................................................................................................10
Consolidated Financial Information........................................................................................10
Selected Annual and Quarterly Information ...........................................................................10
Results of Operations ............................................................................................................11
Liquidity and Capital Resources ............................................................................................12
Related Party Transactions ...................................................................................................13
Stock Options Granted ..........................................................................................................14
Changes in Accounting Policies.............................................................................................14
International Financial Reporting Standards ..........................................................................14
Financial Instruments and Other Instruments ........................................................................15
Outstanding Share Data............................................................................................................15

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
The following is a managements discussion and analysis (MD&A) of War Eagle Mining Company
Inc. (War Eagle or the Company), prepared as of July 28, 2009. This MD&A should be read
together with the audited consolidated financial statements for the year ended March 31, 2009 and
related notes, which are prepared in accordance with Canadian generally accepted accounting
principles (Canadian GAAP). Financial amounts are expressed in Canadian dollars unless
otherwise specified.
Certain information included in this MD&A may constitute forward-looking statements. Statements in
this report that are not historical facts are forward-looking statements involving known and unknown
risks and uncertainties, which could cause actual results to vary considerably from these statements.
Readers are cautioned not to put undue reliance on forward-looking statements.
Additional information related to War Eagle is available on our website www.wareaglemining.com or
for view on SEDAR at www.sedar.com.
INCORPORATION AND ORGANIZATION OF THE COMPANY
The Company was incorporated under the laws of British Columbia on March 6, 1984 as 275210
BC Ltd.. The Company changed its name to War Eagle Resources Ltd. on April 10, 1984 and then
changed its name from War Eagle Resources Ltd. to War Eagle Mining Company Inc. on May 25,
1987.
In September 2003, the Company received shareholder approval for the consolidation of its
authorized share capital on a six-for-one share basis and to subsequently increase its authorized
share capital to 100,000,000 common shares without par value. This share consolidation and
increase in the authorized share capital was completed in December 2004. In November 2006, the
memorandum of the Company was amended to increase the authorized capital of the Company to
an unlimited number of common shares without par value.
The Companys head office is located at Suite 906 595 Howe Street, Vancouver, British Columbia,
Canada, V6C 2T5 and its registered office is located at Suite 1000 - 595 Burrard Street Vancouver,
British Columbia Canada, V7X 1S8.
The Company has four subsidiaries: War Eagle Resources Corporation, a wholly owned Idaho
corporation; Tombstone Mining Inc. (Tombstone Mining), a company incorporated in the British
Virgin Islands; Minera Aguila Canadiense, S.A. de C.V. (Minera Aguila), a 99% owned Mexican
corporation; and Tombstone Exploration de Mexico S.A. de C.V. (Tombstone Mexico), a 99%
owned Mexican corporation.
DESCRIPTION OF BUSINESS
The Company is involved in the acquisition, exploration and, if warranted, development of mineral
resource properties. The Company has three principal exploration properties: the Tres Marias
property, the MAC property and the Georges Lake property, with the primary focus being on the Tres
Marias property.
In addition to its three main properties, the Company has a 1.5% royalty on gross revenues from the
Candle Lake property, located in central Saskatchewan and a 0.5% net smelter royalty (NSR) from
the Antimony Mountain property.

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
In 2007, the Company entered into an agreement with ELCOGAS, SA (ELCOGAS) to conduct
testing and sampling of fly ash at the Puertollano IGCC power generation company, located in
Madrid, Spain, for the possible recovery of germanium (Ge) and gallium (Ga). Sampling,
research, chemical analyses and materials testing are being completed by three of Spains leading
research organizations: Andalussian Association for Research and Industrial Cooperation (AICIA)
University of Seville, Jaume Almera (CSIC), University of Barcelona (described below).
Following its March 31, 2009 year end, the Company reduced its overhead and undertook a detailed
assessment of its mineral properties and business plan. With diminishing cash reserves and a tight
capital market, it was clear the Company would be unable to secure funding to develop all its
properties and complete its fly ash initiative. At the date of this MD&A, the Company has not
completed its assessment, however it has decided to sell the MAC property and to discontinue work
on the fly ash initiative.
CORPORATE DEVELOPMENTS
HIGHLIGHTS FOR THE FOURTH QUARTER ENDED MARCH 31, 2009
In January 2009, the Company announced the appointment of Jeffery Lantz as president
and chief executive officer.
In February 2009, the Company discontinued exploration fieldwork on its Tres Marias
property while it develops a suitable exploration plan.
In March 2009, the Company accepted the resignations of Jeffrey Lantz as president,
chief executive officer and director, of David Hackman as director and of Terence Schorn
as chairman of the board and chief financial officer. Mr. Schorn continues to be a director
and consultant of the Company.
In March 2009, the Company appointed Simon Anderson the positions of interim
president, interim chief executive officer, interim chief financial officer and director and
appointed Anthony Dutton as director. Don Padgett accepted the position of chairman of
the board and remains a director of the Company.
In March 2009, the Company wrote down its Tres Marias and MAC properties by
$5,207,000 as discussed below, bringing the total mineral property write-down for the year
to $10,524,000.
HIGHLIGHTS SUBSEQUENT TO MARCH 31, 2009

In April 2009, the Company granted 3,665,000 incentive stock options to directors, officers
and consultants of the Company. The stock options have an exercise price of $0.15 with
1,665,000 options expiring March 31, 2012 and 2,000,000 options expiring April 28, 2014.

In April 2009, the Company suspended work on its fly ash project.

In May 2009, the Company signed a letter of intent with VM Exploration Ltd. (VM
Exploration), to enter into a definitive agreement, under which VM Exploration will have
the option to earn up to an 80% interest in the MAC property. The Company will maintain
a carried interest on the MAC property until VM Exploration completes a bankable
feasibility study. Completion of the proposed transaction is subject to execution of a formal
definitive agreement and approval by the board of directors of the Company and, if
required, by the TSX Venture Exchange (the Exchange).

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
MINERAL PROPERTIES
TRES MARIAS
In March 2001, the Company entered into a letter agreement (the HTMC Agreement) with High
Tech Metals Corp. (HTMC), whereby the Company acquired a 100% interest in HTMCs option to
acquire a 100% interest in the Tres Marias property. Under the HTMC Agreement, the Company
paid HTMC $15,712 and issued 200,000 shares to HTMC.
HTMC originally acquired an option to acquire a 100% interest in the Tres Marias property under an
option agreement (the Option Agreement) dated July 27, 2000 between HTMC, Tombstone Aruba
A.V.V. and Tombstone Mexico. Under the HTMC Agreement, the Company assumed all of the rights
and obligations of HTMC under the Option Agreement. In order to exercise the option and acquire a
100% interest in the property, the Company issued a total of 525,000 common shares to Tombstone
Aruba A.V.V and made property payments totalling $315,000. In addition, pursuant to the Option
Agreement, the Company has made total exploration expenditures of US$500,000 on this property.
The Company acquired a 100% interest in the property subject to royalties in fiscal 2007.
The Tres Marias property remains the Companys principal exploration focus, but the Company has
suspended exploration activities pending development of a work program that is in accordance with
the Companys resources and ability to raise money.
Property Description
The following description of the property is taken from the Technical Report on the Tres Marias
Zinc/Germanium Project prepared for the Company by Dr. Peter Megaw, a qualified person, dated
September 4, 2001 and revised July 11, 2002, a copy of which can be found on www.sedar.com.
The Tres Marias property is located in the northeast corner of Chihuahua State, Mexico and consists
of nine exploration concessions covering a total of 2,831 hectares.
Claim Name

Type

Title

File

Hectares

Lajitas Uno

Exploitation

186430

1/122

112

Celia

Exploitation

169682

16/3563

31

A. Dos Marias

Exploitation

169681

16/3343

16

Las Dos Marias

Exploitation

169684

16/3818

Maria

Exploitation

169683

16/3641

14

Cassiopea

Exploitation

169685

16/4093

10

La Osa

Exploitation

209806

1/1.3/945

24

Tres Marias

Exploration

204384

1/2.4/566

1,622

Tres Marias 2

Exploration

208814

1/2.4/569

993

Total

2,831

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
Exploration at the Tres Marias property continued through to February 2009. Parallel drill programs
were conducted underground within the historic mine workings and on surface.
Underground: 421.18 metres were drilled during the fourth quarter of 2009 and 1,975.28
metres in total for fiscal 2009. Since TE-1 commenced in August 2006, 3,624.51 metres in
total have been drilled. 10 holes were completed during the fourth quarter.
Surface: 749.58 metres were drilled during the fourth quarter of 2009 and 2,498.46 metres
in total for fiscal 2009. Since GO-1 commenced in February 2007, 4670.82 metres in total
have been drilled. Eight holes were completed during the fourth quarter.
Seven of these holes were located on surface in the mine-yard and were drilled into the
Mina Vieja Sur block by way of a dual approach.
During the year ended March 31, 2009, the Company filed for and was awarded an amendment to
its current exploration permit, in order to drill on the following five targets within the concession,
which may be described as follows:
Molino Truebe
Located in Mining Lote Tres Marias 2, the target is a northeast (NE) southwest (SW) structure
associated with a geochemical anomaly with breccias, offset Del Rio shale and iron oxides
hosted in Santa Elena limestone.
El Graven
The El Graven target is located in Mining Lote Tres Marias, and is described as the graben
boundary faults that run northwest (NW) southeast (SE) with associated breccias and iron
oxides.
El Tanque
Located between Mining Lotes Maria, Celia and Tres Marias, the El Tanque target is a
structural intercept between two faults that run NW SE and NE SW consecutively, with
associated breccias and iron oxides. The historic Tres Marias mine is about 500 metres south of
this target. The approximate area of interest is 300 metres by 300 metres.
La Blanca
The La Blanca target is located 600 metres south of the mine, characterized by a strong NE SW trending structure, this target is regarded as separate from the original Tres Marias deposit.
This is the first of the outlying geological areas of interest to be drill tested. GO-31 commenced
drilling by the end of December 2008.
La Blanca Sur
The La Blanca Sur target is located between Mining Lotes Lajitas 1 and Celia, and is at the
structural intersection of a NE SW fault that is cut by a NW SE fault with associated breccias,
calcite veining and iron oxides. The principal structure is parallel to La Blanca.
During the year ended March 31, 2009, the Company expended $1,850,114 in exploration costs. In
February 2009 the Company announced a suspension of drilling operations at the Tres Marias
property during the economic downturn in light of current financial markets and the significant
4

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
decrease in zinc prices over the past year. In fiscal 2009, the Company has taken a write-down of
$8,905,000 in exploration expenditures with respect to the Tres Marias property. The Company has
placed its equipment in storage while it assesses how best to proceeds with the Tres Marias
property.
MAC PROPERTY
In February 2001, the Company decided to expand its exploration focus to include rare earth
minerals and entered into an option to acquire a rare minerals property known as the MAC property
located in the Northwest Territories, Canada.
The Company exercised its option to purchase the MAC property by paying $100,000 to Strategic
Metals Ltd. (Strategic) on February 14, 2007, which gave War Eagle 100% ownership in the MAC
tantalum, tin and lithium property subject to a 2.0% NSR. The Company has the right to purchase
1% of Strategics net smelter royalty for $1,000,000 until February 14, 2010.
On June 22, 2007, the Company received final approval from the TSX Venture Exchange (the
Exchange), and on December 10, 2007, Eagle Hill Exploration Corporation (Eagle Hill) received
its final approval. In 2007 the Company entered into an agreement with Eagle Hill Exploration
Corporation (Eagle Hill) whereby Eagle Hill has the right to earn up to a 70% interest in the
property by spending a minimum of $2,800,000 in accordance with the following schedule:

An option to spend $1,400,000 on or before December 31, 2009 to earn a 25%

interest in the property;
An option to spend an additional $700,000 on or before December 31, 2010 to earn
an additional 25% interest in the property; and
An option to spend a further $700,000 on or before December 31, 2011 to earn a final
20% interest in the property.

If Eagle Hill does not make the required expenditures by each of the indicated dates, except with
respect to interest already earned or if the failure to incur expenses is beyond the control of Eagle
Hill, the options to earn interest in the property will expire.
In May 2009, the Company signed a letter of intent with in which the Company plans to enter into a
definitive agreement with VM Exploration Ltd. (VM Exploration), a private company based in
Vancouver, British Columbia. Under the agreement, VM Exploration will have the option to earn up
to an 80% interest in the MAC mineral property
Subject to a final definitive agreement and a written agreement with Eagle Hill, the Company will
grant VM Exploration the sole and exclusive right to earn up to an 80% interest in the MAC property
in consideration of VM Exploration incurring expenditures of up to a total of $2,000,000 in
accordance the following payment schedule, determined by the execution date of a definitive
agreement (the Effective Date):

$350,000 on or before the first anniversary of the Effective Date.

$650,000 on or before the second anniversary of the Effective Date.
$1,000,000 on or before the third anniversary of the Effective Date.

The Company will maintain a carried interest on the MAC property until a bankable feasibility study is
complete, after which it will continue to have a working interest and become responsible for

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
additional expenditures. VM Exploration will develop an exploration program for the MAC property to
continue exploration and maintenance of the propertys mineral leases.
Property Description
The MAC property is located in the southwest Northwest Territories, approximately 250 kilometres
by air north of Watson Lake, at latitude 6211N and longitude 12554W on NTS 1051/2 and
comprised of seven contiguous claims covering 4,473 hectares, which were staked between August
2000 and September 2001.
Claim

Grant No.

Expiry

MAC 1

F65138

September 19, 2010

MAC 2

F65139

September 19, 2010

MAC 3

F65140

September 19, 2010

MAC 4

F36511

September 19, 2010

MAC 5

F36512

September 19, 2010

MAC 6

F66407

March 27, 2011

MAC 7

F36513

November 11, 2010

Road access to within 20 kilometres of the property is possible from Watson Lake by way of the
Robert Campbell Highway and Nahanni Range Road, a total distance of 300 kilometres. From this
point an abandoned winter road runs northwest to the Howards Pass lead-zinc deposit, passing
within two kilometres of the northern end of the MAC claim block. A bulldozer trail (also to Howards
Pass) runs within one kilometre of the southern part of the property. The closest lake suitable for
float plane access is Moose Lake which is one kilometre east of the claim block.
The claims lie within the Selwyn Mountains. The north-western edge of the claim block roughly
parallels a relatively flat topped ridge ranging in elevation between 2,000 to 2,100 metres. Bedrock
exposure is excellent and north facing slopes have moderate to steep relief and were cut by Late
Pleistocene glaciers to form numerous cirques and secondary ridges. Southern exposures exhibit
moderate to gentle talus slopes incised by glacial valleys. Elevations range from 1,200 metres near
Moose Lake to 2,100 metres atop the main ridge. The tree line is about 1,500 metres and below this
elevation glacial till and moraines predominate.
Exploration
In fiscal 2008, the Company carried out a soil geochemical sampling program over the claim area.
The results of this sampling suggest that the dykes continue for at least one kilometre north and two
kilometres south of known exposures.
A diamond drilling program was also carried out in fiscal 2008 and consisted of eight holes totalling
approx. 1,798 metres (5,900 feet ). This is the first drilling that has been done on the property and
provides the following information with regard to the extent and geometry of the mineralized dyke
swarms.

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
The 2007 drilling program consisted of eight holes and totalled 5,900 feet (1,798 metres). The drill
holes MAC001, MAC006, and MAC007 show the most promising results. The further five drill holes
show continuation of the pegmatite system to depth. In six of the eight holes, pegmatite was
encountered within the last ~10 metres of the drill holes.
All drill holes intersected the pegmatite dikes including a ~25.4 metre section from MAC006 (from
165.9 metres to 191.33 metres) that was sampled continuously to include the host rock
(metasediments) of the pegmatite. The continuously sampled section indicates mineralization
beyond the margin of the pegmatite and into the host rock. Lithium diffuses the most (up to 1070
parts per million ~1.2 metres away from the contact), then tantalum (up to 102.5 parts per million 0.5
metres away from the contact) and tin (up to 236 parts per million 0.5 metres away from the contact).
The grades of the 2007 geochemical sampling from the diamond drilling program correlate well with
the previous surficial specimen, channel and chip sampling. Thus, the results from the diamond
drilling, coupled with historical surface sampling programs, confirm not only the large aerial extent of
the mineralized system but also the continuation of the system to depths in the order of 1000 metres
(plateau height to valley bottom). Tables 1a and 1b below show the normalized grade highlights as
indicated from multi-element evaluation of lithium, tantalum and tin.
Table 1a. Selected "individual" intercepts with minimum mineable width of 2.5 metres applied
DDH
Hole

From
To
(metres) (metres)

Total
Width
(metres)

Collective
Pegmatite Lithium
(ppm)
Width
(metres)

Lithium
% Tantalum
Oxide
Spodumene Oxide (g/t)
(%)

Tin
Oxide
(g/t)

MAC001

62.5

63.6

2.5

1.1

98

0.02

0.26

317.46 307.34

MAC001

68.8

70.1

2.5

1.3

609

0.13

1.64

84.25 250.19

MAC001

86

89.2

3.2

2.1

2497

0.54

6.74

76.92 384.81

MAC001

102.8

105.94

3.14

1.74

2910

0.63

7.86

140.42 189.23

MAC006

61.88

66.86

4.98

2.18

1186

0.26

3.2

76.92 231.14

MAC006

85.6

87

2.5

1.4

1703

0.37

4.6

177.05 298.45

MAC006

172.37

190.64

18.27

13

4294

0.92

11.59

32.97 149.86

MAC007

30.22

33.62

3.4

0.98

911

0.2

2.46

57.39 171.45

MAC007

105.84

116.78

10.94

9.86

5581

1.2

15.07

35.41 219.71

MAC007

143.73

149.2

5.47

1.69

1536

0.33

4.15

26.86 104.14

MAC008

37.58

38.73

2.5

1.15

1243

0.27

3.36

79.37

241.3

MAC008

153.93

158.45

4.52

2.02

898

0.19

2.42

35.41

82.55

Table 1b. Selected "bulk" intercepts with widths larger than 50 metres
DDH
From
To
Hole (metres) (metres)

Total
Collective
Lithium
Width
Pegmatite
(ppm)
(metres) Width (metres)

Lithium
% Tantalum
Oxide
Spodumene Oxide (g/t)
(%)

Tin
Oxide
(g/t)

MAC001

62.5

122.1

59.6

8.93

345

0.07

0.93

39.07

68.58

MAC006

61.88

190.64

128.76

30.16

735

0.16

1.98

13.43

40.64

MAC007

100.85

179.1

78.25

15.25

977

0.21

2.64

9.77

54.61

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009

Lithium assays are received in ppm, however, product is typically delivered as a lithium bearing
silicate mixture (i.e., spodumene) with a minimum Li2O content reported in per cent. Tantalum and
tin assays are also received in ppm but often reported in oxide form (Ta2O5 and SnO2, respectively)
and reported in grams per tonne (g/t).
Ivan Young, P Geo., is the qualified person under National Instrument 43-101 who supervised the
exploration program on the MAC property. All analytical work was completed by ALS Chemex
Laboratories Ltd. of North Vancouver, BC, using standard assay procedures that included analysis
of Li via method MEMS61 (four-acid "near total" digestion), while all other elements were obtained
via method MEMS81 (a more robust technique using sample fusion in lithium borate).
No work was carried out by the Company during current year; however Eagle Hill expended
$62,110, which was comprised primarily of clean-up and post repair of the property. The scope of
exploration work was such that there was little disturbance of the land and asset retirement
obligations, if any, are minimal.
After consideration of the terms of the proposed option agreement with VM Exploration, the
Company recorded a write-down of $1,619,406 against the net book value of the MAC property, for
a carrying value of $500,000.
ANTIMONY MOUNTAIN
In March 2004, the Company acquired an interest in Antimony Mountain property, a copper, silver
and gold prospect, located 65 kilometres northeast of Dawson City, Yukon, by staking. In fiscal
2005, the Company and another public company entered into a joint venture agreement to explore
the prospect. The terms of the joint venture agreement called for each party to have an initial 50%
interest in the joint venture, which may be diluted if a party does not elect to contribute to a work
program. Should a partys interest fall to 10% the partys interest will be converted into a 5% net
profits interest. The Company then transferred its interest in the project to the other company in
exchange for the optional right to acquire a 100% working interest in the MAC property, subject to a
0.5% net smelter royalty.
GEORGES LAKE
War Eagle has earned a 90% property interest the Georges Lake gold property, located
approximately 135 kilometres northeast of La Ronge, Saskatchewan.
In the year ended March 31, 2007, the Company signed an option agreement with a public company
whereby the public company could acquire up to a 70% property interest in the Georges Lake gold
property by incurring exploration expenditures of $1,000,000 by December 31, 2008. On November
9, 2007, this option agreement was terminated and no funds were expended by the public company.
The Company then entered into a letter of intent with Yankee Hat Minerals Inc. (Yankee Hat)
whereby Yankee Hat may acquire up to a 70% interest in the property by incurring exploration
expenditures of a total of $1,500,000 by December 31, 2010. In July 2008, this letter of intent was
terminated and $198,447 in exploration costs previously recorded as exploration advances were
charged to exploration.

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
Property Description
The Georges Lake property was optioned during fiscal 2006 at a cost of $145,000. Initial 2006 work
consisted of geological mapping and sampling along with geophysical surveys at a cost of $42,000.
A showing, referred to as the VG showing, appears to be the most economically significant known
showing on the Georges Lake Property. The mineralization is exposed in a 17 x 27 metre area (A)
and in an adjacent 8 x 10 metre area (B). A series of volcanics and sediments are cut by a thick
quartz vein that is folded and plunges at a shallow angle to the southwest. The chip sampling of the
area (A) returned an average of 7.8 g/t (0.25 oz/t) gold (uncut) from all 43 samples. An average of
15.3 g/t (0.50 oz/t) gold (uncut) was obtained from 21 samples that represents the western half of
the area. The chip sampling of area (B) returned an average of 1.7 g/t (0.06 oz/ton) gold (uncut) from
all 18 samples. An average of 3.2 g/t (0.10 oz/t) gold (uncut) was obtained from nine samples that
represents the eastern half of the area.
A 852 line kilometre airborne magnetic and electromagnetic survey was carried out over the property
in December 2007 by Fugro Airborne Surveys Corp. with positive results. The dominant feature seen
in the magnetic field data is a strong, north-south trending contact/fault running along the eastern
edge of the block. Several strong, highly faulted and deformed bodies lie within the central part of
the block. The Seabee gold mine is located about 15 kilometres northeast of the block and could
possibly correlate with the magnetic and electromagnetic anomalies located by the survey.
FLY ASH METAL RECOVERY PROJECT
In November 2007, the Company signed a letter of intent with ELCOGAS, a Spain-based power
generation company, to begin testing fly ash from one of its largest power plants for contents of Ge
and Ga. This testing will be followed by a feasibility study and economic proposal to build a
processing plant, located near ELCOGAS power plant in Puertollano, Spain, to extract the Ge and
Ga from the fly ash output.
The letter of intent also provides for the Company to use all or part of ELCOGAS patented
procedures for recovering Ge and Ga from the fly ash. All research, testing costs and feasibility
studies are the Companys responsibility.
The Company has successfully completed phase 1 of a two-phase investigation into the recovery of
Ge and Ga from fly ash generated at the Puertollano power plant. Phase 1 consisted of a structured
program of analytical and laboratory processing test work carried out on selected samples of fly ash.
This work was completed by three of Spains leading research organizations, which have
considerable experience in various aspects of research on Ge in fly ash:
AICIA, through the chemical and environmental engineering department of the University
of Seville in laboratory scale processing;
CSIC/IJA (institute of Earth Sciences Jaume Almera. Spanish research Council), a large
research organization based on the campus of Barcelona University;
The University of Barcelona, department of materials science and metallurgical
engineering.
The Company is also involved with the University of Barcelonas Department of Materials, Science,
and Metallurgical Engineering to identify areas of known high Ge associated with coal mining.

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
In fiscal 2009, the Company incurred expenses of $478,169 (2008 - $53,638) on the fly ash project,
which are included in reconnaissance on the income statement. These costs include an accrual of
$200,000 related to certain costs which the Company is currently seeking to have reduced. Work
during the period consisted of testing the recovery of germanium from various types of leach
solutions on fly ash generated at the ELCOGAS power plant. This testing is being conducted at the
University of Seville by the AICIA on laboratory scale. It appears that the germanium recovery is
technically feasible. The Companys assessment is that while it is not economically feasible for the
Company to pursue this initiative, an industry participant may be able to generate a reasonable
return on investment. Accordingly the Company is seeking to joint venture its fly ash recovery
project. with the joint venturer likely to be operating in this sector already. The next stage of work, if
warranted, is testing of the fly ash on a pilot plant scale.
FINANCIAL
CONSOLIDATED FINANCIAL INFORMATION
The Companys consolidated financial information in this managements discussion and analysis
should be read in conjunction with the audited financial statements for the year ended March 31,
2009.
The following is a summary of certain selected financial information that is qualified by the more
detailed information appearing in the financial statements of the Company.
SELECTED ANNUAL AND QUARTERLY INFORMATION
The Companys fiscal period ends on March 31 of each year. The following is a summary of certain
selected audited consolidated financial information for the Companys three most recently completed
fiscal years ended, March 31, 2009, 2008 and 2007:
March 31
2009
2008
$12,134,900 $ 1,538,129
(0.23)
(0.03)
4,091,551
16,099,916
$
- $
-

Net loss
Net loss per share
Total assets
Total long-term debt
Cash dividends

10

2007
$1,667,484
(0.04)
12,320,710
$
-

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
The following is a summary of the eight mostly recently completed quarters:
Resource
Property
Write-Down

Quarter Ended

June 30, 2007

September 30, 2007
December 31, 2007
March 31, 2008
June 30, 2008
September 30, 2008
December 31, 2008
March 31, 2009

Net loss

- $
136,859 $
404,540
465,120
531,610
408,571
315,506
5,316,422
5,727,660
5,207,471 $ 5,683,163 $

Net loss
per share

(0.01) $
(0.01)
(0.01)
(0.00)
(0.01)
(0.01)
(0.11)
(0.11) $

Total assets

12,362,143
12,458,953
15,975,577
16,099,916
15,558,018
15,146,623
9,479,110
4,091,551

During this period, the Company did not generate any revenues or have discontinued operations or
extraordinary items. Apart from mineral property write-downs (discussed below) the main factors
contributing to variations in the quarterly loss were stock-based compensation awards,
reconnaissance activities and foreign exchange gains and losses.
The loss for the December 31, 2008 quarter increased because of the write-down on the Tres
Marias property. Without this write-down, the loss would have been $411,218. Similarly, in the
quarter ended March 31, 2009, the loss excluding the mineral property write-down was $546,027
which is comparable to preceding quarters.
RESULTS OF OPERATIONS
In the following discussion, amounts other than per-share amounts have been rounded to the
nearest thousand dollars.
The Companys Mexican subsidiary, Minera Aguila, held a Mexican property that has been
abandonned. The Company has been advised that Minera Aguila has a potential liability dating from
many years ago of up to US$560,000 for unpaid surface area taxes on various lapsed and dropped
claims. The Company has not received any formal notification of liability and believes that these
taxes will not be paid. No liability has been recorded in its financial statements and Minera Aguila
does not have any assets.
Results of Operations for the Year Ended March 31, 2009
During the year ended March 31, 2009, the Company expended $2,597,000 on the exploration and
reconnaissance of mineral properties as compared to $3,701,000 for the year ended March 31,
2008. These expenditures were related to exploration costs for the Tres Marias property, where a
total of $1,920,000 (2008 - $2,580,000) was spent, $198,000 for Georges Lake (2008 $27,000)
and $478,000 (2008 - $59,000) for reconnaissance related to the fly ash recovery project and other
initiatives. The Company also expended $1,036,000 on the MAC property.
The Company incurred a net loss before and after tax of $12,134,900, or $0.23 per share, for the
year ended March 31, 2009, which included a write-down of $10,524,000 in exploration expenditures

11

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
with respect to the Tres Marias and MAC properties. During the year ended March 31, 2008, the
Company incurred a loss before tax $1,709,000 and due to the issuance of $500,000 flow through
shares the Company recorded a future income tax recovery of $171,000 and a resulting net loss
after tax of $1,538,000, or $0.03 per share.
This following section discusses operating expenses for the year ended March 31, 2009 as
compared to year ended March 31, 2008, unless discussed elsewhere:
Consulting expense of $374,000 (2008 - $372,000) is comparable to the prior year.
Investor relations of $144,000 (2008 - $331,000) is lower due to decreased investor
relations activities.
Professional fees of $43,000 (2008 - $77,000) are directly related to the level of legal and
audit activity of the Company.
Management fees of $95,000 (2008 - $108,000) are charged by our former president and
current chairman for administration of the Company and are lower than the prior period
due to the discontinued use of a services company.
Office administration, rent and miscellaneous decreased to $204,000 (2008 - $298,000)
as a result of the Company being able to cost share its administration and rent costs with
other public companies and the direct allocation of expenses during 2008 to deferred
exploration costs.
Stock based compensation expense $186,000 (2008 - $472,000) is a non-cash related
expense associated with the issuance of options and fluctuates with the issuance of
options.
Stock transfer and filing fees of $20,000 (2007 - $62,000) were down from the prior period
due to fewer transactions.
Travel expenses of $54,000 (2008 - $142,000) were down from last period due to less
travel to and from our mineral properties.
As noted above, in February 2009 the Company suspended its drilling operations at the
Tres Marias property in light of current financial markets and the significant decrease in
zinc prices over the past year, and determined that the Company would take a write-down
of $8,905,000 in exploration expenditures with respect to the Tres Marias property.
As a direct result of fluctuations in the Canadian dollar the Company also incurred a
foreign exchange loss $91,000 during the year ended March 31, 2009 (2008 $36,000).
The Company received interest income on its cash balances of $78,000 (2008 -$175,000).
Results of Operations for the Fourth Quarter
The net loss for the quarter ended March 31, 2009 was $5,683,000 or $0.11 per share as compared
with a loss of $5,728,000 in the third quarter ended December 31, 2008 and a net loss for the
quarter ended March 31, 2008 of $532,000. The loss for the fourth quarter was generally
comparable to that of other quarters in the preceding year or so, after segregating mineral property
write-downs ($5,316,000 in the quarter ended December 31, 2008 and $5,207,000 in the quarter
ended March 31, 2009).
LIQUIDITY AND CAPITAL RESOURCES
The Company has not paid any dividends since incorporation and it has no plans to pay dividends in
the immediate future. The Company expects to retain its earnings, if any, to finance further growth
12

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
and, when appropriate, retire existing debt. The directors of the Company will determine if and when
dividends should be declared and paid in the future based on the Companys financial position at the
relevant time. All of the common shares of the Company are entitled to an equal share in any
dividends declared and paid.
As at March 31, 2009, the Company incurred losses of $12,135,000 (being $0.23 per share), which
included write-downs on resource properties of $10,524,000, resulting in an accumulated deficit of
$36,548,000. While the Company had current assets in excess of current liabilities in the amount of
$1,708,000 its ability to continue as a going concern is dependent upon the discovery of
economically recoverable mineral reserves, confirmation of the Companys interest in the underlying
mineral claims, the ability of the Company to obtain necessary financing to complete their
development, and future profitable production or proceeds from the disposition thereof.
The Company is owed $127,117 by Pacific Copper Corp. which is secured by a claim over certain of
Pacific Copper Corp.s properties. Pacific Copper Corp.s filings with the US Securities and
Exchange Commission, state that in February 2009, War Eagle notified Pacific Copper that it would
not fund the full amounts contemplated in the War Eagle Note, funding shortfall of US$55,000.
Pacific Copper has notified War Eagle that it considers this failure to fully fund the War Eagle Note to
be a breach, has denied the security interest, and has reserved all of its legal rights. The Company
believes that Pacific Copper Corp. assertion that the Company had an obligation to fund a further
US$55,000 is incorrect and believes that its security interest is still effective. The Company believes
that it will ultimately collect the amount due.
Since March 31, 2009 the Company has significantly reduced the scope of its operations and, by
extension its expenses, so as to extend the life of its cash reserves. The Company believes that,
under current capital market conditions, it will be difficult to raise additional funds unless it can
demonstrate a focused business plan.
At the date of this MD&A, the Company has cash of approximately $1.5 million. This is sufficient to
maintain the Companys assets for a period of 12 months but will not permit the Company to develop
any of its properties. As discussed above, the Companys board and management is assessing the
Companys business plan, with a view to disposing of assets that are better held by someone else
and joint venturing on other assets. The Company does not expect to generate proceeds from the
disposal of any properties.
RELATED PARTY TRANSACTIONS
During the year ended March 31, 2009 the Company had the following transactions with related
parties.
1. Robert Faris, an officer of the Company, received $39,000 (2008 - $43,000) in consulting
fees.
2. Monita Faris, an officer of the Company, received $17,000 (2008 - $nil) in consulting fees.
3. Terence Schorn, a director and officer of the Company, received management fees of
$95,000 (2008 - $108,000).
4. Exploration expenditures on the Tres Marias property include $72,000 (2008 - $60,000) for
fees paid to David Hackman a director of the Company.
5. Exploration expenditures on the Tres Marias property include $143,000 (2008 - $nil) for fees
paid to Jeff Lantz a director and officer of the Company.

13

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
STOCK OPTIONS GRANTED
In April 2008, the Company granted options to purchase 100,000 shares to a company for investor
relations services exercisable until April 11, 2013 with an exercise price of $0.30 and vesting over
eighteen months.
In January 2009, the Company granted options to purchase 600,000 shares to a director and officer
that are exercisable until January 7, 2014.
In April 2009, the Company granted incentive stock options to directors, officers and consultants of
the Company, for the purchase of an aggregate of 3,665,000 common shares of the Company, at an
exercise price of $0.15, with 1,665,000 options expiring March 31, 2012 and 2,000,000 options
expiring April 28, 2014. Of this grant, 450,000 of the options expiring March 31, 2012 were awarded
to a director of the Company and 1,500,000 of the options expiring April 28, 2014 were awarded to
individuals who are a director or a director and an officer of the Company.
The options were granted pursuant to the terms of the Company's 2008 stock option plan.
CHANGES IN ACCOUNTING POLICIES
During the year ended March 31, 2009 the Company adopted new accounting policies as described
in note 3 of the March 31, 2009 audited financial statements.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
As required, the Company will convert its reporting from Canadian GAAP to International Financial
Reporting Standards (IFRS) in its 2012 fiscal year. The Company has not yet prepared a complete
IFRS changeover plan (the IFRS Plan), but has completed a high-level scoping study to consider
the potential impact of the implementation of IFRS on the Companys financial reporting. IFRS will
not only impact the presentation and disclosure of items in the financial statements but also the
determination of future net income or loss and the measurement of balance sheet items. The next
stage will be to develop a detailed IFRS Plan.
The Companys IFRS Plan will include modelling the impact of individual IFRS standards and related
interpretations on our financial statements. As part of the IFRS Plan, it will be required to prepare a
transition balance sheet as at March 31, 2010 (to be representative of the opening April 1, 2010
balance sheet) in accordance with IFRS. This opening balance sheet will form the opening position
of the Companys comparative financial statements when reporting under IFRS. Based on the highlevel scoping study, the following IFRS standards are expected to have the most significant impact
us.

IFRS 1 First-time adoption of IFRS

IFRS 2 Share Based Payments

IFRS 6 Exploration and evaluation of mineral resources

IAS 16 Property, plant and equipment

IAS 36 Impairment of Assets

Once the detailed IFRS Plan is complete, the Company will begin to design and build an IFRS
framework, which includes decisions on available accounting policy choices, formulate policy
positions and execution and roll-out of communications strategy. Once the design and build phase is
complete the Company will move to the implement and review phase which includes, preparation of
an IFRS opening balance sheet, compilation of comparative data, preparation of quarterly financial
statements and disclosures, preparation of annual financial statements and disclosures, monitoring
14

WAR EAGLE MINING COMPANY INC.

Annual Report
Managements Discussion and Analysis
For the Year Ended March 31, 2009
how IFRS evolves, conducting post implementation review and communicating ongoing
requirements.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
Information about financial instruments is disclosed in note 14 of the financial statements.
OUTSTANDING SHARE DATA
As at the date of this MD&A, the Company had:
53,910,392 common shares issued and outstanding.
No warrants to purchase common shares
Stock options to purchase 5,046,200 common shares to directors, officers, employees,
investor relations providers and consultants.
The maximum number of shares potentially issuable is therefore 58,956,592.

15

SCHEDULE D
Unaudited Consolidated Financial Statements for War Eagle Mining Company Inc. for the Three
Month Interim Period Ended June 30, 2011

D-1 AC/1463772.11

WAR EAGLE MINING COMPANY INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Amended See note 2
(Unaudited Prepared by Management)

JUNE 30, 2011 and 2010

WAR EAGLE MINING COMPANY INC.

Condensed Consolidated Interim Statements of Financial Position
Expressed in Canadian Dollars
Note

June 30,
2011
(unaudited)
$

March 31,
2011
(note 20)
$

April 1,
2010
(note 20)
$

29,485
3,901
22,051
55,437

52,290
38,951
33,791
125,032

911,893
16,787
27,621
956,301

64,488

29,314

1,602
1,648,843

119,925

154,346

2,606,746

305,730
305,730

231,153
231,153

49,976
49,976

38,506,429
3,005,628
(41,697,862)

38,506,429
3,005,628
(41,588,864)

37,620,513
2,984,858
(38,048,601)

(185,805)

(76,807)

2,556,770

119,925

154,346

2,606,746

ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Loan receivable
Prepaid expenses and deposits
Total current assets

6
7

Petroleum interests
Investment in Andromeda
Exploration and evaluation assets

8
9

LIABILITIES AND SHAREHOLDERS EQUITY

Current liabilities
Accounts payable and accrued liabilities
Total current liabilities
Shareholders' equity (deficiency)
Share capital
Share-based payment reserve
Deficit

10

Corporate information (note 1)

Commitments (note 9)
Events after the reporting date (note 19)

On behalf of the board of directors:

Terence Schorn
Terence Schorn

Simon Anderson
Simon Anderson

Director

See accompanying notes

Director

WAR EAGLE MINING COMPANY INC.

Condensed Consolidated Interim Statements of Total Comprehensive Loss
Unaudited Prepared by Management
Expressed in Canadian Dollars
Note

Operating expenses
Consulting fees
Directors fees
Insurance
Investor relations and news dissemination
Management fees and salaries
Office and miscellaneous
Professional fees
Rent
Transfer agent and filing fees

Three Months Ended June 30

2011
2010
$
$
21,000
6,205
3,797
64,948
2,786
4,575
4,500
747

800
21,953
7,857
4,841
67,223
2,788
3,957
4,500
4,676

(108,558)

(118,595)

(694)
254
(440)

159
1,058
1,217

(108,998)

(117,378)

Basic and diluted loss per common share

(0.03)

(0.04)

Basic and diluted comprehensive loss per common share

(0.03)

(0.04)

3,482,270

2,697,491

13

13

13

Loss before other income

Other income (expense)
Foreign exchange loss (gain)
Interest income

Loss and total comprehensive loss for the period

Weighted average number of common shares outstanding,

basic and diluted

See accompanying notes.

WAR EAGLE MINING COMPANY INC.

Condensed Consolidated Interim Statements of Cash Flows
Unaudited Prepared by Management
Expressed in Canadian Dollars
Note

Operating activities
Loss for the period

Three Months Ended June 30

2011
2010
$
$
(108,998)

(117,378)

(254)

(1,058)

35,050
11,741
41,832

(6,986)
7,857
(3,949)

(20,629)

(121,514)

67,000
571,497

638,497

(2,430)
254

(100,162)
(700,000)
1,058

(2,176)

(799,104)

(22,805)

(282,121)

Cash beginning of period

52,290

911,893

Cash end of period

29,485

629,772

Adjustments for
Interest income
Changes in non-cash operating working capital
Accounts receivable
Prepaid expenses
Accounts payable and accrued liabilities
Cash used in operating activities
Financing activities
Share subscriptions received
Issuance of common shares, net of issue costs

10
10

Cash provided by financing activities

Investing activities
Exploration and evaluation assets
Investment in Andromeda
Interest income

9
8

Cash used in investing activities

Decrease in cash

Non-cash transactions (note 17)

See accompanying notes.

WAR EAGLE MINING COMPANY INC.

Condensed Interim Consolidated Statements of Changes in Shareholders Equity (Deficiency)
Unaudited Prepared by Management
Expressed in Canadian Dollars
Note

Number of
common
shares

Common
shares

Share-based
payment
reserve
$

Deficit

Share
subscriptions
received
$

Total
shareholders
equity
$

Balance March 31, 2010

10

2,695,522

37,439,113

2,984,858

(37,867,201)

2,556,770

Effect of transition to IFRS

Private placement
Share issue costs
Share subscription received
Fair value of finders warrants
Loss for the period

10
10
10
10

478,833
-

181,400
574,600
(3,103)
(1,200)
-

67,000
-

1,200
-

(181,400)
(117,378)

574,600
(3,103)
67,000
(117,378)

3,174,355

38,190,810

67,000

2,986,058

(38,165,979)

3,077,889

Balance, June 30, 2010

Private placement
Share issue costs
Finders fee
Share subscriptions
Fair value of finders warrants
Loss for the period

10
10
10
10
10

252,084
55,833
-

302,500
(3,103)
(31,208)
67,000
(19,570)
-

(67,000)
-

19,570
-

(3,422,885)

302,500
(3,103)
(31,208)
(3,422,885)

Balance March 31, 2011

10

3,482,272

38,506,429

3,005,628

(41,588,864)

(76,807)

(108,998)

(108,998)

3,482,272

38,506,429

3,005,628

(41,697,862)

(185,805)

Loss for the period

Balance June 30, 2011
See accompanying notes.

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011

1. Corporate Information
War Eagle Mining Company Inc. (the Company) was incorporated under the laws of British Columbia on
March 6, 1984. The Company is involved in the acquisition, exploration and, if warranted, development of
mineral resource properties. The Company is listed on the TSX Venture Exchange (the TSX-V), having a
symbol WAR, as a Tier 2 mining issuer.
These unaudited condensed interim financial statements have been prepared on a going concern basis which
assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of
business for the foreseeable future. The continuing operations of the Company are dependent upon its ability
to raise adequate financing to develop its business and commence profitable operations in the future. These
unaudited condensed interim financial statements do not give effect to adjustments that would be necessary
to the carrying values and classification of assets and liabilities should the Company be unable to continue as
a going concern.
In July 2011, the Company effected a consolidation of its share capital on a 20 for 1 basis, consolidating
69,645,394 outstanding common shares to 3,482,272 common shares. Shareholder authorization to effect the
share consolidation was approved at the Company's annual and special general meeting held on February
28, 2011. All share and per share amounts have been restated to reflect the share consolidation.
The address of the Companys corporate office and principal place of business is Suite 906, 595 Howe Street,
Vancouver, British Columbia, Canada, V6C 2T5.
2. Basis of Presentation
These financial statements have been amended to remove the Notice of no Auditor Review of Condensed
Consolidated Interim Financial Statements and to reflect the final finders fee payment in note 19, Events
After the Reporting Date. The Companys financial position, total comprehensive income and cash flow are
unchanged from the financial statements filed on SEDAR on September 29, 2011.
a) Statement of compliance
These unaudited condensed interim financial statements have been prepared in accordance with IAS 34
Interim Financial Reporting (IAS 34) using accounting policies consistent with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and
interpretations of the International Financial Reporting Interpretations Committee.
These are the Companys first unaudited condensed interim financial statements prepared in accordance
with IAS 34 and IFRS using accounting policies consistent with IFRS. The accounting policies have been
selected to be consistent with IFRS as is expected to be effective on March 31, 2012, the Companys first
annual IFRS reporting date. These unaudited condensed consolidated interim financial statements do not
include all of the information required for full consolidated annual financial statements. Previously, the
Company prepared its interim and annual consolidated financial statements in accordance with Canadian
generally accepted accounting principles (Canadian GAAP).
b) Basis of measurement
The condensed interim financial statements have been prepared on a historical cost basis, as modified by
the revaluation of available-for-sale financial assets and at fair value through profit or loss (FVTPL). The
condensed interim financial statements are presented in Canadian dollars, which is also the Companys
functional currency.
The preparation of financial statements in compliance with IFRS requires management to make certain
critical accounting estimates. It also requires management to exercise judgment in applying the
Companys accounting policies. The areas involving a higher degree of judgment of complexity, or areas
where assumptions and estimates are significant to the financial statements are disclosed in note 5.

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
2. Basis of Presentation (continued)
b) Basis of measurement (continued)
The standards and interpretations within IFRS are subject to change and accordingly, the accounting
policies for the annual period that are relevant to these unaudited condensed interim financial statements
will be finalized only when the first annual IFRS financial statements are prepared for the year ending
March 31, 2012.
The adoption of IFRS resulted in changes to the accounting policies as compared with the most recent
annual consolidated financial statements prepared under Canadian GAAP. The accounting policies set
out below have been applied consistently to all periods presented. They also have been applied in the
preparation of an opening IFRS condensed consolidated statement of financial position as at April 1,
2010 (the Transition Date), as required by IFRS 1 First Time Adoption of International Financial
Reporting Standards (IFRS 1). The impact of the transition from Canadian GAAP to IFRS is explained in
note 20.
c) Going concern of operations
The Company has not generated revenue from operations. The Company incurred a loss of $108,998
during the three months ended June 30, 2011 and, as of that date the Companys deficit was
$41,697,862. However, the Company is dependent on its ability to raise additional debt or equity to raise
sufficient cash resources to meet its current financial obligations. As the Company is in the exploration
stage, the recoverability of the costs incurred to date on exploration properties is dependent upon the
existence of economically recoverable reserves, the ability of the Company to obtain the necessary
financing to complete the exploration and development of its properties and upon future profitable
production or proceeds from the disposition of the properties and deferred exploration expenditures. The
Company will periodically have to raise funds to continue operations and, although it has been successful
in doing so in the past, there is no assurance it will be able to do so in the future. The Company had cash
and cash equivalents of $29,485 at June 30, 2011 (March 31, 2011 - $52,290; April 1, 2010 $911,893).
3. Summary of Significant Accounting Policies
The accounting policies set out below are expected to be adopted for the year ending March 31, 2012 and
have been applied consistently to all periods presented in these condensed interim financial statements for
the purposes of the transition to IFRS, unless otherwise indicated.
a) Principles of consolidation
These consolidated financial statements include the accounts of War Eagle Mining Company Inc., its
wholly owned subsidiary, War Eagle Resources Corporation, a US corporation, Tombstone Mining Inc, a
company incorporated in the British Virgin Islands and a 99% interest in Tombstone Exploration de
Mexico S.A. de C.V., a Mexican corporation and Minera Aguila, its 99% owned Mexican subsidiary, until it
was sold on March 11, 2011. All significant intercompany transactions have been eliminated.
b) Foreign currency transactions
Foreign currency accounts are translated into Canadian dollars as follows:
At the transaction date, each asset, liability, revenue and expense denominated in a foreign currency is
translated into Canadian dollars by the use of the exchange rate in effect at that date. At the year-end
date, unsettled monetary assets and liabilities are translated into Canadian dollars by using the exchange
rate in effect at the year-end date and the related translation differences are recognized in net loss.

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
3. Summary of Significant Accounting Policies (continued)
b) Foreign currency transactions (continued)
Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian
dollars by using the exchange rate in effect at the date of the initial transaction and are not subsequently
restated. Non-monetary assets and liabilities that are measured at fair value or a revalued amount are
translated into Canadian dollars by using the exchange rate in effect at the date the value is determined
and the related translation differences are recognized in net income or other comprehensive loss
consistent with where the gain or loss on the underlying non-monetary asset or liability has been
recognized.

c) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and
other short-term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and subject to an insignificant risk of change in value. For cash
flow statement presentation purposes, cash and cash equivalents includes bank overdrafts.
d) Mineral exploration and evaluation expenditures
Pre-exploration costs
Pre-exploration costs are expensed in the period in which they are incurred.
Exploration and evaluation expenditures
Once the legal right to explore a property has been acquired, costs directly related to exploration and
evaluation expenditures are recognized and capitalized, in addition to the acquisition costs. These direct
expenditures include such costs as materials used, surveying costs, drilling costs, payments made to
contractors and depreciation on plant and equipment during the exploration phase. Costs not directly
attributable to exploration and evaluation activities, including general administrative overhead costs, are
expensed in the period in which they occur.
The Company may occasionally enter into farm-out arrangements, whereby the Company will transfer
part of a mineral interest, as consideration, for an agreement by the transferee to meet certain exploration
and evaluation expenditures which would have otherwise been undertaken by the Company. The
Company does not record any expenditures made by the farmee on its behalf. Any cash consideration
received from the agreement is credited against the costs previously capitalized to the mineral interest
given up by the Company, with any excess cash accounted for as a gain on disposal.
When a project is deemed to no longer have commercially viable prospects to the Company, exploration
and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those
exploration and evaluation expenditure costs, in excess of estimated recoveries, are written off to the
statement of comprehensive loss/income. The Company assesses exploration and evaluation assets for
impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its
recoverable amount.
Once the technical feasibility and commercial viability of extracting the mineral resource has been
determined, the property is considered to be a mine under development and is classified as mines under
construction. Exploration and evaluation assets are tested for impairment before the assets are
transferred to development properties.
As the Company currently has no operational income, any incidental revenues earned in connection with
exploration activities are applied as a reduction to capitalized exploration costs. Mineral exploration and
evaluation expenditures are classified as intangible assets.

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
3. Summary of Significant Accounting Policies (continued)
e) Property and equipment
Recognition and measurement
On initial recognition, property, plant and equipment are valued at cost, being the purchase price and
directly attributable cost of acquisition or construction required to bring the asset to the location and
condition necessary to be capable of operating in the manner intended by the Company. Such costs
include appropriate borrowing costs and the estimated present value of any future unavoidable costs of
dismantling and removing items. The corresponding liability is recognized within provisions.
Property, plant and equipment is subsequently measured at cost less accumulated depreciation, less any
accumulated impairment losses, with the exception of land which is not depreciated.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for
as separate items (major components) of property and equipment.
Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will flow to
the Company and its cost can be measured reliably. The carrying amount of the replaced part is
derecognized.
The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as
incurred.
Major maintenance and repairs
Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to the profit or loss during the financial period in which they are incurred.
Gains and losses
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing
the proceeds from disposal with the carrying amount, and are recognized net within other income in profit
or loss.
Depreciation
Depreciation is recognized in profit or loss and is provided on a straight-line basis over the estimated
useful life of the assets as follows:
Furniture and fixtures
5 years
Office equipment
5 years
Vehicles
5 years
Field equipment
5 years
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and
adjusted if appropriate.
f)

Impairment of non-financial assets

Impairment tests on intangible assets with indefinite useful economic lives are undertaken annually at the
financial year-end. Other non-financial assets, including exploration and evaluation assets are subject to
impairment tests whenever events or changes in circumstances indicate that their carrying amount may
not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the
higher of value in use and fair value less costs to sell, the asset is written down accordingly. Where it is
not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out
on the asset's cash-generating unit, which is the lowest group of assets in which the asset belongs for
which there are separately identifiable cash inflows that are largely independent of the cash inflows from
other assets.
8

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
3. Summary of Significant Accounting Policies (continued)
f)

Impairment of non-financial assets (continued)

The Company has one cash-generating unit for which impairment testing is performed.
An impairment loss is charged to the profit or loss, except to the extent they reverse gains previously
recognized in other comprehensive loss/income.

g) Financial instruments
Financial assets
Financial assets are classified as into one of the following categories based on the purpose for which the
asset was acquired. All transactions related to financial instruments are recorded on a trade date basis.
The Company's accounting policy for each category is as follows:
Financial assets at FVTPL
Financial assets are classified as FVTPL where the asset is either

Held for trading or

It is designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any resulting gain or loss recognized in profit or
loss. The fair value is the estimated amount that a bank would receive or pay to terminate the derivative
contracts at the reporting date, taking into account current exchange rates, volatility and the creditworthiness of the counterparties (mark-to-market).
Loans and receivables
These assets are non-derivative financial assets resulting from the delivery of cash or other assets by a
lender to a borrower in return for a promise to repay on a specified date or dates, or on demand. They are
initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or
issue and subsequently carried at amortized cost, using the effective interest rate method, less any
impairment losses. Amortized cost is calculated taking into account any discount or premium on
acquisition and includes fees that are an integral part of the effective interest rate and transaction costs.
Gains and losses are recognized in the profit or loss when the loans and receivables are derecognized or
impaired, as well as through the amortization process.
Available for sale investments
Non-derivative financial assets not included in the above categories are classified as available-for-sale
and comprise principally the Company's strategic investments in entities not qualifying as subsidiaries or
associates. Available-for-sale investments are carried at fair value with changes in fair value recognized
in accumulated other comprehensive loss/income. Where there is a significant or prolonged decline in the
fair value of an available-for-sale financial asset (which constitutes objective evidence of impairment), the
full amount of the impairment, including any amount previously recognized in other comprehensive
loss/income, is recognized in profit or loss. If there is no quoted market price in an active market and fair
value cannot be readily determined, available-for-sale investments are carried at cost.
On sale or impairment, the cumulative amount recognized in other comprehensive loss/income is
reclassified from accumulated other comprehensive loss/income to profit or loss.
Impairment on financial assets
At each reporting date the Company assesses whether there is any objective evidence that a financial
asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to
be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events
that has occurred after the initial recognition of the asset and that event has an impact on the estimated
future cash flows of the financial asset or the group of financial assets.

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
3. Summary of Significant Accounting Policies (continued)
Financial liabilities
Financial liabilities are classified as other financial liabilities, based on the purpose for which the liability
was incurred, and comprise of trade payables and accrued liabilities. These liabilities are initially
recognized at fair value net of any transaction costs directly attributable to the issuance of the instrument
and subsequently carried at amortized cost using the effective interest rate method. This ensures that any
interest expense over the period to repayment is at a constant rate on the balance of the liability carried in
the statement of financial position. Interest expense in this context includes initial transaction costs and
premiums payable on redemption, as well as any interest or coupon payable while the liability is
outstanding.
Trade and other payables represent liabilities for goods and services provided to the Company prior to
the end of the period which are unpaid. Trade payable amounts are unsecured and are paid based on
availability of funds.
h) Provisions
Decommissioning provision
The Company is subject to various government laws and regulations relating to environmental
disturbances caused by exploration and evaluation activities. The Company records the present value of
the estimated costs of legal and constructive obligations required to restore the exploration sites in the
period in which the obligation is incurred. The nature of the rehabilitation activities include restoration,
reclamation and re- vegetation of the affected exploration sites.
The rehabilitation provision generally arises when the environmental disturbance is subject to government
laws and regulations. When the liability is recognized, the present value of the estimated costs is
capitalized by increasing the carrying amount of the related mining assets. Over time, the discounted
liability is increased for the changes in present value based on current market discount rates and liability
specific risks.
Additional environment disturbances or changes in rehabilitation costs will be recognized as additions to
the corresponding assets and rehabilitation liability in the period in which they occur.
Other provisions
Provisions are recognized for liabilities of uncertain timing or amount that have arisen as a result of past
transactions, including legal or constructive obligations. The provision is measured at the best estimate of
the expenditure required to settle the obligation at the reporting date.
i)

Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in
net income except to the extent that they relate to a business combination or items recognized directly in
equity or in other comprehensive loss/income.
Current income taxes are recognized for the estimated income taxes payable or receivable on taxable
income or loss for the current year and any adjustment to income taxes payable in respect of previous
years. Current income taxes are determined using tax rates and tax laws that have been enacted or
substantively enacted by the period-end date.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs
from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and
temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a
business combination and at the time of the transaction affects neither accounting nor taxable profit or
loss.

10

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
3. Summary of Significant Accounting Policies (continued)
i) Income taxes (continued)
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences
is restricted to those instances where it is probable that future taxable profit will be available against
which the deferred tax asset can be utilized. At the end of each reporting period the Company reassesses
unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax
asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset
to be recovered.
j)

Share capital
Financial instruments issued by the Company are classified as equity only to the extent that they do not
meet the definition of a financial liability or financial asset. The Companys common shares, options,
share warrants and flow-through shares are classified as equity instruments. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the
proceeds.
Earnings / loss per share
Basic earnings/loss per share is computed by dividing the income or loss applicable to common shares of
the Company by the weighted average number of common shares outstanding for the relevant period.
Diluted earnings/loss per common share is computed by dividing the income or loss applicable to
common shares by the sum of the weighted average number of common shares issued and outstanding
and all additional common shares that would have been outstanding, if potentially dilutive instruments
were converted. Stock options and share purchase warrants are not included in the computation of loss
per share for the quarter ended June 30, 2011 and 2010 as such inclusion would be anti-dilutive.
At June 30, 2011, the Company had stock options and share purchase warrants outstanding that could
result in the issuance of up to 632,632 additional common shares (March 31, 2011 632,632; April 1,
2010 235,750).

k) Share-based payments
Where equity-settled share options are awarded to employees, the fair value of the options at the date of
grant is charged to the statement of comprehensive loss/income over the vesting period. Performance
vesting conditions are taken into account by adjusting the number of equity instruments expected to vest
at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is
based on the number of options that eventually vest. Non-vesting conditions and market vesting
conditions are factored into the fair value of the options granted. As long as all other vesting conditions
are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The
cumulative expense is not adjusted for failure to achieve a market vesting condition or where a nonvesting condition is not satisfied. Where the terms and conditions of options are modified before they
vest, the increase in the fair value of the options, measured immediately before and after the modification,
is also charged to the statement of comprehensive loss/income over the remaining vesting period.
Where equity instruments are granted to employees, they are recorded at the fair value of the equity
instrument granted at the grant date. The grant date fair value is recognized in comprehensive
loss/income over the vesting period, described as the period during which all the vesting conditions are to
be satisfied. Where equity instruments are granted to non-employees, they are recorded at the fair value
of the goods or services received in the statement of comprehensive loss/income, unless they are related
to the issuance of shares. Vesting conditions, other than market conditions, are not be taken into account
when estimating the fair value of the shares or share options at the measurement date. Instead, vesting
conditions are taken into account by adjusting the number of equity instruments included in the
measurement of the transaction amount so that, ultimately, the amount recognized for goods or services
received as consideration for the equity instruments granted shall be based on the number of equity
instruments that eventually vest. Amounts related to the issuance of shares are recorded as a reduction
of share capital.
11

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
3. Summary of Significant Accounting Policies (continued)
k) Share-based payments (continued)
When the value of goods or services received in exchange for the share-based payment cannot be
reliably estimated, the fair value is measured by use of Black-scholes valuation model. The expected life
used in the model is adjusted, based on managements best estimate, for the effects of nontransferability, exercise restrictions, and behavioural considerations.
All equity-settled share-based payments are reflected in Share-based payment reserve, until exercised.
Upon exercise, shares are issued from treasury and the amount reflected in contributed surplus is
credited to share capital, adjusted for any consideration paid. Where a grant of options is cancelled or
settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the
Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the
amount that otherwise would have been recognized for services received over the remainder of the
vesting period. Any payment made to the employee on the cancellation is accounted for as the
repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity
instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.
4. Adoption of New Accounting Pronouncements and Recent Developments
Standards, amendments and interpretations not yet effective
Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are
mandatory for accounting periods beginning after January 1, 2011 or later periods. The Company has
early adopted the amendments to IFRS 1 which replaces references to a fixed date of 1 January 2004
with the date of transition to IFRSs. This eliminates the need for the Company to restate derecognition
transactions that occurred before the date of transition to IFRSs. The amendment is effective for yearends beginning on or after July 1, 2011; however, the Company has early adopted the amendment. The
impact of the amendment and early adoption is that the Company only applies IAS 39 derecognition
requirements to transactions that occurred after the date of transition.
The following new standards, amendments and interpretations, that have not been early adopted in these
interim financial statements, will or may have an effect on the Companys future results and financial
position:
a) IFRS 7 - Financial Instruments: Disclosures (Amendment)
This amendment increases the disclosure required regarding the transfer of financial assets, especially if
there is a disproportionate amount of transfer transactions that take place around the end of a reporting
period. This amendment is effective for annual periods beginning on or after July 1, 2011.
b) IFRS 9 - Financial Instruments
The IASB intends to replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) in
its entirety with IFRS 9, Financial Instruments (IFRS 9) in three main phases. IFRS 9 will be the new
standard for the financial reporting of financial instruments that is principles-based and less complex than
IAS 39, and is effective for annual periods beginning on or after January 1, 2013, with earlier adoption
permitted. In November 2009 and October 2010, phase 1 of IFRS 9 was issued and amended,
respectively, which addressed the classification and measurement of financial assets and financial
liabilities. IFRS 9 requires that all financial assets be classified as subsequently measured at amortized
cost or at fair value based on the Companys business model for managing financial assets and the
contractual cash flow characteristics of the financial assets. Financial liabilities are classified as
subsequently measured at amortized cost except for financial liabilities classified as at fair value through
profit or loss, financial guarantees and certain other exceptions. The IASB has issued exposure drafts
addressing impairment of financial instruments, hedge accounting and the offsetting of financial assets
and liabilities, comments were due in March and April of 2011. The complete IFRS 9 is expected to be
issued during the second half of 2011. The Company is currently evaluating the impact the final standard
is expected to have on its financial statements.
12

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
4. Adoption of New Accounting Pronouncements and Recent Developments (continued)
c) IFRS 10, Consolidated Financial Statements
IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements
when an entity controls one or more other entities. IFRS 10 supersedes IAS 39, Financial Instruments:
Recognition and Measurement. The Company has not early adopted the standard and is currently
assessing the impact it will have on the condensed consolidated financial statements.
d) IFRS 11 - Joint Arrangements
IFRS 11 establishes principles for the financial reporting by parties to a joint arrangement. IFRS 11
supersedes current IAS 31, Interests in Joint Ventures and SIC-13, Jointly Controlled Entities NonMonetary Contributions by Venturers, and is effective for annual periods beginning on or after January 1,
2013. Earlier adoption is permitted. The Company is currently evaluating the impact of this standard on its
condensed financial statements.
e) IFRS 12 - Disclosure of Interests in Other Entities
IFRS 12 applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an
unconsolidated structured entity. IFRS 12 is effective for annual periods beginning on or after January 1,
2013. Earlier adoption is permitted. The Company is currently evaluating the impact of this standard on its
condensed financial statements.
f)

IFRS 13 - Fair Value Measurements

IFRS 13 defines fair value, sets out in a single IFRS framework for measuring value and requires
disclosures about fair value measurements. The IFRS 13 applies to IFRSs that require or permit fair value
measurements or disclosures about fair value measurements, except in specified circumstances. IFRS 13
is to be applied for annual periods beginning on or after January 1, 2013. Earlier adoption is permitted.
The Company is currently assessing the impact of the standards on its condensed financial statements.
The Company anticipates that the application of these standards, amendments and interpretations will
have no material impact on the results and financial position of the Company. The following new
standards, amendments and interpretations, that have not been early adopted in these condensed interim
financial statements, will not have an effect on the Companys future results and financial position:

IFRS 1: Severe Hyperinflation (Effective for periods beginning on or after July 1, 2011)

IAS 12: Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12 (Effective for
periods beginning on or after January 1, 2012)

Amendments to IFRS 9: Financial Instruments (Effective for periods beginning on or after January
1, 2013)

g) IAS 1 - Presentation of Financial Statements (Amendment)

In June 2011, the IASB and the Financial Accounting Standards Board (FASB) issued amendments to
standards to align the presentation requirements for other comprehensive income (OCI). The IASB issued
amendments to IAS 1 Presentation of Financial Statements to require companies preparing financial
statements under IFRS to group items within OCI that may be reclassified to the profit or loss. The
amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented
as either a single statement or two consecutive statements. The amendments to IAS 1 set out in
Presentation of Items of Other Comprehensive Income and are effective for fiscal years beginning on or
after July 1, 2012.

13

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
5. Critical Accounting Estimates and Judgments
The Company makes estimates and assumptions about the future that affect the reported amounts of assets
and liabilities. Estimates and judgments are continually evaluated based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances. In
the future, actual experience may differ from these estimates and assumptions.
The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive
income in the period of the change, if the change affects that period only, or in the period of the change and
future periods, if the change affects both.
Information about critical judgments in applying accounting policies that have the most significant risk of
causing material adjustment to the carrying amounts of assets and liabilities recognized in the condensed
interim financial statements within the next financial year are discussed below:
Exploration and evaluation expenditures
The application of the Companys accounting policy for exploration and evaluation expenditures requires
judgment in determining whether it is likely that future economic benefits will flow to the Company, which may
be based on assumptions about future events or circumstances. Estimates and assumptions made may
change if new information becomes available. If, after an expenditure is capitalized, information becomes
available suggesting that the recovery of the expenditure is unlikely, the amount capitalized is written off in the
profit or loss in the period the new information becomes available.
Title to mineral property interests
Although the Company has taken steps to verify title to mineral properties in which it has an interest, these
procedures do not guarantee the Companys title. Such properties may be subject to prior agreements or
transfers and title may be affected by undetected defects.
Income taxes
Significant judgment is required in determining the provision for income taxes. There are many transactions
and calculations undertaken during the ordinary course of business for which the ultimate tax determination is
uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the
Companys current understanding of the tax law. For matters where it is probable that an adjustment will be
made, the Company records its best estimate of the tax liability including the related interest and penalties in
the current tax provision. Management believes it has adequately provided for the probable outcome of these
matters; however, the final outcome may result in a materially different outcome than the amount included in
the tax liabilities.
In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent
there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation
authority and the same taxable entity against which the unused tax losses can be utilized. However, utilization
of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses
are recouped.
Share -based payment transactions
The Company measures the cost of equity-settled transactions with employees by reference to the fair value
of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment
transactions requires determining the most appropriate valuation model, which is dependent on the terms and
conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation
model including the expected life of the share option, volatility and dividend yield and making assumptions
about them. The assumptions and models used for estimating fair value for share-based payment
transactions are disclosed in note 11.

14

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
6. Cash

Cash

June 30,
2011
$

March 31,
2011
$

April 1,
2010
$

29,485

52,290

911,893

Cash in banks earns interest at floating rates based on bank daily deposit rates.
7. Loan Receivable
On February 17, 2009, the Company entered into an agreement with another public company that had a
director in common at the time, Pacific Copper Corp. (Pacific Copper). The Company agreed to loan Pacific
Copper up to US$155,000 in exchange for a promissory note with a maturity date of June 30, 2009, bearing
interest at an annual rate of 15%. In fiscal 2009 the Company advanced US$100,000 to Pacific Copper and
has not advanced further funds in the fiscal years 2011 and 2010.
This promissory note is secured by certain of Pacific Coppers mineral properties in South America. In
correspondence to the Company, Pacific Copper has stated that since the entire note was not funded the
amount advanced is unsecured. The Company believes that Pacific Coppers position is without merit.
As at June 30, 2011 and March 31, 2011 this promissory note had matured but remains outstanding. The
Company provided for collectability of the outstanding amount in the year ended March 31, 2010.
June 30,
2011
Balance due US$

105,486

Balance due C$
Allowance for doubtful collectability
Effect of foreign exchange rate changes
Net book value

103,007
(103,007)
-

March 31,
2011
105,486
102,553
(102,553)
-

April 1,
2010
105,486
110,697
(106,310)
(4,387)
-

8. Investment in Andromeda
In June and July 2010, the Company paid cash consideration of $1,000,000 to acquire a 17% interest in
Andromeda Resources Inc. (Andromeda). In August 2010, the Company entered into a letter of intent to
undertake an RTO with Andromeda, which was terminated in December 2010. As of March 31, 2011, the
Company wrote off its investment in Andromeda. Subsequent to the reporting date, the Company signed a
revised letter of intent to undertake an RTO with Andromeda (note 19)

15

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
9. Exploration and Evaluation Assets

Acquisition costs
Canada:
Antimony Mountain Joint
Venture
Georges Lake
Mexico:
Tres Marias Property
Deferred exploration
expenditures
Canada:
Georges Lake
MAC Property
Mexico:
Tres Marias Property

Acquisition Costs
Canada:
Antimony Mountain Joint
Venture
Georges Lake
Mexico:
Tres Marias Property
Deferred Exploration
Expenditures
Canada:
Georges Lake
MAC Property
Mexico:
Tres Marias Property

March 31,
2011
$

Additions

Impairment

June 30,
2011
$

1
1

29,313

29,313

35,174

35,174

29,313

35,174

64,487

29,314

35,174

64,488

April 1,
2010
$

Additions

Impairment

March 31,
2011
$

1
316,162
316,163

75,000
75,000

(391,162)
(391,162)

1
1

772,436
1,088,599

75,000

(772,436)
(1,163,598)

350,370
-

(14,460)
29,313

(335,910)
-

29,313

209,874

248,787

(458,661)

560,244

263,640

(794,571)

29,313

1,648,843

338,640

(1,958,169)

29,314

1
1

16

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
9. Exploration and Evaluation Assets (continued)
In the year ended March 31, 2011, the Company recorded impairment of $1,231,097 on its Tres Marias
property, as a result of the incomplete transaction with Andromeda and accordingly a reduced prospect of
exploiting the property in the near term. The Company also recorded impairment of $727,072 on its Georges
Lake property as it has no plans for development of this property.
a) Tres Marias
On March 23, 2001, the Company signed a letter agreement with a private mining company to acquire a
100% interest in the private companys option agreement on the Tres Marias property in Chihuahua, Mexico.
Under the terms of the letter agreement the Company paid $15,712 and issued 10,000 common shares.
The Company has assumed the rights and obligations of the option agreement to acquire a 100% interest in
the Tres Marias property. The terms of the option agreement were amended during the year ended March 31,
2003 in exchange for the Company issuing 26,250 common shares. The option agreement was again
amended during the year ended March 31, 2004, and the new terms of the option agreement call for a 3% net
smelter royalty (NSR) on all production, except for oxide production (where the NSR is 1.5%), and a 1% net
profits royalty all payable to the optionor. The NSR can be bought down to a 0.5% NSR on all production
including oxide production for US$500,000, subject to regulatory approval. If the NSR is bought down to 0.5%
the NSR will cease once NSR payments after the buy down total US$2 million.
With a final payment of $170,970 paid on July 27, 2006, the Company completed its required payments and
expenditures and has satisfied all of its obligations under the purchase option agreement for the Tres Marias
property.
The Company also issued an additional 2.5% NSR to a third party during the year ended March 31, 2004
which was bought down to a 1.5% NSR during the year ended March 31, 2005 for $123,090.
b) Antimony Mountain Joint Venture
The Antimony Mountain prospect is located 65 kilometres northeast of Dawson City, Yukon Territory, Canada.
During the year ended March 31, 2005, the Company and another public company entered into a joint venture
agreement to explore the prospect. The Company then transferred its interest in the project to the other
company in exchange for the optional right to acquire a 100% working interest in the MAC Property (note 9d).
The Company retains a 0.5% net smelter royalty in Antimony Mountain.

17

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
9. Exploration and Evaluation Assets (continued)
c) Georges Lake
During the year ended March 31, 2006 the Company acquired a 90% interest in the Georges Lake gold
property located northwest of La Ronge, Saskatchewan, Canada by paying the optioner $75,000 and issuing
25,000 common shares. The Company then had the option to acquire an additional 5% property interest
anytime by paying $2,000,000. There is a 0.5% NSR on the property, which the Company can purchase
anytime for a cash payment of $250,000.
During the year ended March 31, 2007 the Company signed an option agreement with another public
company whereby the other public company may acquire up to a 70% property interest in the Georges Lake
gold property by incurring exploration expenditures of $1 million by December 31, 2008. During the year
ended March 31, 2009, it was determined that the optionee would not be going forward with the letter of intent
and a total of $198,447 in exploration payments previously recorded as a loan receivable was expensed.
In February 2010, the Company entered into an agreement to purchase the remaining 10% interest in the
Georges Lake property for cash consideration of $75,000 and completed the purchase in April 2010.
The Company does not have any plans to develop this property and accordingly, the Company has provided
for a full impairment of its carrying value.
d) MAC Property
On February 23, 2001, the Company signed an option agreement, with another public company, to purchase
a 50% interest in the MAC property located in the south western Northwest Territories, Canada.
During the year ended March 31, 2005 the Company transferred its interest in the Antimony Mountain Joint
Venture (note 8b) to the other company and was granted the optional right to acquire a 100% interest in the
MAC property, subject to a 2% NSR payable to the other company, for cash payments of $22,000 by
February 28, 2005 (paid), cash of $100,000 or common shares of equivalent value by February 14, 2006
(issued) and $100,000 by February 14, 2007 (paid). Upon meeting the payment terms the Company had the
right to purchase 1% of the other companys NSR for $1 million until February 14, 2010, but this right has now
lapsed.
In June 2007, the Company entered into an option agreement with Eagle Hill Exploration Corporation (Eagle
Hill) whereby Eagle Hill had the right to earn up to a 70% interest in the property by spending a minimum of
$2,800,000 over a period ending on December 31, 2011. In July 2009, the Company entered into a mutual
release agreement with Eagle Hill whereby the MAC property option agreement was terminated. Under the
terms of the mutual release agreement Eagle Hill will maintain a 3.5% interest in the MAC property.
In August 2009, the Company entered into option agreement with VM Exploration Ltd. (VM Exploration).
Under the option agreement, VM Exploration has the option to earn up to an 80% interest in the Companys
MAC property in consideration of incurring expenditures of $2 million payable over a three-year period. In
June 2010, the Company and VM Exploration terminated the option agreement. The Company did not have
any plans to develop this property in 2010 and accordingly, the Company provided for a full impairment of its
carrying value in 2010.
In 2012, the Company intends to take the MAC claims 1-7 to lease and, to do so, it is required to submit a
survey of the claims by November 30, 2011. The Company has contracted a surveyor to complete the work,
which is estimated to cost approximately $100,000, of which, the Company incurred $29,313 as of June 30,
2011.

18

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
10. Share Capital and Reserves
Authorized capital
Unlimited common shares, without par value.
Issued capital
In July 2011, the Company effected a consolidation of its share capital on a 20 for 1 basis, consolidating its
69,645,394 currently outstanding common shares to 3,482,272 common shares (note 19). All references to
common stock in the financial statements have been changed to reflect the share consolidation (March 31,
2011 3,482,272 common shares; April 1, 2010 - 2,695,522 common shares).
Non-brokered private placement
In June and July 2010, the Company undertook a private placement and issued 786,750 units for gross
proceeds of $944,100. Of these units, the Company issued 478,833 units before June 30, 2010 and received
a further $67,000 in subscriptions. Each unit was priced at $1.20 with each unit consisting of one common
share of the Company and one-half common share purchase warrant exercisable at $3.00. Each full warrant,
which is subject to an acceleration provision, entitles the holder to purchase one common share of the
Company for a period of 18 months following the date of closing of the offering.
In connection with the private placement, the Company incurred cash issue costs of $6,206, paid aggregate
cash finders fees of $31,208 and issued 26,007 finders warrants with a fair value of $20,770. The finders
warrants are exercisable on the same terms of the financing warrants, except that they are not transferable.
Net proceeds of the offering were used to acquire a minority interest in Andromeda (note 8).
11. Share-Based Payments
On September 30, 2008, the shareholders of the Company approved an incentive stock option plan (the
Plan) which provides that the aggregate number of common shares of the Companys capital stock
issuable pursuant to options granted may not exceed 404,327. Options granted under the Plan may have a
maximum term of five years and the exercise price of options granted will not be less than the discounted
market price of the common shares as of the award date. The board of directors has the authority to set the
vesting terms of options granted, subject to the rules of the TSX Venture Exchange (the Exchange)
regarding options granted for investor relations services.
Number of
options

Weighted
average
exercise price
$

April 1, 2010

235,750

3.80

Granted
Exercised
Expired

(22,500)

11.20

June 30, 2011 and March 31, 2011

213,250

3.00

19

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
11. Share-Based Payments (continued)
The Companys outstanding and exercisable stock options at June 30, 2011 were:

Exercise
Price

Number

Expiry Date

Outstanding Options
Weighted
Average
Remaining
Life

$
March 31, 2012
January 7, 2014
April 28, 2014

3.00
3.00
3.00

83,250
30,000
100,000
213,250

Exercisable Options
Number
Weighted
Average
Exercise
Price
$

Weighted
Average
Exercise
Price
$

0.75
2.52
2.83
1.98

3.00
3.00
3.00
3.00

83,250
30,000
100,000
213,250

3.00
3.00
3.00
3.00

The Company did not issue stock options in the three months ended June 30, 2011 or 2010.
12. Warrants

Number of
financing
warrants

Weighted
average
exercise price
$

Number of
broker
warrants

Weighted
average
exercise price
$

Granted

393,375

3.00

26,007

3.00

June 30 and March 31, 2011

393,375

3.00

26,007

3.00

April 1, 2010

As at June 30, 2011 the following stock purchase warrants were outstanding and exercisable:
Number of Financing
Warrants

Number of Finders
Warrants

239,417
100,208
53,750
393,375

Exercise Price

1,373
16,034
8,600
26,007

$ 3.00
$ 3.00
$ 3.00

Expiry Date

December 29, 2011

January 20, 2012
January 30, 2012

The following assumptions were employed to value share purchase warrants issued in the comparative
period:
2010
Expected annual volatility
Risk-free interest rate
Expected life
Expected dividend yield

173%
1.4%
1.5 years
0%
20

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011

13. Related Party Transactions

The Company entered into the following transactions with related parties not disclosed elsewhere in these
consolidated financial statements as follows:
June 30, 2011

Director or
Officer
Compensation
1

Terence Schorn
2
S2 Management Inc.
3
Donald Padgett
4
Anthony Dutton
5
IBC Advanced Alloys Corp.
6
Koios Corporate Financial Services Ltd.

June 30, 2010

Director or
Officer
Compensation
1

Terence Schorn
2
S2 Management Inc.
3
Donald Padgett
4
Anthony Dutton
5
IBC Advanced Alloys Corp.

2
3
4
5
6

$
15,000
15,000
10,500
10,500
4,500
55,500

$
15,000
15,000
10,500
10,500
51,000

Consulting
Fees
$
2,380
2,380
Consulting
Fees
$
5,520
5,520

Rent

$
4,500
4,500
Rent

$
4,500
4,500

Total

$
15,000
17,380
10,500
10,500
4,500
4,500
62,380
Total

$
15,000
20,520
10,500
10,500
4,500
61,020

Mr. Schorn is a director and the secretary of the Company and was an officer of the Company in the
comparative period.
Beneficially owned by Simon Anderson, the Companys president and a director. Consulting fees are
for administrative and secretarial services provided by another employee of S2 Management Inc.
Mr. Padgett is a director of the Company.
Mr. Dutton is a director of the Company.
A company with a significant shareholder and two directors or officers in common with the Company.
Beneficially owned by Salil Dhaumya, the Companys CFO.

In September 2011, directors and a contractor agreed to forgo all fees accrued for their services from
November 1, 2010 (see note 19).

21

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
13. Related Party Transactions (continued)
Related party balances are due on demand, bear no interest, are unsecured and have no fixed payment
terms.
As at June 30, 2011, $71,000 (March 31, 2011 - $85,000) is owing to an officer and directors for services,
$41,680 (March 31, 2011 - $1,680) is owing to companies, owned by officers of the Company, for services,
$2,083 (March 31, 2011 - $526) is owing to a company, owned by an officer and director of the Company, for
contracted administrative services and $4,500 (March 31, 2011 - $3,360) is owing to a company with an
officer and a director in common with the Company for rent. These amounts owing have been included in
accounts payable and accrued liabilities.
Transactions with related parties were in the normal course of business and were measured at the exchange
amount, which is the amount of consideration established and agreed to by the related parties.
14. Capital Management
The Companys policy is to maintain a strong capital base to maintain financial flexibility and to sustain the
future development of the business. The Company considers its capital structure to include shareholders
equity and working capital. In order to maintain financial flexibility, the Company may from time to time issue
shares and adjust its spending to manage current and projected capital levels. To assess capital and
operating efficiency and financial strength, the Company continually monitors its working capital which is
calculated as follows:

Current assets
Current liabilities
Working capital (deficiency)

June 30, 2011

$
55,437
305,730
(250,293)

March 31, 2011

$
125,032
231,153
(106,121)

April 1, 2010
$
956,301
49,976
906,325

The Company is an exploration stage company. The Company monitors its forecasted working capital
requirements on a quarterly basis. The Company prepares expenditure budgets, which are updated as
necessary depending on varying factors including current and forecast prices, successful capital deployment
and general industry conditions. The Companys board of directors approves annual budgets.
The Company is not subject to external restrictions. The Company has not paid or declared any dividends
since the date of incorporation, nor are any contemplated in the foreseeable future. There were no changes to
the Companys approach to capital management during the three months ended June 30, 2011.

22

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
15. Financial Instruments
The Company has exposure to credit, liquidity and market risks from its use of financial instruments. This note
provides information about the Company's exposure to each of these risks, and the Company's objectives,
policies and processes for measuring and managing such risks. The board of directors has overall
responsibility for the establishment and oversight of the Company's risk management framework.
Market risk
The Companys profitability and long-term viability will depend, in large part, on the market price of zinc,
copper and lead. The market prices for metals can be volatile and are affected by numerous factors beyond
the Companys control, including: global or regional consumption patterns; the supply of, and demand for,
these metals; speculative activities; the availability and costs of metal substitutes; expectations for inflation;
and political and economic conditions, including interest rates and currency values. The Company cannot
predict the effect of these factors on metal prices.
The market price of these minerals and metals may not remain at current levels. In particular, an increase in
worldwide supply and consequent downward pressure on prices may result over the longer term from
increased zinc and lead production from mines developed or expanded as a result of current metal price
levels.
Foreign currency exchange rate risk
The Company is exposed to foreign currency fluctuations as it has cash, denominated in Canadian dollars
and a significant portion of the Company's investing activities are conducted in US dollars and Mexican
pesos. There are no exchange rate contracts in place. A change in the US dollar or Mexican peso would not
have a material effect on the Companys loss.
Financial instruments denominated in foreign currencies are:
At June 30, 2011

US Dollars

Cash and cash equivalents

Accounts payable and accrued liabilities
Exchange rate - $1.00 =
At March 31, 2011

3,352
41,940

6,639
-

1.02

12.06

US Dollars

Cash and cash equivalents

Accounts payable and accrued liabilities
Exchange rate - $1.00 =

23

Mexican
Pesos

Mexican
Pesos

10,294
37,959

13,576
-

1.03

12.26

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
15. Financial Instruments (continued)
Interest rate risk
The Companys interest rate risk mainly arises from the interest rate impact on cash and cash equivalents,
which receive interest based on market interest rates. As at June 30, 2011, with other variables unchanged, a
1% increase in the interest rate would decrease the Companys loss by approximately $294.
Fair Value
At June 30, 2011, the fair value of the Company's financial instruments, including cash and cash equivalents,
accounts receivable, and accounts payable and accrued liabilities approximate their carrying values due to
their short terms to maturity. Cash and cash equivalents are valued using level 1 inputs; the investment in
Andromeda is valued using level 2 inputs.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in paying obligations as they come due. The
Company's financial liabilities consist of accounts payable and accrued liabilities. Accounts payable consists
of invoices payable to trade suppliers for capital expenditures, field operating activities, and general corporate
expenses. The Company processes invoices within a normal payment period.
The Company prepares operation and capital expenditure budgets, which are regularly monitored and
updated. As well, the Company utilizes authorizations for expenditures on both operated and non-operated
projects to further manage capital expenditures.
16. Segment Reporting
The Companys activities are all in one industry segment of mineral property acquisition and exploration. The
mineral properties are segmented by geographic location as disclosed in note 9. Substantially all
administrative expenses are incurred in Canada.
17. Non Cash Transactions
Three months ended June 30

Financing activities:
Fair value of finders warrants
Investing activities:
Exploration and evaluation related change in accounts payable

24

2011

2010

1,200

10,452

26,594

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
18. Loss Per Share
Three months ended June 30,

2011

2010

Loss for the period

Weighted average number of common shares outstanding

$ (108,998)
3,482,270

$ (117,378)
2,695,522

Loss per share, basic and diluted

(0.03)

(0.00)

Diluted loss per share for the periods ended June 30, 2011 and 2010 is the same as basic loss per share as
the impact of the exercise of the share options and warrants is anti-dilutive.
19. Events After the Reporting Date
Private placement
In September 2011, the Company completed a private placement consisting of 3,960,000 units at a price of
$0.25 per unit for gross proceeds of $990,000. Each unit comprises one common share of the Company and
one common share purchase warrant exercisable at $0.34 until September 26, 2013.
War Eagle has agreed to pay qualified parties finders fees of $49,800 and non-transferable warrants entitling
them to purchase 199,200 War Eagle common shares on terms and conditions similar to that of the warrants
issued under the private placement, subject to the approval of the TSX Venture Exchange.
Reverse take-over with Andromeda
In September 2011, the Company entered into a letter of intent with Andromeda, which is a private company
incorporated under the laws of Ontario. It is contemplated that the shareholders of Andromeda will exchange
all of the issued and outstanding common shares of Andromeda for common shares of War Eagle (the
"RTO") such that the current shareholders of War Eagle will own approximately 32% of the outstanding
shares of the combined company resulting from the RTO (the "Resulting Issuer") and shareholders of
Andromeda (other than War Eagle) will own the remaining 68% of the Resulting Issuer before any concurrent
financing. War Eagle currently owns 17% of Andromedas issued shares.
Concurrently with the letter of intent, the Company advanced $250,000 to Andromeda with an interest rate of
6% per year. Upon completion of the RTO any interest accrued will be waived and the loan treated as an
intercompany loan.
Completion of the transaction with Andromeda is conditional upon, among other things, receipt of all required
regulatory and shareholder approvals, the negotiation and execution of definitive documentation and the
completion of a financing to raise gross proceeds of at least C$7,000,000.
Debt settlement agreement
In September 2011, directors and a contractor agreed to forgo fees accrued since November 1, 2010 totalling
$275,000. The Company plans to issue warrants to these parties as partial compensation but the terms of
such warrants have not been finalized at the date of these financial statements.

25

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011
20. First Time Adoption of IFRS
The Companys financial statements for the year ending March 31, 2012 are the first annual financial
statements that will be prepared in accordance with IFRS. IFRS 1 - First Time Adoption of International
Financial Reporting Standards, requires that comparative financial information be provided. As a result, the
first date at which the Company has applied IFRS was April 1, 2010 (the Transition Date). IFRS 1 requires
first-time adopters to retrospectively apply all effective IFRS standards as of the reporting date, which for the
Company will be March 31, 2012. However, it also provides for certain optional exemptions and certain
mandatory exceptions for first time IFRS adoption. Prior to transition to IFRS, the Company prepared its
financial statements in accordance with Canadian GAAP.
In preparing the Companys opening IFRS financial statements, the Company has adjusted amounts reported
previously in the financial statements prepared in accordance with Canadian GAAP.
The Company elected to take the following IFRS 1 optional exemptions:
Business Combinations
The Company elected not to retrospectively apply IFRS 3 - Business Combinations to any business
combinations that may have occurred prior to its Transition Date and such business combinations have not
been restated.
Share -based Payment Transactions
The Company has elected not to retrospectively apply IFRS 2 to equity instruments that were granted and
had vested before the Transition Date. As of April 1, 2010, there were no unvested equity instruments
outstanding.
The Company elected to take the following IFRS 1 mandatory exemptions:
Derecognition of Financial Assets and Liabilities
The Company has applied the derecognition requirements in IAS 39 Financial Instruments: Recognition and
Measurement prospectively from the Transition Date. As a result any non-derivative financial assets or
nonderivative financial liabilities derecognized prior to the Transition Date in accordance with Canadian GAAP
have not been reviewed for compliance with IAS 39.
Estimates
The estimates previously made by the Company under Canadian GAAP were not revised for the application
of IFRS except where necessary to reflect any difference in accounting policy or where there was objective
evidence that those estimates were in error. As a result the Company has not used hindsight to revise
estimates.

26

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011

20. First Time Adoption of IFRS (continued)

Reconciliations of Canadian GAAP equity and comprehensive income to IFRS.
IFRS 1 requires an entity to reconcile equity, comprehensive income and cash flows for prior periods. The
changes made to the statements of financial position and statements of comprehensive income as shown
below have resulted in reclassifications of various amounts on the statements of cash flows, however as there
have been no material adjustments to the net cash flows, no reconciliation of the statement of cash flows has
been prepared.
a) Under IFRS, flow-through share capital instruments are accounted for as combined instruments comprising a
liability component and an equity instrument upon issuance of the flow-through instruments. Upon
renunciation of the expenditures for Canadian income tax purposes, the liability is reversed and a taxable
temporary difference is recorded. Under Canadian GAAP flow-through instruments are accounted for as
equity instruments only. Upon renunciation of the expenditures for Canadian tax purposes, a taxable
temporary difference effected at the issuers applicable tax rate is recorded and charged to equity as cost of
issuance of flow-through instruments. The adjustment relating to deferred tax expenses for prior flow-through
share transactions for transition to IFRS amounted to $181,400. Accordingly, the adjustment has been
booked between share capital and deficit.
Reconciliation of Statement of Financial Position as at April 1, 2010 Transition Date
Sub
Note

Canadian
GAAP

IFRS

Effect of
transition to
IFRS
$

911,893
16,787
27,621
956,301

911,893
16,787
27,621
956,301

1,602
1,648,843

1,602
1,648,843

2,606,746

2,606,746

49,976
49,976

49,976
49,976

37,439,113
2,984,858
(37,867,201)

181,400
(181,400)

37,620,513
2,984,858
(38,048,601)

2,556,770

2,556,770

2,606,746

2,606,746

ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Prepaid expenses and deposits
Total current assets
Petroleum interests
Mineral properties

LIABILITIES AND SHAREHOLDERS EQUITY

Current liabilities
Accounts payable and accrued liabilities
Total current liabilities
Shareholders' equity
Share capital
Contributed surplus
Deficit

a
a

27

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011

20. First Time Adoption of IFRS (continued)

Reconciliation of Statement of Financial Position as at June 30, 2010
Sub
Note

Canadian
GAAP

IFRS

Effect of
transition to
IFRS
$

629,772
23,773
19,764
673,309

629,772
23,773
19,764
673,309

700,000
1,602
1,775,559

700,000
1,602
1,775,559

3,150,470

3,150,470

72,581
72,581

72,581
72,581

38,009,410
67,000
1,200
2,984,858
(37,984,579)

181,400
(181,400)

38,190,810
67,000
1,200
2,984,858
(38,165,979)

3,077,889

3,077,889

3,150,470

3,150,470

ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Prepaid expenses and deposits
Total current assets
Investment
Petroleum interests
Mineral properties

LIABILITIES AND SHAREHOLDERS EQUITY

Current liabilities
Accounts payable and accrued liabilities
Total current liabilities
Shareholders' equity
Share capital
Share subscriptions received
Warrants
Contributed surplus
Deficit

28

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011

20. First Time Adoption of IFRS (continued)

Reconciliation of Statement of Financial Position as at March 31, 2011
Sub
Note

Canadian
GAAP

IFRS

Effect of
transition to
IFRS
$

52,290
38,951
33,791
125,032

52,290
38,951
33,791
125,032

29,314

29,314

154,346

154,346

231,153
231,153

231,153
231,153

38,325,029
3,005,628
(41,407,464)

181,400
(181,400)

38,506,429
3,005,628
(41,588,864)

(76,807)

(76,807)

154,346

154,346

ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Prepaid expenses and deposits
Total current assets
Exploration and evaluation assets

LIABILITIES AND SHAREHOLDERS

DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities
Total current liabilities
Shareholders' deficiency
Share capital
Contributed surplus
Deficit

a
a

29

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011

20. First Time Adoption of IFRS (continued)

Reconciliation of the Statement of Comprehensive Loss for the Three Months Ended June 30, 2010
Canadian
GAAP
$
Operating expenses
Consulting fees
Directors fees
Insurance
Investor relations and news dissemination
Management fees and salaries
Office and miscellaneous
Professional fees
Rent
Transfer agent and filing fees

800
21,953
7,857
4,841
67,223
2,788
3,957
4,500
4,676

Loss before other income

Other income
Foreign exchange gain
Interest income
Loss and total comprehensive loss for the period

Basic and diluted loss per common share

Basic and diluted total comprehensive loss per
common share
Weighted average number of common shares
outstanding, basic and diluted

30

Effect of
transition to
IFRS
$

IFRS

(118,595)

800
21,953
7,857
4,841
67,223
2,788
3,957
4,500
4,676
(118,595)

159
1,058
1,217
(117,378)

159
1,058
1,217
(117,378)

(0.04)

(0.04)

(0.04)

(0.04)

2,697,491

2,697,491

WAR EAGLE MINING COMPANY INC.

Notes to the Condensed Interim Consolidated Financial Statements
Unaudited Prepared by Management
For the Three Months Ended June 30, 2011

20. First Time Adoption of IFRS (continued)

Reconciliation of the Statement of Comprehensive Loss for the Year Ended March 31, 2011
Canadian
GAAP
$
Operating expenses
Consulting fees
Directors fees
Insurance
Investor relations and news dissemination
Management fees and salaries
Office and miscellaneous
Professional fees
Rent
Transfer agent and filing fees
Loss before other income
Other income (expense)
Property impairment
Investment impairment
Foreign exchange loss
Interest income

Loss and total comprehensive loss for the period

Basic and diluted loss per common share

Basic and diluted total comprehensive loss per
common share
Weighted average number of common shares
outstanding, basic and diluted

Effect of
transition to
IFRS
$

IFRS

3,050
86,223
31,119
22,873
278,898
12,765
61,556
53,000
29,700

3,050
86,223
31,119
22,873
278,898
12,765
61,556
53,000
29,700

(579,184)

(579,184)

(1,959,771)
(1,000,000)
(3,320)
2,012
(2,961,079)

(1,959,771)
(1,000,000)
(3,320)
2,012
(2,961,079)

(3,540,263)

(3,540,263)

(1.08)

(1.08)

(1.08)

(1.08)

3,267,616

3,267,616

21. Approval of the Financial Statements

The condensed interim consolidated financial statements of the Company for the period ended June 30, 2011
were approved and authorized for issuance by the board of directors on September 28, 2011.

31

Schedule E
Interim Management Discussion and Analysis of War Eagle Mining Company Inc. for the Three
Month Interim Period Ended June 30, 2011

E-1 AC/1463772.11

WAR EAGLE MINING COMPANY INC.

Amended Managements Discussion and Analysis

June 30, 2011

Table of Contents
War Eagles Business ................................................................................................................ 1
Incorporation and Organization of the Company ........................................................................ 1
Corporate Developments ........................................................................................................... 2
Andromeda Resources Inc. ........................................................................................................ 2
Mineral Properties ...................................................................................................................... 3
Tres Marias ............................................................................................................................ 3
Mac Property .......................................................................................................................... 8
Georges Lake .......................................................................................................................12
Other Mineral Property Interests ............................................................................................13
Financial ...................................................................................................................................13
Consolidated Financial Information ........................................................................................13
Selected Quarterly Information ..............................................................................................14
Results of Operations ............................................................................................................14
Exploration Expenditures .......................................................................................................15
Liquidity and Capital Resources ............................................................................................15
Share Capital ............................................................................................................................17
2011 Private Placement.........................................................................................................17
Share Consolidation ..............................................................................................................17
Related Party Transactions ...................................................................................................17
Financial Instruments and Other Instruments ........................................................................17
International Financial Reporting Standards..............................................................................17
Impact of adopting IFRS on the Companys Business ...........................................................18
Impact of adopting IFRS on the Companys accounting policies ............................................18
Reconciliations between Canadian GAAP and IFRS .............................................................19
Risks .........................................................................................................................................20
Outstanding Share Data............................................................................................................20

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
The following is managements discussion and analysis (MD&A) of War Eagle Mining
Company Inc. (War Eagle or the Company), prepared as of November 10, 2011. This MD&A
should be read together with the unaudited interim consolidated condensed financial statements
for the three months ended June 30, 2011 and the audited consolidated condensed financial
statements for the year ended March 31, 2011 and related notes. Financial amounts are
expressed in Canadian dollars unless otherwise specified. This MD&A has been amended to
reflect accurate information regarding the Companys September 2011 private placement and
outstanding share data.
Certain information included in this MD&A may constitute forward-looking statements.
Statements in this report that are not historical facts are forward-looking statements involving
known and unknown risks and uncertainties, which could cause actual results to vary
considerably from these statements. Readers are cautioned not to put undue reliance on
forward-looking statements. Forward-looking statements include references to the proposed
transaction with Andromeda Resources Inc., potential joint venture opportunities and potential
production at the Companys Tres Marias property.
As of April 1, 2011, the Company adopted International Financial Reporting Standards (IFRS).
The Companys unaudited condensed consolidated interim financial statements for the three
month period ending June 30, 2011 have been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting (IAS 34) using accounting policies
consistent with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board and interpretations of the International Financial
Reporting Interpretations Committee.
The accounting policies have been selected to be consistent with IFRS as is expected to be
effective on March 31, 2012, the Companys first annual IFRS reporting date. These unaudited
condensed consolidated interim financial statements do not include all of the information
required for full annual consolidated financial statements. Previously, the Company prepared its
interim and annual consolidated financial statements in accordance with Canadian generally
accepted accounting principles (GAAP). The Companys fiscal 2011 comparatives in this
MD&A have been presented in accordance with IFRS. This MD&A contains forward looking
statements that are subject to risk factors set out in this MD&A.
Additional information related to War Eagle is available on the Companys website
www.wareaglemining.com or for view on SEDAR at www.sedar.com.
WAR EAGLES BUSINESS
The Company is involved in the acquisition, exploration and, if warranted, development of
mineral properties. In fiscal 2011, the Companys primary focus was on its 100% interest in the
Tres Marias zinc / lead / germanium property located in Chihuahua, Mexico. The Company has
signed a letter of intent with Andromeda Resources Inc. (Andromeda) that will move the
Companys focus to Andromedas Terrazas property.
INCORPORATION AND ORGANIZATION OF THE COMPANY
The Company was incorporated under the laws of British Columbia on March 6, 1984 as
275210 BC Ltd. The Company changed its name to War Eagle Resources Ltd. on April 10,
1984 and then changed its name from War Eagle Resources Ltd. to War Eagle Mining
Company Inc. on May 25, 1987.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
The Companys head office is located at Suite 906 595 Howe Street, Vancouver, British
Columbia, Canada, V6C 2T5 and its registered office is located at Suite 700 - 595 Burrard
Street, Vancouver, British Columbia, Canada, V7X 1S8.
The Company has three subsidiaries: War Eagle Resources Corporation, a wholly owned Idaho
corporation; Tombstone Mining Inc. (Tombstone Mining), a company incorporated in the
British Virgin Islands; and Tombstone Exploration de Mexico S.A. de C.V. (Tombstone
Mexico), a 99% owned Mexican corporation. Of these companies, only Tombstone Mexico is
active.
In July 2011, the Company effected a consolidation of its share capital on a 20 for 1 basis,
consolidating its 69,645,394 outstanding common shares to 3,482,272 common shares.
Shareholder authorization to effect the share consolidation was approved at the Company's
annual and special general meeting held on February 28, 2011. See Financial below. All share
and per share amounts have been restated to reflect the share consolidation.
CORPORATE DEVELOPMENTS

The Company has entered into a letter of intent with Andromeda Resources Inc.
("Andromeda") that will constitute a reverse takeover transaction for Andromeda, see
Andromeda Resources Inc. below.
In September 2011, the Company has closed its non-brokered private placement of
3,960,000 units at a price of $0.25 per unit for gross proceeds of $990,000. See Share
Capital below.

ANDROMEDA RESOURCES INC.

War Eagle has entered into a letter of intent dated September 26, 2011 with Andromeda. It is
contemplated that all the shareholders of Andromeda (other than War Eagle) will exchange
each issued and outstanding common share of Andromeda for 6.67 common shares of War
Eagle (the "RTO") such that the current shareholders of War Eagle will own approximately 32%
of the outstanding shares of the combined company resulting from the RTO (the "Resulting
Issuer") and shareholders of Andromeda (other than War Eagle) will own the remaining 68% of
the Resulting Issuer before the concurrent financing described below. Andromeda currently has
2,900,000 common shares issued and outstanding, of which War Eagle currently owns 500,000
common shares. There are currently no options or warrants exercisable into securities of
Andromeda.
In June and July 2010, the Company acquired a 17% minority interest in Andromeda, a private
company incorporated under the laws of Ontario, by purchasing 500,000 common shares in for
total cash consideration of $1,000,000. In August 2010, War Eagle entered into a letter of intent
with Andromeda but Andromeda terminated that letter of intent in December 2010. Andromeda
and War Eagle have revised the terms of the proposed transaction to satisfy the requirements of
prospective investors.
Completion of the transaction is conditional upon, among other things, receipt of all required
regulatory and shareholder approvals, the negotiation and execution of definitive documentation
and the completion of a financing to raise gross proceeds of at least C$7,000,000 (the
"Financing"). The Financing will comprise units of Andromeda at an issue price of $3.00 per
unit, with each unit containing one common share of Andromeda and one-half share purchase
warrant. Each whole warrant will be exercisable into one common share of Andromeda at an
exercise price of $4.00 per share for a period of 24 months. All Andromeda securities issued
pursuant to the Financing will be immediately exchanged for securities of War Eagle pursuant to
2

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
the RTO on the basis of the same exchange ratio as will be used for current Andromeda
shareholders.
Andromeda, which is at arm's length from War Eagle, has negotiated an agreement to purchase
the Terrazas zinc-copper property ("Terrazas") for cash consideration of US$5,000,000 payable
in installments over two years, issuance of Andromeda common shares corresponding to
11,244 shares of the Resulting Issuer and a 2.0% NSR, sliding up to 3.0% at $2.00/lb zinc. To
date Andromeda has paid US$1,200,000 and issued the common shares.
As part of the letter of intent, War Eagle has agreed to advance Andromeda $250,000 to fund a
staged acquisition payment, an updated National Instrument 43-101 technical report and
incidental expenses to further the Terrazas project. To date, War Eagle as advanced $200,000
to Andromeda.
MINERAL PROPERTIES
TRES MARIAS
In March 2001, the Company entered into a letter agreement (the HTMC Agreement) with
High Tech Metals Corp. (HTMC), whereby the Company acquired a 100% interest in HTMCs
option to acquire a 100% interest in the Tres Marias property. Under the HTMC Agreement, the
Company paid HTMC $15,712 and issued 10,000 shares to HTMC.
In order to acquire a 100% interest in the property, the Company issued a total of 26,250
common shares to Tombstone Aruba A.V.V. and made property payments totalling $315,000. In
addition, the Company made total exploration expenditures of US$500,000 on this property. The
Company completed the acquisition of this property, subject to royalties, in fiscal 2007. The Tres
Marias property is subject to a 3% net smelter royalty (NSR) on all production, except for oxide
production (for which the NSR is 1.5%), and a 1% net profits royalty. The NSR can be bought
down to a 0.5% NSR on all production including oxide production for US$500,000, subject to
regulatory approval. If the NSR is bought down to 0.5%, the NSR will cease once NSR
payments after the buy down totals US$2,000,000. The Company is also committed to an
additional 1.5% NSR to a third party.
In early 2009, the Company suspended exploration activities pending development of a work
program that is in accordance with the Companys resources and ability to raise money. In late
2009, the Company commenced an assay program, which is discussed in further detail below.
The assay results were very favourable and suggest that it may be possible to establish
economically feasible mining operations sooner than expected. Accordingly, the Company is
currently assessing the viability of a limited mining program and is formulating a mining plan and
investigating processing options. The Company is aware of processing mills in the Tres Marias
area, but has not quantified the cost of processing ore. The flow sheets will likely have to be
adjusted to suit the Tres Marias type of sulphide ore and any oxide ore may need to be treated
by a leaching process.
The Company also plans to develop the next steps of its exploration plan as it seeks to better
understand the nature of the mineral structures before moving ahead with a National Instrument
43-101(NI 43-101) technical report. The objective of the program will be to determine if the
high-grade mineralization that was recently outlined by the drill core sampling program can be
reached from a short, accessible adit and decline, rather than hoisting the material to surface
through the present shaft facilities. As part of this program, the Company commissioned a
metallurgy report. See DICOMI Metallurgy Report below.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
The extent of mineralization identified at Tres Marias does not justify construction of a
processing plant. Accordingly, the Company intends to seek partners with which it can combine
development of Tres Marias and similar properties with a view to spreading costs over a
broader base of activity. Following the termination of the Andromeda letter of intent (see
Andromeda Resources Inc. above) the Company believes that it is unlikely to develop the Tres
Marias property in the short term and accordingly provided for a full impairment of value at
March 31, 2011.
PROPERTY DESCRIPTION
The following description of the property is taken from the technical report on the Tres Marias
project prepared for the Company by Dr. Peter Megaw, a qualified person, dated September 4,
2001 and revised July 11, 2002, a copy of which can be found under the Companys corporate
profile on www.sedar.com.
The Tres Marias property is located in the northeast corner of Chihuahua State, Mexico and
consists of nine exploration concessions covering a total of 2,831 hectares. The Company is in
the process of dropping its Tres Marias 2 claims which cover 993 hectares.
Claim Name

Type

Title

File

Hectares

Lajitas Uno

Exploitation

186430

1/122

112

Celia

Exploitation

169682

16/3563

31

A. Dos Marias

Exploitation

169681

16/3343

16

Las Dos Marias

Exploitation

169684

16/3818

Maria

Exploitation

169683

16/3641

14

Cassiopea

Exploitation

169685

16/4093

10

La Osa

Exploitation

209806

1/1.3/945

24

Tres Marias

Exploration

204384

1/2.4/566

1,622

Tres Marias 2

Exploration

208814

1/2.4/569

Total

1,838

In fiscal 2009, the Company filed for and was awarded an amendment to its current exploration
permit, in order to drill on the following five targets within the concession, which may be
described as follows:
MOLINO TRUEBE
Located in Mining Lote Tres Marias 2, the target is a northeast (NE) southwest (SW)
structure associated with a geochemical anomaly with breccias, offset Del Rio shale and iron
oxides hosted in Santa Elena limestone.
EL GRAVEN
The El Graven target is located in Mining Lote Tres Marias, and is described as the graben
boundary faults that run northwest (NW) southeast (SE) with associated breccias and iron
oxides.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
EL TANQUE
Located between Mining Lotes Maria, Celia and Tres Marias, the El Tanque target is a
structural intercept between two faults that run NW SE and NE SW consecutively, with
associated breccias and iron oxides. The historic Tres Marias mine is about 500 metres south of
this target. The approximate area of interest is 300 metres by 300 metres.
LA BLANCA
The La Blanca target is located 600 metres south of the mine, characterized by a strong NE SW trending structure and is regarded as separate from the original Tres Marias deposit. This is
the first of the outlying geological areas of interest to be drill tested. GO-31 commenced drilling
in 2008. Zinc-germanium mineralization has been located in this area by drilling and surface
sampling of old pits.
LA BLANCA SUR
The La Blanca Sur target is located between Mining Lotes Lajitas Uno and Celia, and is at the
structural intersection of a NE SW fault that is cut by a NW SE fault with associated
breccias, calcite veining and iron oxides. The principal structure is parallel to La Blanca.
PREVIOUS EXPLORATION
Exploration at the Tres Marias property continued through to February 2009. Parallel drill
programs were conducted underground within the historic mine workings and on the surface.
Underground: 2,396.46 metres in total were drilled during fiscal 2009. Since TE-1
commenced in August 2006, 3,624.51 metres in total have been drilled. 10 holes
were completed during the fourth quarter of fiscal 2009.
Surface: 3,248.04 metres in total were drilled during fiscal 2009. Since GO-1
commenced in February 2007, 4,670.82 metres in total have been drilled. Eight holes
were completed during the fourth quarter of fiscal 2009.
Seven of these holes were located on surface in the mine-yard and were drilled into
the Mina Vieja Sur block by way of a dual approach.
In February 2009 the Company announced a suspension of drilling operations at the Tres
Marias property during the economic downturn in light of the state of the financial markets and
the significant decrease in zinc prices over 2008 and 2009. In fiscal 2009, the Company took a
write-down of $8,905,000 in exploration expenditures with respect to the Tres Marias property.
The Company has placed its equipment in storage while it develops a suitable exploration plan
and assesses how best to proceed with the Tres Marias property.
The Company did no drilling on the Tres Marias property in the three months ended June 30,
2011, but in fiscal 2011 the Company retained two geologists to oversee sampling and analysis
work. The assay program focused on mineralized drill intercepts in two areas of the Tres Marias
property that had been recognized but not sampled due to the suspension of exploration
activities in February 2009. Previous drilling was done in the general mine area located south
and west to the former mine workings.
The Company had planned on developing Tres Marias in connection with the proposed
transaction with Andromeda. As a result of the incomplete transaction, the Company took a
write-down of $1,232,000 on its Tres Marias property, as it plans to seek alternative
development opportunities.
5

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
The GO-series holes were drilled from the mine-yard on surface down into the historic mine
area during the fourth quarter of 2008. The mineralization that was intersected by the surface
GO drill holes is a new zone that is located above the fifth level to the west of the former mine
workings.
Table 1 - Drill Results for GO-32 to GO-38
Borehole
ID
GO-32
GO-32
GO-33
GO-33
GO-33
GO-34
GO-35
GO-36
GO-36
GO-36
GO-36
GO-37
GO-37
GO-37
GO-37
GO-38
GO-38
GO-38

From
56.22
62.28
58.07
77.05
89.74
76.50
53.43
58.90
71.40
76.67
85.94
58.85
69.78
75.70
89.60
54.42
67.38
89.40

To
75.89
75.89
61.32
79.67
98.84
92.52
59.26
60.20
74.26
81.60
90.14
61.54
72.00
86.15
97.87
56.15
86.76
90.90

Intercept in
metres
19.67
13.61
3.25
2.62
9.10
16.02
5.83
1.30
2.86
4.93
4.20
2.69
2.22
10.45
8.27
1.73
19.38
1.50

Germanium
ppm
103
111
165
107
390
391
84
216
261
154
380
154
303
140
198
172
221
209

Zinc %
6.98
8.06
11.04
9.40
16.54
28.77
6.75
15.00
17.38
10.98
21.89
11.62
15.52
19.31
14.85
18.00
15.93
15.00

Lead %
2.61
2.50
1.76
0.87
1.20
1.89
9.07
0.91
2.10
0.82
2.72
1.17
3.05
0.65
1.35
9.58
1.61
1.61

Iron %
2.17
2.88
1.62
20.00
3.50
4.36
2.78
8.80
10.79
2.90
7.64
7.64
11.85
2.32
1.94
2.18
6.20
9.32

The TE-series holes were drilled underground within the old workings of the historic Tres
Marias mine during the second half of 2008. The mineralization intersected by the TE
underground drill holes is additional zones located beyond the former mine workings to the
south.
Table 2 - Drill Results for TE-086 to TE-108
Borehole
ID
TE-086
TE-087
TE-090
TE-092
TE-092
TE-092
TE-093A
TE-096
TE-097
TE-097
TE-098

From
16.80
0.00
0.00
0.00
37.45
44.00
19.20
0.00
6.30
22.50
12.70

To
20.10
8.90
11.70
6.00
40.27
45.00
21.93
4.60
8.25
41.25
16.70

Intercept in
metres
3.30
8.90
11.70
6.00
2.82
1.00
2.73
4.60
1.95
18.75
4.00

Germanium
ppm
41
20
139
68
427
423
24
232
410
246
65

Zinc %
37.67
47.50
11.27
33.64
14.59
27.43
18.43
6.22
39.86
19.24
8.09

Lead %
0.15
0.04
1.25
0.16
2.56
3.71
0.12
1.55
3.36
2.73
0.81

Iron %
2.50
0.57
1.48
2.14
3.94
2.83
1.30
2.35
3.69
3.76
13.40

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
Borehole
ID
TE-098
TE-098
TE-099
TE-099
TE-099
TE-100
TE-100
TE-100
TE-100
TE-101
TE-101
TE-101
TE-102
TE-102
TE-105
TE-105
TE-106
TE-106
TE-107
TE-107
TE-107
TE-107
TE-108
TE-108

From

To

22.65
36.70
5.85
16.70
34.90
0.00
11.20
29.30
44.90
18.45
24.30
29.60
3.80
8.15
32.09
37.61
11.27
16.17
8.10
11.43
18.27
29.69
10.67
15.22

35.00
42.40
9.40
28.80
36.60
1.40
26.05
34.35
49.40
21.50
29.10
30.00
6.80
9.04
34.82
39.00
13.04
17.27
10.50
13.36
19.35
34.93
13.23
19.74

Intercept in
metres
12.35
5.70
3.55
12.10
1.70
1.40
14.85
5.05
4.50
3.05
4.80
0.40
3.00
0.89
2.73
1.39
1.77
1.10
2.40
1.93
1.08
5.24
2.56
4.52

Germanium
ppm
147
285
201
291
11
35
147
166
n/a
138
335
290
424
400
518
5
196
179
570
72
452
400
356
404

Zinc %
12.50
21.41
18.03
21.67
5.02
5.24
19.64
16.03
18.03
9.21
19.33
19.10
34.50
38.06
37.99
27.62
1.00
1.00
41.08
23.00
36.70
20.31
32.87
35.34

Lead %
1.96
3.04
1.87
3.06
0.51
0.61
1.79
2.18
0.07
0.86
2.39
2.29
10.92
3.84
12.93
0.16
1.57
4.02
1.80
0.23
2.85
3.33
1.70
6.32

Iron %
3.37
15.24
3.73
11.67
12.07
2.51
9.71
10.08
0.40
1.27
3.36
2.85
2.89
2.64
3.82
0.16
4.50
9.75
3.52
0.54
9.58
3.22
4.61
11.27

The assay results were completed by Inspectorate in Durango, Texas using four-acid digest and
AA finish; SGS Lakefield processed the check assays.
As is normal, the Company undertook an assay program with blanks and check assays. The
Qualified Person, as defined below, reported that the blanks lined up perfectly and the check
assays were all acceptable.
The program was supervised by Mr. Alistair Logan, BSc., a qualified geologist, reporting to Mr.
Terry Schorn, P. Geo, the Qualified Person for the Company, pursuant to NI 43-101, and who
has reviewed and approved the disclosure above.
DICOMI METALLURGY REPORT
In September 2010, the Company retained DICOMI (Diseo, Construccion y Mantenimiento
Industrial) of Torreon, Mexico to conduct metallurgical tests on mineralized samples taken from
historic underground workings of the Tres Marias mine. The Company submitted two samples of
20 kilograms each: one of sulphides and the other oxides. The general scope of work was to
establish ore benefication characteristics for the sulphides and oxides with emphasis on
germanium, zinc and lead. DICOMI delivered a technical report to the Company in November
2010 and subsequently delivered a supplemental report addressing the recovery of germanium
from the ore.

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
Preliminary findings indicate that favourable recoveries of germanium, zinc and lead may be
obtained for both sulphides and oxides. DICOMI undertook analysis of five mesh sizes (-60
+100; 100 + 150; 150 + 200; -200 + 250; and -250) leading to the following conclusions:
Sulphides

Grinding tests show that the mineralization, marmatitic sphalerite, may be easily milled
due to the soft and friable nature of the ore.

Experiments using the flotation method demonstrate that a zinc concentrate may be
obtained with projected recoveries in the order of 80 to 90%.

Micro probe tests show that the germanium, 15 to 30 micrometres, is encapsulated

within the sphalerite. It is expected that the germanium would concentrate in a ratio of
approximately 2.5:1. Further tests are currently in progress to measure the distribution
of germanium values in the different size fractions from the head sample to the
concentrate.
Oxides

Germanium values in the oxides are erratic compared to the sulphides. The principal
zinc mineral is smithsonite, a carbonate of zinc.

Grinding tests indicate 90% liberation of zinc to the size fraction of -200 + 250 mesh.

Proposed options to process this material include acid leaching with electrolysis or
reduction using an oven.
Germanium

A zinc concentrate was produced from the sulphide sample taken from the optimum
grind of -200 to +250 mesh (Tyler) with values:
2 ppm Ag, 5.17 % Pb, 18 ppm Cu, 56.70 % Zn, 9.3 % Fe, 720 ppm Ge

The resulting value of 720 ppm Ge associated with 56.70% Zn in the concentrate, which
demonstrates that the germanium will go into the zinc concentrate using the flotation
method. The approximate order of concentration from the head value is expected to be
2.5:1.

Of further interest, it is reported that the mineral Germanita (Spanish name)

Cu6FeGeS8 contained within the concentrate; 45% is free and 55% encapsulated within
the sphalerite. In theory, this may lead to the possibility of producing a partial
germanium concentrate by mechanical means.
In December 2010, three technical representatives from DICOMI visited the Tres Marias
property. They will prepare proposals to the Company: (1) addressing cost estimates for mine
rehabilitation and conceptual operating costs; and (2) defining a metallurgical balance with a
view to plant design; one each for sulphides and oxides, realizing the limited mineralization that
has been defined at the Tres Marias property. The Company will need to seek input from
potential customers to complete its feasibility assessment.
Considering that a remnant mineral has been quantified within the old workings not NI 43101 compliant the Company is progressing to determine the feasibility of conducting a bulk
sampling exercise. In the case of the sulphides, the aim would be to produce a germanium-zinc
concentrate using a ball mill and bank of flotation cells. Options to process the oxides include
experimentation using submerged combustion melter technology.
MAC PROPERTY
In February 2001, the Company decided to expand its exploration focus to include rare earth
minerals and entered into an option to acquire a rare minerals property known as the MAC
property located in the Northwest Territories, Canada.
8

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
The Company exercised its option to purchase the MAC tantalum, tin and lithium property by
paying $100,000 to Strategic Metals Ltd. (Strategic) on February 14, 2007, which gave War
Eagle 100% ownership in the MAC property subject to a 2.0% NSR. The Company had the right
to purchase 1% of Strategics net smelter royalty for $1,000,000 until February 14, 2010, but did
not exercise this option.
In June 2007, the Company received final approval from the Exchange, and in December 2007,
Eagle Hill Exploration Corporation (Eagle Hill) received its final approval, for an option
agreement whereby Eagle Hill had the right to earn up to a 70% interest in the MAC property by
spending a minimum of $2,800,000 over a period ending on December 31, 2011.
In July 2009, the Company entered into a mutual release agreement with Eagle Hill whereby the
MAC property option agreement was terminated. Under the terms of the mutual release
agreement Eagle Hill maintains a 3.5% interest in the MAC property.
In August 2009, the Company entered into an option agreement with VM Exploration Ltd. (VM
Exploration), a private company based in Vancouver, British Columbia. A letter of intent was
previously signed in May 2009. Under the agreement, VM Exploration had the option to earn up
to an 80% interest in the MAC property in consideration of VM Exploration incurring
expenditures of up to a total of $2,000,000 in accordance with a definitive agreement executed
in August 2009. In June 2010, the Company and VM Exploration terminated the option
agreement and the Company recorded a full impairment of its investment in the MAC property.
Based on review of drill results and modelling work performed over time, the Company believes
that the MAC property has potential but that a relationship with a processor or consumer will be
required to justify development.
PROPERTY DESCRIPTION
The MAC property is located in the southwest Northwest Territories, approximately 250
kilometres by air north of Watson Lake, at latitude 6211N and longitude 12554W on NTS
1051/2 and comprised of ten contiguous claims covering 15,015 hectares, which were staked
between August 2000 and September 2001 and in July 2007.
Several of these claims expired in September 2010; however, the Company submitted the lease
application documents and associated rental fees and was granted an extension to lease these
properties, as indicated below:
Claim

Grant No.

Acres

Expiry Date

Extension Granted

MAC 1

F65138

1,219

September 19, 2010 *

November 30, 2011

MAC 2

F65139

1,807

September 19, 2010 *

November 30, 2011

MAC 3

F65140

2,066

September 19, 2010 *

November 30, 2011

MAC 4

F36511

1,807

September 19, 2010 *

November 30, 2011

MAC 5

F36512

826

September 19, 2010 *

November 30, 2011

MAC 6

F66407

1,807

March 27, 2011

November 30, 2011

MAC 7

F36513

1,446

November 11, 2011

November 30, 2011

MAC 8

K07610

1,239

July 17, 2017

MAC 9

K07611

1,535

July 17, 2017

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
MAC 10

K07612

1,188

July 17, 2017

Although the claims have expired, the Company is still able to convert these claims to lease until the extension
dates indicated above.

The Company has also applied to take MAC claims 6 and 7 to lease which are scheduled to
expire in 2011. The Company intends to submit the application for lease for seven of the MAC
claims by the November 30, 2011 deadline. The Company has contracted a surveyor to
complete the work, which is estimated to cost approximately $100,000, of which, the Company
has already incurred $29,000.
The MAC property also includes certain claims located in Yukon, as follows:
Claim

Grant No.

Expiry

Selwyn 1

YC71589

June 26, 2013

Selwyn 2

YC71590

June 26, 2013

Selwyn 3

YC71591

June 26, 2013

Selwyn 4

YC71592

June 26, 2013

Selwyn 5

YC71593

June 26, 2013

Selwyn 6

YC71594

June 26, 2013

Selwyn 7

YC71595

June 26, 2013

Selwyn 8

YC71596

June 26, 2013

Selwyn 9

YC71597

June 26, 2013

Selwyn 10

YC71598

June 26, 2013

Road access to within 20 kilometres of the property is possible from Watson Lake by way of the
Robert Campbell Highway and Nahanni Range Road, a total distance of 300 kilometres. From
this point an abandoned winter road runs northwest to the Howards Pass lead-zinc deposit,
passing within two kilometres of the northern end of the MAC claim block. A bulldozer trail (also
to Howards Pass) runs within one kilometre of the southern part of the property. The closest
lake suitable for floatplane access is Moose Lake, which is one kilometre east of the claim
block.
The claims lie within the Selwyn Mountains. The north-western edge of the claim block roughly
parallels a relatively flat topped ridge ranging in elevation between 2,000 to 2,100 metres.
Bedrock exposure is excellent and north-facing slopes have moderate to steep relief and were
cut by Late Pleistocene glaciers to form numerous cirques and secondary ridges. Southern
exposures exhibit moderate to gentle talus slopes incised by glacial valleys. Elevations range
from 1,200 metres near Moose Lake to 2,100 metres atop the main ridge. The tree line is about
1,500 metres and below this elevation glacial till and moraines predominate.
EXPLORATION
In fiscal 2008, the Company carried out a soil geochemical sampling program over the claim
area. The results of this sampling suggest that the dykes continue for at least one kilometre
north and two kilometres south of known exposures.
10

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
A diamond drilling program was also carried out in fiscal 2008 and consisted of eight holes
totalling approximately 1,798 metres (5,900 feet). This is the first drilling that has been done on
the property and provides the following information with regard to the extent and geometry of
the mineralized dyke swarms.
The drill holes MAC001, MAC006, and MAC007 show the most promising results. The further
five drill holes show continuation of the pegmatite system to depth. In six of the eight holes,
pegmatite was encountered within the last ~10 metres of the drill holes.
All drill holes intersected the pegmatite dikes including a ~25.4 metre section from MAC006
(from 165.9 metres to 191.33 metres) that was sampled continuously to include the host rock
(metasediments) of the pegmatite. The continuously sampled section indicates mineralization
beyond the margin of the pegmatite and into the host rock. Lithium diffuses the most (up to
1,070 parts per million ~1.2 metres away from the contact), then tantalum (up to 102.5 parts per
million ~ 0.5 metres away from the contact) and tin (up to 236 parts per million 0.5 metres away
from the contact).
The grades of the 2007 geochemical sampling from the diamond drilling program correlate well
with the previous surficial specimen, channel and chip sampling. Thus, the results from the
diamond drilling, coupled with historical surface sampling programs, confirm not only the large
aerial extent of the mineralized system but also the continuation of the system to depths in the
order of 1,000 metres (plateau height to valley bottom). Tables 1a and 1b below show the
normalized grade highlights as indicated from multi-element evaluation of lithium, tantalum and
tin.
Table 1a. Selected "individual" intercepts with minimum mineable width of 2.5 metres
applied
DDH
Hole

From
To
(metres) (metres)

Collective
Total
Pegmatite
Width
Width
(metres)
(metres)

Lithium
(ppm)

Lithium
Oxide
(%)

%
Spodumene

Tantalum
Oxide
(g/t)

Tin
Oxide
(g/t)

MAC001

62.5

63.6

2.5

1.1

98

0.02

0.26

317.46 307.34

MAC001

68.8

70.1

2.5

1.3

609

0.13

1.64

84.25 250.19

MAC001

86

89.2

3.2

2.1

2497

0.54

6.74

76.92 384.81

MAC001

102.8

105.94

3.14

1.74

2910

0.63

7.86

140.42 189.23

MAC006

61.88

66.86

4.98

2.18

1186

0.26

3.2

76.92 231.14

MAC006

85.6

87

2.5

1.4

1703

0.37

4.6

177.05 298.45

MAC006

172.37

190.64

18.27

13

4294

0.92

11.59

32.97 149.86

MAC007

30.22

33.62

3.4

0.98

911

0.2

2.46

57.39 171.45

MAC007

105.84

116.78

10.94

9.86

5581

1.2

15.07

35.41 219.71

MAC007

143.73

149.2

5.47

1.69

1536

0.33

4.15

26.86 104.14

MAC008

37.58

38.73

2.5

1.15

1243

0.27

3.36

79.37

241.3

MAC008

153.93

158.45

4.52

2.02

898

0.19

2.42

35.41

82.55

11

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
Table 1b. Selected "bulk" intercepts with widths larger than 50 metres

DDH
Hole

From
To
(metres) (metres)

Collective
Total
Pegmatite
Width
Width
(metres)
(metres)

Lithium
(ppm)

Lithium
Tin
%
Tantalum
Oxide
Oxide
Spodumene Oxide (g/t)
(%)
(g/t)

MAC001

62.5

122.1

59.6

8.93

345

0.07

0.93

39.07 68.58

MAC006

61.88

190.64

128.76

30.16

735

0.16

1.98

13.43 40.64

MAC007

100.85

179.1

78.25

15.25

977

0.21

2.64

9.77 54.61

Lithium assays are received in ppm, however, product is typically delivered as a lithium bearing
silicate mixture (i.e., spodumene) with a minimum Li2O content reported in per cent. Tantalum
and tin assays are also received in ppm but often reported in oxide form (Ta2O5 and SnO2,
respectively) and reported in grams per tonne (g/t).
Ivan Young, P Geo., is the qualified person under NI 43-101 who supervised the exploration
program on the MAC property. All analytical work was completed by ALS Chemex Laboratories
Ltd. of North Vancouver, BC, using standard assay procedures that included analysis of Li via
method MEMS61 (four-acid "near total" digestion), while all other elements were obtained via
method MEMS81 (a more robust technique using sample fusion in lithium borate).
The Company did not carry out any work on the MAC property in fiscal 2009 or fiscal 2010 prior
to the option agreement with VM Exploration; however Eagle Hill expended $62,110 in fiscal
2009, which was comprised primarily of clean-up and post repair of the property. The scope of
exploration work was such that there was little disturbance of the land and asset retirement
obligations, if any, are minimal. In fiscal 2011, the Company completed modelling work to better
demonstrate the mineral structures and to perform internal estimates of ore volumes and
economics. As described above, the Company intends to take the MAC claims 1-7 to lease and,
to do so, has contracted a surveyor to complete the work by November 30, 2011. Due to
adverse weather conditions, it may not be possible to survey the property before the November
30, 2011 deadline.
GEORGES LAKE
War Eagle earned a 90% property interest in the Georges Lake gold property, located
approximately 135 kilometres northeast of La Ronge, Saskatchewan. In February 2010 the
Company signed an agreement with Bullion Fund Inc. (Bullion) to acquire the remaining 10%
interest of the Georges Lake property for a cash payment of $75,000 and completed the
acquisition in June 2010. The Company now owns an undivided 100% working interest in
Georges Lake.
The Company is seeking to sell or option the Georges Lake gold property and currently does
not have any immediate plans to develop this property. Accordingly, the Company recorded an
impairment of $727,072 on its Georges Lake property in fiscal 2011.

12

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
The Company submitted the necessary assessment application and is in good standing for all
claims on the Georges Lake property, as indicated below:
Claim Number
S-111184
S-111185
S-111186
S-111400
S-111401
S-111402
S-111403
S-111404

Expiry
November 18, 2011
November 18, 2011
November 18, 2011
July 8, 2012
July 8, 2012
July 8, 2012
July 8, 2012
July 8, 2012

PROPERTY DESCRIPTION
The Georges Lake property was optioned during fiscal 2006 at a cost of $145,000. Initial 2006
work consisted of geological mapping and sampling along with geophysical surveys at a cost of
$42,000.
A showing, referred to as the VG showing, appears to be the most economically significant
known showing on the Georges Lake property. The mineralization is exposed in a 17 x 27
metre area (A) and in an adjacent 8 x 10 metre area (B). A series of volcanics and sediments
are cut by a thick quartz vein that is folded and plunges at a shallow angle to the southwest. The
chip sampling of the area (A) returned an average of 7.8 g/t (0.25 oz/t) gold (uncut) from all 43
samples. An average of 15.3 g/t (0.50 oz/t) gold (uncut) was obtained from 21 samples that
represents the western half of the area. The chip sampling of area (B) returned an average of
1.7 g/t (0.06 oz/ton) gold (uncut) from all 18 samples. An average of 3.2 g/t (0.10 oz/t) gold
(uncut) was obtained from nine samples that represent the eastern half of the area.
In December 2007, Fugro Airborne Surveys Corp. carried out an 852-line kilometre airborne
magnetic and electromagnetic survey over the property, with positive results. The dominant
feature seen in the magnetic field data is a strong, north-south trending contact/fault running
along the eastern edge of the block. Several strong, highly faulted and deformed bodies lie
within the central part of the block. The Seabee gold mine is located about 15 kilometres
northwest of the block and could possibly correlate with the magnetic and electromagnetic
anomalies located by the survey.
The Company did not work on the Georges Lake property in the three months ended June 30,
2011 and is seeking to option it to a third party.
OTHER MINERAL PROPERTY INTERESTS
The Company also owns the rights to a 1.5% royalty on gross revenues from the Candle Lake
diamond property, located in central Saskatchewan and a 0.5% net smelter royalty from the
Antimony Mountain gold property, located in Yukon.
FINANCIAL
CONSOLIDATED FINANCIAL INFORMATION
In the following discussion, financial amounts other than per-share amounts have been rounded
to the nearest thousand dollars. The following is a summary of certain selected financial
13

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
information that is qualified by the more detailed information appearing in the financial
statements of the Company.
SELECTED QUARTERLY INFORMATION
The following is a summary of the eight mostly recently completed quarters:
Quarter ended

Accounting
principles

Asset
Impairment
$

Loss for the

period
$

Loss per
share
$

Total assets
$

September 30, 2009

December 31, 2009
March 31, 2010

Canadian GAAP
Canadian GAAP
Canadian GAAP

(500,000)

(298,499)
(31,040)
(666,711)

(0.11)
(0.01)
(0.25)

3,785,409
3,267,643
2,606,746

June 30, 2010

September 30, 2010
December 31, 2010
March 31, 2011
June 30, 2011

IFRS
Canadian GAAP
Canadian GAAP
Canadian GAAP
IFRS

(923,313)
(2,034,856)
-

(117,378)
(148,892)
(1,129,166)
(2,144,827)
(108,998)

(0.04)
(0.04)
(0.32)
(0.62)
(0.03)

3,150,470
3,263,188
2,228,667
154,346
119,925

During this period, the Company did not generate any revenues or have discontinued
operations or extraordinary items. Apart from mineral property write-downs (discussed below)
the main factors contributing to variations in the quarterly loss were stock-based compensation
awards, reconnaissance activities and foreign exchange gains and losses.
The Company scaled back its operations in the spring of 2009 and the quarterly loss has
typically been in the range of $100,000 to $150,000 since then, except in quarters when it has
recorded an asset impairment as disclosed in the table above.
RESULTS OF OPERATIONS
All fiscal 2012 and comparative financial amounts discussed below are determined in
accordance with IFRS.
The Company incurred a net loss before and after tax of $109,000 or $0.03 per share, for the
three months ended June 30, 2011, compared to a loss of $117,000 or $0.04 per share, in the
three months ended June 30, 2010. The Companys expenses were minimal in the first three
months of fiscal 2012 as it evaluated potential opportunities for its projects, which is consistent
with the comparative period and the remainder of fiscal 2011.
This following section discusses significant operating expenses for the three months ended
June 30, 2011 as compared to the three months ended June 30, 2010, unless discussed
elsewhere:
Consulting fees These fees are paid to consultants not acting in a management or
staff capacity. The Company did not incur consulting fees in the current period.
Director fees Since April 1, 2009, the Company has paid its two independent
directors $3,500 per month each. Subsequent to the reporting date, the directors
agreed to forgo fees accrued in the current and certain prior periods. See Liquidity
and Capital Resources below.
Insurance The Company maintains liability and related insurance in respect of its
Canadian and Mexican offices. It also has a directors and officers policy.
14

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
Investor relations and news dissemination In view of poor capital markets and few
corporate developments, the Company limited investor relations activities to a
minimum.
Management fees and salaries This expense represents amounts paid to officers
and contractors that administer the operations of the company. Subsequent to the
reporting date, an officer of the Company agreed to forgo fees paid in the current and
certain prior periods. See Liquidity and Capital Resources below.
Professional fees Professional fees comprise audit and legal fees.
Rent Rent expense comprises the cost of the Companys Vancouver office.
Interest income The lower balance of cash resulted in a decline in interest income
compared to the comparative period.
EXPLORATION EXPENDITURES
Deferred exploration expenditures and acquisition costs in the three months ended June 30,
2011 comprised:
Tres
Marias
$

Georges
Lake
$

MAC
$

29,313

29,314

3,557
4,165
13,423
4,141
688
7,176
2,024

3,557
4,165
13,423
4,141
688
7,176
2,024

At March 31, 2011

Additions
Accounting
Administration
Assays
Consulting
Labour
Legal
License and lease
Permits
Regulatory
Supplies
Travel
Acquisition
Additions in the period

Total
$

35,174

35,174

35,174

29,313

64,488

Impairment
At June 30, 2011

Antimony
Mountain
$

Expenditures on Tres Marias relate to maintenance and the assessment of economic feasibility.
In fiscal 2011, the Company took a property write-down of $1,960,000, on its Tres Marias and
Georges Lake properties, as it defers any immediate development plans on these properties
while it focuses on seeking joint venture opportunities.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2011, the Company had a working capital deficiency of $251,000. As discussed in
further detail below, the Company subsequently completed a private placement and directors
and a contractor agreed to forgo amounts accrued to them. These changes have substantially
improved the liquidity of the Company.
15

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
War Eagle has not paid any dividends since incorporation and it has no plans to pay dividends
in the immediate future. The Company expects to retain its earnings, if any, to finance further
growth. The directors of the Company will determine if and when dividends should be declared
and paid in the future based on the Companys financial position at the relevant time. All of the
common shares of the Company are entitled to an equal share in any dividends declared and
paid.
The Company has a history of losses and its ability to continue as a going concern is dependent
upon the discovery of economically recoverable mineral reserves, confirmation of the
Companys interest in the underlying mineral claims, the ability of the Company to obtain
necessary financing to complete their development, and future profitable production or proceeds
from the sale of the property. The significant factors that affect the Companys liquidity over the
next few months are:

In September 2011, the Company completed a private placement that raised gross
proceeds of $990,000 and net cash proceeds of approximately $920,000.

In September 2011, directors and a contractor agreed to forgo all fees accrued from
November 2010 totalling $275,000. The Company plans to issue warrants to these
parties but, as of the date of this MD&A, the Company has not yet finalized the terms of
the warrants.

The Company has signed a letter of intent with Andromeda to enter into a reverse
takeover transaction with a concurrent financing (see Andromeda Resources Inc.
above). If the transaction closes as planned, the Companys cash outlays will increase
significantly as it undertakes development work on the Terrazas property.

The Company plans to bring certain of its MAC claims to lease, which will require
payment of fees and a survey of the property at an estimated aggregate cost of
$100,000.

Other factors affecting liquidity include

The Company is owed US$100,000 (approximately $104,000) plus accrued interest by

Pacific Copper Corp. which debt is secured by a claim over certain of Pacific Copper
Corp.s properties. Pacific Copper Corp.s filings with the US Securities and Exchange
Commission, state that in February 2009, War Eagle notified Pacific Copper that it
would not fund the full amounts contemplated in the War Eagle Note, funding shortfall of
US$55,000. Pacific Copper has notified War Eagle that it considers this failure to fully
fund the War Eagle Note to be a breach, has denied the security interest, and has
reserved all of its legal rights. The Company believes that Pacific Copper Corp.s
assertion that the Company had an obligation to fund a further US$55,000 is incorrect
and believes that its security interest is still effective. The Company believes that it may
ultimately collect the amount due, but has fully provided for the outstanding balance of
the promissory note and accrued interest.

The Companys board and management has assessed the Companys business plan, with a
view to disposing of certain assets that are better held by someone else and joint venturing on
other assets. The Company does not expect to generate significant proceeds from the disposal
or optioning of any properties.

16

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
SHARE CAPITAL
2011 PRIVATE PLACEMENT
In September 2011, the Company closed a non-brokered private placement announced on
September 7, 2011 consisting of 3,960,000 units at a price of $0.25 per unit for gross proceeds
of $990,000. Each unit comprises one common share of the Company and one common share
purchase warrant entitling the holder to purchase one common share of the Company at a price
of $0.34 until September 26, 2013.
The Company has agreed to pay qualified parties finders fees of $49,800 and non-transferable
warrants entitling them to purchase 199,200 common shares on terms and conditions similar to
that of the warrants issued under the private placement.
All securities issued with respect to the placement are subject to a four-month hold period
expiring on January 27, 2012, in accordance with the policies of the Exchange and the
provisions of the Securities Act (British Columbia).
SHARE CONSOLIDATION
In July 2011, the Company effected a consolidation of its share capital on a 20 for 1 basis,
consolidating its 69,645,394 currently outstanding common shares to 3,482,272 common
shares. Shareholder authorization to effect the share consolidation was approved at the
Company's annual and special general meeting held on February 28, 2011.
The consolidation was effected to provide the Company with increased flexibility when
negotiating potential financing opportunities and allow it to more easily implement joint venture
or acquisition proposals.
RELATED PARTY TRANSACTIONS
Particulars of transactions with related parties are disclosed in note 13 of the Companys June
30, 2011 financial statements. The Company does not have any contractual commitments to
related parties.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
Information about financial instruments is disclosed in note 15 of the financial statements.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Effective with the beginning of the fiscal 2012 reporting year, the Company now prepares
financial statements under IFRS. The Company has completed its evaluation of the impact of
IFRS on its financial accounting and reporting systems and has prepared accounting
information under IFRS for comparative purposes effective April 1, 2010.
The condensed unaudited interim consolidated financial statements for the three months ending
June 30, 2011, have been prepared in accordance with IAS 34, using accounting policies
consistent with IFRS. These are the Companys first financial statements prepared in
accordance with IAS 34 using accounting policies consistent with IFRS. Previously the
Company prepared its annual and interim financial statements in accordance with Canadian
GAAP.
The accounting policies listed below have been applied consistently to all of the periods
presented in the financial statements. They have also been applied in preparing an opening
17

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
IFRS statement of financial position as at April 1, 2010, for the purpose of transition to IFRS, as
required by IFRS 1 - First Time Adoption of International Reporting Standards (IFRS 1).
IMPACT OF ADOPTING IFRS ON THE COMPANYS BUSINESS
The adoption of IFRS has resulted in some changes to the Companys accounting systems and
business processes; however, the impact has been minimal. The Company has not identified
any contractual arrangements that are significantly impacted by the adoption of IFRS.
The Companys officers and staff involved in the preparation of financial statements have been
appropriately trained on the relevant aspects of IFRS and the changes to accounting policies.
The board of directors and audit committee have been regularly updated throughout the
Companys IFRS transition process and are aware of the key aspects of IFRS affecting the
Company.
IMPACT OF ADOPTING IFRS ON THE COMPANYS ACCOUNTING POLICIES
The adoption of IFRS requires the application of IFRS 1, which provides guidance for an entitys
initial adoption of IFRS. IFRS 1 generally requires retrospective application of IFRS as effective
at the end of its first annual IFRS reporting period. However, IFRS 1 also provides certain
optional exemptions and mandatory exceptions to this retrospective treatment, which are
discussed in more detail in note 20 of the Companys June 30, 2011 financial statements.
The Company has changed certain accounting policies to be consistent with IFRS effective
March 31, 2012, the Companys first annual IFRS reporting date. The changes to its accounting
policies have resulted in certain changes to the recognition and measurement of assets equity
and expenses within its financial statements. The following IFRS standards have the most
significant impact on the Company:
IFRS 2 Share Based Payments
Both Canadian GAAP and IFRS 2 Share Based Payments, measure share-based
compensation related to share purchase options at the fair value of the options granted. The
Company has used the Black-Scholes option-pricing model and recognized this expense over
the vesting period of the options. There is minimal difference between Canadian GAAP and
IFRS when options vest when awarded, but there is a significant difference when options vest
over time. Under Canadian GAAP, the Company recognized the expense evenly over the
vesting period. Under IFRS, the Company employs graded vesting the result that the expense
is recognized more quickly. In addition, under IFRS 2, the definition of an employee is broader
allowing the Company to group employees and others providing similar services together.
IAS 16 Property and equipment
Under the cost method, IAS 16 requires property equipment to be separated into its significant
components and depreciated according to the useful life of those particular components. IAS 16
also requires the depreciation to commence when an asset is available for use, which is when
it is in the location and condition necessary for it to be capable of operating in the manner
intended by management. Furthermore, under IFRS, the cost of major overhauls on items of
property and equipment is capitalized as a component of the related item of property and
equipment and depreciated over the period until next major overhaul.
Managements analysis of the Companys property and equipment concluded the Companys
drill equipment can be separated into components that have different lives. As a result, the
asset will be amortized more slowly under IFRS.

18

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
IAS 36 Impairment of Assets
The need to address impairment is substantially the same as under Canadian GAAP. There is a
difference, however, in how the impairment amount is quantified. IAS 36 uses a one-step
approach for testing and measuring asset impairments, with asset carrying values being
compared to the higher of (1) value in use; and (2) fair value less costs to sell. Value in use is
defined as being equal to the present value of future cash flows expected to be derived from the
asset in its current state. In the absence of an active market, fair value less costs to sell may
also be determined using discount cash flows. Canadian GAAP uses undiscounted future cash
flows are compared to the assets carrying value to determine if impairment exists.
The difference between the one-step (IFRS) and two-step (Canadian GAAP) approaches to
determining whether an impairment has occurred does not have a bearing on War Eagles
mineral properties as the Company made a determination at March 31, 2010 to test for
impairment under Canadian GAAP. Given that the Companys mineral properties are not readily
comparable to other mineral properties and since it isnt practical to determine a cash exchange
value, the Company used its market capitalization to determined fair value. The Company will
use the Canadian GAAP fair value as the basis for its IFRS opening carrying value.
IFRS requires impairment to be reversed if the underlying assumptions have changed. An
increase in the Companys market capitalization would result in an increase in the carrying value
of mineral properties, assuming there were no other impairment considerations in the interim.
Flow-through Share Offerings
Current Canadian tax legislation permits mining entities to issue flow-through shares to
investors. Flow-through shares are securities issued to investors whereby the deductions for tax
purposes related to mineral exploration and evaluation expenditures may be claimed by
investors instead of the entity. Under Canadian GAAP, in accordance with EIC-146 Flowthrough Shares, a deferred tax liability was recognized on the date that the Company filed
renouncement documents with the Canadian tax authorities assuming there is reasonable
assurance the expenditures will be made.
Under IFRS, the issue of flow-through shares is treated as an issue of ordinary shares and the
sale of tax deductions. At the time the Company issues flow-through shares, the sale of tax
deductions is deferred and presented as other liabilities in the statement of financial position to
recognize the obligation to incur and renounce eligible mineral exploration and evaluation
expenditures. The Company analyzed the flow-through share issuance in fiscal 2011 and noted
that as the market value was equal to the price of the flow-through units, no liability was incurred
on issuance of the flow-through shares.
Please refer to note 3 of the interim consolidated financial statements for a summary of the
Companys accounting policies to be consistent with IFRS effective March 31, 2012, the
Companys first annual IFRS reporting date.
RECONCILIATIONS BETWEEN CANADIAN GAAP AND IFRS
Please refer to the note 20 of the interim consolidated financial statements for reconciliations
from Canadian GAAP to IFRS of the Companys:
statements of financial position at April 1, 2010, June 30, 2011 and March 31, 2011; and
statements of comprehensive loss for the period ended June 30, 2011 and the year
ended March 31, 2011.

19

WAR EAGLE MINING COMPANY INC.

Managements Discussion and Analysis
For the Three Months Ended June 30, 2011
RISKS

The Companys letter of intent with Andromeda is subject to regulatory approval,

shareholder approval and a financing, among other conditions. There can be no
assurance that all conditions will be satisfactorily addressed.

The Company continues to seek complementary joint venture opportunities for its
projects and requires additional financing to fund its plans and any possible
transactions.

The Company will require additional investment to fund its plans to place Tres Marias in
production; it may not be possible to obtain such investment.

Although the Company hopes to generate revenues from the sale of minerals from its
Tres Marias property, it will incur significant operating losses for the foreseeable future.

Although there is mineralization at the Tres Marias property, the Company does not
have quantified mineral deposits at its Tres Marias property.

If the Company identifies economic deposits at Tres Maris, it will need to identify or
develop processing facilities to process ore or concentrate. The proposed Terrazas
development may provide an opportunity to process Tres Marias ore.

The Companys success is dependent on future mineral prices.

In order to develop its mineral properties, the Company will need to add experienced
senior management, personnel and consultants. Furthermore, it will be substantially
dependent upon the services of a few key individuals for the successful operation of its
business.

The development of mines is subject to extensive laws and regulations by various

government agencies that may make mine development uneconomic or impossible.

There can be significant political risk to operating in foreign jurisdictions and northern
Mexico has been adversely affected by drug wars.

OUTSTANDING SHARE DATA

As at the date of this MD&A, the Company had:
7,442,272 common shares issued and outstanding, which includes 3,960,000 shares
issued in the September 2011 private placement.
4,353,375 warrants to purchase common shares, which includes 3,960,000 share
purchase warrants issued in the September 2011 private placement.
225,207 finders warrants to purchase common shares, which includes 199,200
finders warrants issued in the September 2011 private placement.
Stock options to purchase 213,250 common shares to directors, officers, employees,
investor relations providers and consultants.
The maximum number of shares potentially issuable is therefore 12,234,104.

20

Schedule F
Audited Consolidated Financial Statements for Andromeda Resources Inc. for the Period from
Incorporation on January 11, 2010 to August 31, 2011

F-1 AC/1463772.11

SCHEDULE G
Management Discussion and Analysis for Andromeda Resources Inc. for the Period from
Incorporation on January 11, 2010 to August 31, 2011

G-1 AC/1463772.11

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

Managements discussion and analysis (MD&A) is current to November 11, 2011 and is
managements assessment of the operations and the financial results together with future
prospects of Andromeda Resources Inc. (Andromeda, Corporation, or the Company).
This MD&A should be read in conjunction with our audited consolidated financial statements
and related notes for the year ended August 31, 2011, prepared in accordance with Canadian
generally accepted accounting principles. All figures are in Canadian dollars unless stated
otherwise. This discussion contains forward-looking statements that are not historical in nature
and involves risks and uncertainties. Forward-looking statements are not guarantees as to
Andromedas future results as there are inherent difficulties in predicting future results.
Accordingly, actual results could differ materially from those expressed or implied in the
forward-looking statements. The Company has adopted National Instrument 51-102F1 as the
guideline in presenting the MD&A.

TABLE OF CONTENTS
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

Description of Business ........................................................................................................................ 2

Developments during and subsequent to the year ended August 31, 2011 ...................................... 2
Overall Performance ............................................................................................................................ 4
Results of Operations ........................................................................................................................... 4
Summary of Quarterly Results............................................................................................................ 5
Related-party Transactions ................................................................................................................. 7
Financial Instruments and other Instruments ................................................................................... 7
Financial Instruments and other Instruments ................................................................................... 7
Status Andromedas Transition to International Financial Reporting Standards (IFRS) .... 122
Cautionary Note Regarding Forward Looking Statements.......................................................... 155
Managements Responsibility for Financial Information ................................................................ 166

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

1. Description of Business
Andromeda Resources Inc. (Andromeda or the Company) was incorporated under the laws of
the Province of Ontario, Canada on January 11, 2010. Its principal business activities are that of
mineral exploration and development in Mexico.
The Company's development of its Terrazas project is affected by various factors, including the
market price of zinc, regulatory and environmental compliance, general and administrative costs,
the level of exploration and development expenditures and other discretionary costs. While
Andromeda seeks to manage the level of risk associated with its business, many of the factors
affecting these risks are beyond the Companys control.
As at November 11, 2011, the directors and officers of the Company were:
Chris Davie
Rick Moscone
Rene Mlasodich
Andres Tinajero

CEO and Director

Corporate Secretary and Director
Director
CFO

2. Developments during and subsequent to the year ended August 31, 2011
Financing Developments
On September 23rd 2011, the Company entered into a Letter of Intent (LOI) with War Eagle
Mining Company Inc. (War). Under the terms of the LOI, the shareholders of Andromeda will
exchange all of the issued and outstanding common shares of Andromeda for common shares of
War (the "RTO") such that the current shareholders of War will own approximately 32% of the
outstanding shares of the combined company resulting from the RTO (the "Resulting Issuer") and
shareholders of Andromeda (other than War) will own the remaining 68% of the Resulting Issuer
prior to completion of the financing to be closed concurrently with the completion of the
transaction between War an the Company.
Completion of the transaction is conditional upon, among other things, receipt of all required
regulatory and shareholder approvals, the negotiation and execution of definitive documentation
and the completion of a financing. Pursuant to the equity financing, Andromeda will issue a
minimum of 2,333,333 Andromeda units at a price of $3.00 per Andromeda unit to raise gross
proceeds of $7,000,000 and a maximum of 3,333,333 Andromeda units at a price of $3.00 per
Andromeda unit to raise gross proceeds of $10,000,000. Each unit will be comprised of one
Andromeda common share and one-half of one Andromeda common share purchase warrant.
Each whole Andromeda warrant will be exercisable into one Andromeda common share at an
exercise price of $4.00 per Andromeda share for a period of 24 months.
Union Securities Ltd. and Canaccord Genuity Corp., as agents for the financing, will receive a
cash commission of 8% of the gross proceeds of the financing and such number of broker options
equal to 8% of the number of Andromeda units issued pursuant to the financing, each broker
option exercisable into a unit at an exercise price of $3.00 per unit for a period of 24 months.

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

Exploration Developments
Terrazas Project
The Terrazas project has been the subject of a 43-101 compliant resource estimate dated
November 11, 2011. The resource established, based on drilling carried out between 2000 and
2006, is reported as two geologically separate but spatially related resource blocks as follows:

Andromeda considers the measured and indicated resource of 27.8 million tonnes at 3.17 % zinc
and 0.3% copper at the Cerro Verde deposit to be the basis for further investigation of the
economics of the project. All mineralisation is oxide and Andromeda intends to define a suitable
process for extraction of zinc and copper and to advance the project toward feasibility and
eventually production.
3. Overall Performance
For the year ended August 31, 2011 the Companys cash and cash equivalent position decreased
by $556,289 to $67,092 from $623,381 at August 31, 2010. This decrease is mainly due to
property payments on the Companys property and operating expenses.
The Company is engaged in the business of developing the Terrazas project. The Company holds
no interests in producing or commercial ore deposits. The Company has no production or other
revenue. There is no operating history upon which investors may rely. Additional substantial
financial resources will be required to develop the Terrazas project to a state of production. If the
Company is unable to finance the establishment of ore reserves or the development of mining and
processing facilities it will be required to sell all or a portion of its interest in such property to one
or more parties capable of financing such development.

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

4. Results of Operations
Selected Annual Information

Loss before income taxes

Net loss
Loss per weighted average share
basic and diluted
Total Assets

Year Ended
August 31,
2011
$
194,001
194,001

Period from January 11,

2010 (date of incorporation) to
August 31, 2010
$
65,968
65,968

$0.090
1,479,122

$0.042
1,608,108

Three month period ended August 31, 2011

The Company incurred a net loss of $69,170 or $0.024 a share for the three month period ended
August 31, 2011, compared with a net loss of $62,287 or $0.041 a share for the same period
ended August 31, 2010.
For the three month period ended August 31, 2011, management and consulting fees increased by
$4,917 to $15,529 from $10,612 in the same period in 2010. The increase is due to the fact that
the Company was incorporated during 2010 and was fairly dormant during the first few months
of operations.
Professional fees decreased by $6,449 to $8,750 during the three month period ended August 31,
2011 compared to $15,199 in the same period in 2010. The decrease is due to the fact that the
Company engaged auditors late in fiscal 2010 to perform their services.
Travel expenses for the three month period ended August 31, 2011 decreased by $4,850 to
$13,430 from $18,280 in the same period in 2010. The decrease is due to the Company incurring
travel expenses to visit the property soon after incorporation and signing of the property
agreement. The Company incurred less travel expenses in the most recent quarter as it is focused
on completing its going-public transaction with War.
Total office and general costs increased in the three month period ended August 31, 2011, by
$14,037 to $14,626 from $589 in 2010. The increase is attributable to higher operating costs as
the company has operated its office space for a full year as opposed to a short year in 2010 and
prepares for exploration on the properties in fiscal 2012.
For the year ended August 31, 2011
The Company incurred a net loss of $194,001 or $0.09 a share for the year ended August 31,
2011, compared with a net loss of $65,968 or $0.04 a share for the same period ended August 31,
2010.
For the year ended August 31, 2011, management and consulting fees increased by $106,567 to
$117,179 from $10,612 in the same period in 2010. The increase is due to the fact that the
Company incorporated during 2010 and was fairly dormant during the first few months of
operations.

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

Professional fees increased by $4,801 to $20,000 during the year ended August 31, 2011
compared to $15,199 in the same period in 2010. The increase is attributable to higher audit costs
in the current year as the Company had a full year of operations as opposed to a short fiscal year
in 2010.
Travel expenses for the year ended August 31, 2011 increased by $9,778 to $29,739 from
$19,961 in the same period in 2010. The increase is due to the Company ramping up its
operations through advancing its current mineral properties, and thus, an increase in travel costs
to progress and build awareness about its properties.
Total office and general costs increased in the year ended August 31, 2011, by $15,669 to
$18,258 from $2,589 in 2010. The increase is attributable to higher operating costs as the
company has operated its office space for a full year as opposed to a short year in 2010 and
prepares for exploration on the properties in fiscal 2012.
5. Summary of Quarterly Results
Selected financial information for the eight quarters as follows:
August 31,
2011
$
Total revenue
Net loss
Loss per share basic
and diluted

Total revenue
Net loss
Loss per share
basic and diluted

May 31,
2011
$

69,170

26,290

$0.024

$0.009

August 31,
2010

May 31,
2010

February 28, November 30,

2011
2010
$
$
43,431
55,110
$0.015

$0.019

62,287

3,681

January 11, 2010

(incorporation)
to February 28,
2010
$
-

$0.041

$0.001

Working Capital
As at August 31, 2011, the Company had a net working capital of $32,566 compared to $696,349
as at August 31, 2010.
A summary of the Companys cash position and changes in cash and cash equivalents for the year
ended August 31, are provided below:

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

Cash used in operating activities gross

Changes in non-cash operating working capital
Cash used in operating activities - net
Cash used in investing activities
Cash (used in) provided by financing activities
(Decrease) Increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period

Year ended
August 31,
2010
2011
(194,001) $ (63,968)
(72,968)
172,494
(136,936)
(21,507)
(772,191)
(469,782)
1,532,508
(65,000)
623,381
(556,289)
623,381
$ 623,381
67,092

Year ended August 31, 2011 vs. August 31, 2010

Operating Activities
Cash flow used by operating activities before changes in non-cash working capital during the year
ended August 31, 2011 was $(194,001) compared to $(63,968) during the same period 2010.
This represents general operating expenses of the Company and increased as the Company
operated for the full year during 2011 as opposed to a few months during 2010.
Investing Activities
During the year ended August 31, 2010, the Company spent $469,782 on mineral properties and
deferred costs, compared to $772,191 in during 2010. These expenditures were incurred as the
Company acquired and began advancing its newly acquired Terrazas Property.
Financing Activities
During the year ended August 31, 2010, cash flow used in financing activities was $(65,000)
representing costs related to the upcoming RTO with War Eagle, compared to cash provided from
financing activities in the amount of $1,532,508 in 2010 representing cash raised through a
private placement in 2010.
Liquidity Outlook
Andromeda had cash and cash equivalents of $67,092 available at August 31, 2011, a decrease of
$556,289 from the balance at August 31, 2010 of $623,381.
As noted above, the Companys working capital decreased by $663,783 to $32,566 at August 31,
2011 from $696,349 at August 31, 2010.
The Company believes that between its current cash balances, it has the necessary funds available
to meet its operating, investing and financing obligations and execute its current business plans.

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

6. Related-party Transactions
RIM Resources Inc, a company controlled by Chris Davie, the CEO and Director, charged the
company $71,000 (2010 - $4,000) for services rendered.
Andres Tinajero, CFO, charged the company $6,000 (2010 - $nil) for services rendered.
Rene Mladosich, Director, charged the company $33,000 (2010 - $5,000) for services rendered.
Fogler, Rubinoff LLP, a company where Rick Moscone, the Corporate Secretary and Director,
charged the company $65,000 (2010 - $41,000) for services rendered.
7. Additional Disclosure
Disclosure of Outstanding Share Data, November 11, 2011
Authorized
Voting or equity
securities issued
and outstanding

Unlimited
Common Shares

Securities
convertible or
exercisable into
voting or equity
shares

Outstanding
2,900,000 Common Shares

a) No options outstanding.
b) No warrants outstanding.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.
Dividends
The Corporation has neither declared nor paid any dividends on its Common Shares. The
Corporation intends to retain its earnings, if any, to finance growth and expand its operation and
does not anticipate paying any dividends on its Common Shares in the foreseeable future.
Critical Accounting Estimates
Assessment of Recoverability of Mineral Property Costs
The cost of mineral properties and their related exploration and development costs are deferred
until the properties are placed into production, sold or abandoned. These costs will be amortized
over the estimated useful life of the properties following the commencement of production. Cost
includes both the cash consideration as well as the fair market value of any securities issued on
the acquisition of mineral properties. Properties acquired under option agreements or joint
ventures, whereby payments are made at the sole discretion of the Company, are recorded in the
accounts at such time as the payments are made. The proceeds from property options granted
reduce the cost of the related property and any excess over cost is applied to income The
Companys recorded value of its exploration properties is based on historical costs that expect to
be recovered in the future. The Companys recoverability evaluation is based on market
conditions for minerals, underlying mineral resources associated with the properties and future

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

costs that may be required for ultimate realization through mining operations or by sale.
Assessment of Recoverability of Future Income Tax Assets
Andromeda follows the liability method of accounting for income taxes. Under this method,
future tax liabilities and assets are recognized for the estimated tax consequences attributable to
differences between the financial statement carrying amounts of assets and liabilities and their
respective tax bases. Future tax liabilities and assets are measured using substantively enacted
tax rates. The effect on the future tax liabilities and assets of a change in tax rates is recognized
in the period that the change occurs. When the future realization of income tax assets does not
meet the test of being more likely than not to occur, a valuation allowance in the amount of the
potential future benefit is taken and no net asset is recognized. In preparing the consolidated
financial statements, the Company is required to estimate its income tax obligations. This process
involves estimating the actual tax exposure together with assessing temporary differences resulting
from differing treatment of items for tax and accounting purposes. The Company assesses, based
on all available evidence, the likelihood that the future income tax assets will be recovered from
future taxable income and, to the extent that recovery cannot be considered more likely than not, a
valuation allowance is established. If the valuation allowance is changed in a period, an
expense or benefit must be included within the tax provision on the consolidated income
statement.
Estimate of Stock Based Compensation and Associated Assumptions
The Company recorded stock-based compensation based on an estimate of the fair value on the grant
date of stock options issued. This accounting required estimates of interest rate, life of options,
stock price volatility and the application of the Black-Scholes option pricing model.
Assessment of Recoverability of Receivables Including GST
The carrying amount of accounts receivables, and GST are considered representative of their
respective values. The Company assesses the likelihood that these receivables will be recovered
and, to the extent that recovery is considered doubtful a provision for doubtful accounts is
recorded.
Mineral Properties and Deferred Costs
Andromeda defers the costs of exploration on existing projects and carries them as assets until
production commences. The amounts at which mineral properties and deferred exploration costs
are recorded do not necessarily reflect present or future values. If a project is successful, the
related mineral properties and deferred exploration costs are amortized over the estimated
economic life of the project. If a project is unsuccessful, or if exploration has ceased because of
continuation is not economically feasible, the mineral properties and the related deferred
exploration costs are written off. Option payments received are applied against the mineral
property or deferred exploration costs.
Impairment of Long-lived Assets
Andromeda reviews mineral properties and deferred costs for impairment on a periodic basis or
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. Impairment losses on long-lived assets are recognized when events or changes in
circumstances indicate that the undiscounted cash flows estimated to be generated by such assets
are less than their carrying value and, accordingly, all or a portion of such carrying value may not

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

be recoverable. Impairment losses then are measured by comparing the fair value of assets to their
carrying amounts.
8. Financial Instruments and other Instruments
Additional Capital
The exploration activities of the Company may require substantial additional financing. Failure to
obtain sufficient financing may result in delaying or indefinite postponement of exploration and
development of any of the Companys properties. There can be no assurance that additional
capital or other types of financing will be available if needed or that, if available, the terms of such
financings will be favorable to the Company. In addition, low commodity prices may affect the
Companys ability to obtain financing.
Environmental and Permitting
All phases of the Companys operations are subject to environmental regulation in the
various jurisdictions in which it operates. These regulations, among other things, mandate the
maintenance of air and water quality standards, land reclamation, transportation, storage and
disposal of hazardous waste. Environmental legislation is evolving in a manner which will require
stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and a heightened degree of responsibility for
companies and their officers, directors, and employees. There is no assurance that future
changes in environmental regulation, if any, will not adversely affect the Companys
operations.
Acquisition
The Company uses its best judgment to acquire mining properties for exploration and
development in pursuit of such opportunities, the Company may fail to select appropriate
acquisition candidates or negotiate acceptable agreements, including arrangements to finance the
acquisitions and development, or integrate such opportunity and their personnel with the
Company. The Company can not assure that it can complete any acquisition that it pursues or
is currently pursuing, on favorable terms, or that any acquisition completed will ultimately
benefit the Company.
Competition
The mining industry is intensely competitive in all of its phases, and the Company competes with
many companies possessing greater financial resources and technical facilities than itself.
Competition in the mining business could adversely affect the Companys ability to acquire suitable
producing properties or prospectus for mineral exploration in the future.
Financial Risk Factors
Fair Value of Financial Instruments
The Company has designated its cash and cash equivalents and marketable securities as held for
trading, which are measured at fair value. Fair value of marketable securities is determined based
on transaction value and is categorized as Level 1 measurement. Trade and other receivables are
classified for accounting purposes as loans and receivables, which are measured at amortized cost
which approximates fair value. Accounts payable and accrued liabilities and property option
payable are classified for accounting purposes as other financial liabilities, which are measured at
amortized cost which also approximates fair value. Fair value of accounts payable and accrued

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

liabilities and property option payable are determined from transaction values which were derived
from observable market inputs. Fair values of accounts payable and accrued liabilities and
property option payable are based on Level 2 measurements.
The Company has determined the fair value of its financial instruments as follows:
(i) The carrying values of cash and cash equivalents, other receivables, accounts payable and
accrued liabilities, approximate their fair values due to the short-term nature of these instruments.
(ii) Investments and capital assets are carried at amounts in accordance with the Companys
accounting policies.
Fair value estimates are made at a specific point in time, based on relevant market information
and information about financial instruments. These estimates are subject in and involve
uncertainties and matters of significant judgment, therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
A summary of the Company's risk exposures as it relates to financial instruments are reflected
below:
A) Credit Risk
The Company is not exposed to major credit risk attributable to customers. Additionally, the
majority of the Company's cash and cash equivalents are held with a high rated Canadian
financial institution in Canada.
B) Market Risk
i.) Interest Rate Risk
The Company does not have any interest bearing debt. The Company invest cash surplus to its
operational needs in investment-grade short term deposits certificates issued by the bank where it
keeps its Canadian Bank accounts. The Company periodically assesses the quality of its
investments with this bank and is satisfied with the credit rating of the bank and the investment
grade of its short term deposits certificates.
ii.) Market Price Risk
Market risk arises from the possibility that changes in market prices will affect the value of the
financial instruments of the Company. The Company is exposed to fair value fluctuations on its
investments. The Company's other financial instruments (cash, accounts receivable, accounts
payable and accrued liabilities) are not subject to price risk.
iii.) Commodity Price Risk
The price of the common shares in the capital of the Company ("Common Shares"), its financial
results, exploration and development activities have been, or may in the future be, adversely
affected by declines in the price of zinc and/or other metals. Zinc prices fluctuate widely and are
affected by numerous factors beyond the Company's control such as supply-demand dynamics,

10

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

global or regional consumptive patterns, expectations of inflation or deflation, currency exchange

fluctuations, interest rates, speculative activities and increased production due to new mine
developments, improved mining and production methods and international economic and political
trends. The Company's revenues, if any, are expected to be in large part derived from mining and
sale of base metals or interests related thereto. The effect of these factors on the price of base
metals, and therefore the economic viability of any of the Company's exploration projects, cannot
accurately be predicted.
iv.) Liquidity risk
The Companys approach to managing liquidity risk is to ensure that it will have sufficient
liquidity to meet liabilities when due. As at August 31, 2011, the Company had current assets of
$137,149 (August 31, 2010 - $735,917) and current liabilities of $104,583 (August 31, 2010 $39,568). All of the Companys financial liabilities and receivables have contractual maturities
of less than 90 days and are subject to normal trade terms. Current working capital of the
Company is $608,540 (August 31, 2010 - $696,349).
Sensitivity Analysis
The sensitivity analysis shown in the notes below may differ materially from actual results.
Based on managements knowledge and experience of the financial markets, the Company
believes the following movements are reasonably possible over a one year period:
(i)

Cash and cash equivalents include short-term money market mutual fund units that are
subject to floating interest rates. As at August 31, 2011, if interest rates had fluctuate by
1% with all other variables held constant, the loss for the year ended August 31, 2011
would be changed by less than $1,000, as a result of a change in interest income from
cash and cash equivalents.

Internal Control over Financial Reporting

Internal controls over financial reporting are procedures designed to provide reasonable assurance
that transactions are properly authorized, assets are safeguarded against unauthorized or improper
use, and transactions are properly recorded and reported. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance with respect to the
reliability of financial reporting and financial statement preparation.
During the most recent year end there were no changes in the Company's internal control over
financial reporting that materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
Proposed Transactions
In the normal course of business, and as an ongoing part of the exploration process, the
Company investigates mineral properties which are submitted to the Board of Directors for
consideration. As well there are transactions listed in the Subsequent to the end of the year
section of the Financial Statements.
Evaluation of Disclosure Controls and Procedures

11

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

Disclosure controls and procedures are designed to provide reasonable assurance that all
relevant information is gathered and reported to senior management, including the Corporation's
President and Chief Executive Officer and Chief Financial Officer, on a timely basis so that
appropriate decisions can be made regarding public disclosure. As at the end of the year covered
by this management's discussion and analysis, management of the Corporation, with the
participation of the President and Chief Executive Officer and the Chief Financial Officer,
evaluated the effectiveness of the Corporation's disclosure controls and procedures as required by
Canadian securities laws. Based on that evaluation, the President and Chief Executive Officer and
the Chief Financial Officer have concluded that, as of the end of the period covered by this
management's discussion and analysis, the disclosure controls and procedures were effective to
provide reasonable assurance that information required to be disclosed in the Corporation's
annual filings and interim filings (as such terms are defined under Multilateral Instrument 52109 Certification of Disclosure in Issuers' Annual and Interim Filings) and other reports filed or
submitted under Canadian securities laws is recorded, processed, summarized and reported within
the time periods specified by those laws and that material information is accumulated and
communicated to management of the Corporation, including the President and Chief Executive
Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
9. Status of Andromedas Transition to International Financial Reporting Standards
(IFRS)
The AcSB has confirmed that IFRS will replace current Canadian GAAP for publicly accountable
enterprises, effective for fiscal years beginning on or after January 1, 2011. Accordingly, the
Company will report interim and annual financial statements (with comparatives) in accordance
with IFRS beginning with the quarter ended November 30, 2011.
The Company has commenced the development of an IFRS implementation plan to prepare for
this transition, and is currently in the process of analyzing the key areas where changes to current
accounting policies may be required. While an analysis will be required for all current accounting
policies, the initial key areas of assessment will include:

Exploration and development expenditures;

Property, plant and equipment (measurement and valuation);
Provisions, including asset retirement obligations;
Stock-based compensation;
Accounting for joint ventures;
Accounting for income taxes; and
First-time adoption of International Financial Reporting Standards (IFRS 1).

As the analysis of each of the key areas progresses, other elements of the Companys IFRS
implementation plan will also be addressed, including: the implication of changes to accounting
policies and processes; financial statement note disclosures on information technology; internal
controls; contractual arrangements; and employee training.
The table below summarizes the expected timing of activities related to the Companys transition
to IFRS.

12

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

Initial analysis of key areas for which Completed

changes to accounting policies may be
required.
Detailed analysis of all relevant IFRS Completed
requirements and identification of areas
requiring accounting policy changes or
those with accounting policy alternatives.
Assessment of first-time adoption (IFRS Completed
1) requirements and alternatives.
Final determination of changes to Completed
accounting policies and choices to be
made with respect to first-time adoption
alternatives
Resolution of the accounting policy Completed
change implications on information
technology,
internal
controls
and
contractual arrangements
Management and employee education and Completed
training
Quantification of the Financial Statement In progress
impact of changes in accounting policies
The Company continues to monitor the deliberations and progress on plans to converge to IFRS
by accounting standard setting bodies and securities regulators in Canada.
The following provides a summary of the Companys evaluation to date of potential changes to
accounting policies in key areas based on the current standards and guidance within IFRS. This is
not intended to be a complete list of areas where the adoption of IFRS will require a change in
accounting policies, but is intended to highlight the areas the Company has identified as having
the most potential for a significant change. The International Accounting Standards Board has a
number of ongoing projects, the outcome of which may have an effect on the changes required to
the Companys accounting policies on adoption of IFRS. At the present time, however, the
Company is not aware of any significant expected changes prior to its adoption of IFRS that
would affect the summary provided below:
1) Exploration and Evaluation Expenditures
Subject to certain conditions, IFRS currently allows an entity to determine an accounting policy
that specifies the treatment of costs related to the exploration for and evaluation of mineral
properties. The Company expects to establish an accounting policy to expense all costs relating to
exploration and test these balances for impairment on a quarterly basis.
The application of this policy on the adoption of IFRS will result in the expensing of all future
costs of exploration and for comparative purposes.

13

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

2) Impairment of (Non-financial) Assets

IFRS requires a write down of assets if the higher of the fair market value and the value in use of
a group of assets is less than its carrying value. Value in use is determined using discounted
estimated future cash flows. Current Canadian GAAP requires a write down to estimated fair
value only if the undiscounted estimated future cash flows of a group of assets are less than its
carrying value.
The Companys accounting policies related to impairment of non-financial assets will be changed
to reflect these differences. However, the Company does not expect that this change will have an
immediate impact on the carrying value of its assets. The Company will perform impairment
assessments in accordance with IFRS at the transition date.
3) Share-based Payments
In certain circumstances, IFRS requires a different measurement of stock-based compensation
related to stock options than current Canadian GAAP.
The Company does not expect changes to its accounting policies related to share-based payments
that would result in a significant change in line items within its financial statements.
4) Asset Retirement Obligations (Decommissioning Liabilities)
IFRS requires the recognition of a decommissioning liability for legal or constructive obligations,
while current Canadian GAAP only requires the recognition of such liabilities for legal
obligations. A constructive obligation exists when an entity has created reasonable expectations
that it will take certain actions.
The Companys accounting policies related to decommissioning liabilities will be changed to
reflect these differences. However, the Company does not expect this change will have an
immediate impact on the carrying value of its assets.
5) Income Taxes
In certain circumstances, IFRS contains different requirements related to recognition and
measurement of future income taxes.
The Company does not expect any changes to its accounting policies related to income taxes that
would result in a significant change to line items within its financial statements.
6) Foreign Currency
IFRS requires that the functional currency of the Company be determined separately, and the
factors considered to determine functional currency are somewhat different than current Canadian
GAAP.

14

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

The Company does not expect any changes to its accounting policies related to foreign currency
that would result in a significant change to line items within its financial statements at the
transition date.
Subsequent Disclosures
Further disclosers of the IFRS transition process are expected as follows:
The Companys first financial statements prepared in accordance with IFRS will be the
interim financial statements for the three months ending November 30, 2011, which will
include notes disclosing transitional information and disclosure of new accounting policies
under IFRS. The interim financial statements for the three months ending November 30, 2011,
will also include the comparative period adjusted to comply with IFRS, and the Companys
transition date IFRS statement of financial position (at August 31, 2010).
10. Cautionary Note Regarding Forward Looking Statements
This Managements Discussion and Analysis includes "forward-looking statements", within the
meaning of applicable securities legislation, which are based on the opinions and estimates of
Management and are subject to a variety of risks and uncertainties and other factors that could
cause actual events or results to differ materially from those projected in the forward looking
statements. Forward-looking statements are often, but not always, identified by the use of words
such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may",
"will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should",
"believe" and similar words suggesting future outcomes or statements regarding an outlook. Such
risks and uncertainties include, but are not limited to, risks associated with the mining industry
(including operational risks in exploration development and production; delays or changes in
plans with respect to exploration or development projects or capital expenditures; the uncertainty
of reserve estimates; the uncertainty of estimates and projections in relation to production, costs
and expenses; the uncertainty surrounding the ability of the Company to obtain all permits,
consents or authorizations required for its operations and activities; and health safety and
environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the
ability of Andromeda to fund the capital and operating expenses necessary to achieve the business
objectives of Andromeda, the uncertainty associated with commercial negotiations and
negotiating with foreign governments and risks associated with international business activities,
as well as those risks described in public disclosure documents filed by the Company. Due to the
risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors
in securities of the Company should not place undue reliance on these forward-looking
statements. Statements in relation to "reserves" are deemed to be forward-looking statements, as
they involve the implied assessment, based on certain estimates and assumptions, that the
reserves described can be profitably produced in the future.
Readers are cautioned that the foregoing lists of risks, uncertainties and other factors are not
exhaustive. The forward-looking statements contained in this press release are made as of the
date hereof and the Company undertakes no obligation to update publicly or revise any forwardlooking statements or in any other documents filed with Canadian securities regulatory
authorities, whether as a result of new information, future events or otherwise, except in

15

ANDROMEDA RESOURCES INC.

Managements Discussion and Analysis
of Financial Condition and Results of Operation
August 31, 2011

accordance with applicable securities laws.

qualified by this cautionary statement.

The forward-looking statements are expressly

11. Managements Responsibility for Financial Information

Management is responsible for all information contained in this report. The unaudited consolidated
financial statements have been prepared in accordance with Canadian generally accepted
accounting principles and include amounts based on managements informed judgments and
estimates. The financial and operating information included in this report is consistent with
that contained in the unaudited consolidated financial statements in all material aspects.
Management maintains internal controls to provide reasonable assurance that financial
information is reliable and accurate and assets are safeguarded.
External auditors, appointed by the shareholders, have examined the consolidated financial
statements for the year ended August 31, 2011.
The Audit Committee has reviewed the audited consolidated financial statements with management.
The Board of Directors has approved the audited consolidated financial statements on the
recommendation of the Audit Committee.
November 11, 2011
Andres Tinajero
Vice President Finance & CFO

16

SCHEDULE H
Pro Forma Consolidated Financial Statements (Proforma balance sheet) for War Eagle, giving
effect to the Amalgamation as at June 30, 2011

H-1 AC/1463772.11

War Eagle Mining Company Inc.

(to be renamed Andromeda Resources Inc.)

Unaudited Pro-forma Consolidated Financial Statement

June 30, 2011

Androme da Re source s Inc.

(an e xploration stage Company)
Pro-forma State me nt of Financial Position
Historical
Androme da
August 31, 2011
(Audite d)
Asse ts
Curre nt Asse ts
Cash

Trade and other receivables

Deferred transaction costs
Prepaid expenses and deposits

Exploration and evaluation assets

Liabilitie s
Curre nt Liabilitie s
Trade and other payables

Share holde rs' Equity

Share capital

Contributed surplus

Reserve for currency translation

Accumulated deficit

War Eagle
June 30, 2011
(Unaudite d)

67,092

29,485

5,057
65,000
-

3,901
22,051

137,149

55,437

1,341,973

64,488

1,479,122

119,925

104,583
104,583

305,730
305,730

1,634,508

38,506,429

(259,969)

1,374,539
1,479,122

3,005,628

(41,697,862)

(185,805)
119,925

Adjus tme nts

(250,000)
7,000,000
990,000
(49,800)
(585,000)
(65,000)
-

Pro-Forma
Androme da
Re s ource s Inc
Note s
June 30, 2011
(Unaudite d)

(2)
(4)
(8)
(9)
(6)
(2)

7,040,200
(64,488)
(1,341,973)

7,232,786
(7)
(7)

5,633,739

5,633,739
5,633,739

7,232,786

(38,506,429)
3,349,022
(245,000)
7,000,000
(1,598,000)
(294,000)
990,000
(49,800)
(447,000)
(22,000)
74,978
(17,000)
50,000
(3,005,628)
155,000
90,000
1,598,000
294,000
17,000
447,000
22,000
(7,693)
41,697,862
(3,534,827)
(65,000)
(250,000)
(74,978)
(585,000)
(50,000)
(64,488)
(1,334,280)

7,201,777
8,958
22,051

410,313
410,313

(1)
(1)
(3)
(4)
(4)
(5)
(8)
(9)
(8)
(9)
(6)
(6)
(10)
(1)
(3)
(3)
(4)
(5)
(6)
(8)
(9)
(7)
(1)
(1)
(2)
(2)
(6)
(6)
(10)
(7)
(7)

10,425,708

2,623,000
(7,693)

(6,218,542)
6,822,473
7,232,786

Andromeda Resources Inc.

Notes to the Pro-forma Consolidated Financial Statements
At June 30 2011
PROPOSED ARRANGEMENT
War Eagle Mining Company Inc. ("War Eagle") entered into an amalgamation agreement with 2304315 Ontario Limited
("War Eagle Subco"), a wholly owned subsidiary of War Eagle, and Andromeda Resources Inc. ("Andromeda") on
November 9, 2011, pursuant to which War Eagle Subco and Andromeda will be amalgamated (the "Amalgamation").
The Amalgamation agreement provides that, among other things, all of the issued and outstanding common shares of
Andromeda (the "Andromeda Shares") will be exchanged for 6.67 shares of the resulting issuer (Resulting Issuer),
except for the 500,000 Andromeda Shares held by War Eagle, which will be cancelled without the repayment of capital.
Each Andromeda share purchase warrant will be exchanged for 6.67 replacement warrants; each Andromeda broker
option will be exercisable at $3.00 into 6.67 Resulting Issuer shares and 3.33 Resulting Issuer warrants, with the exercise
price of such warrants and broker options being adjusted accordingly. Upon completion of the Amalgamation and
assuming the Concurrent Financing is fully subscribed (see "Pro Forma Assumptions and Adjustments"), the Andromeda
Shareholders will hold approximately 81% of the outstanding shares of the resulting issuer (the "Resulting Issuer") and
the shareholders of War Eagle will hold approximately 19% of the outstanding shares of the Resulting Issuer. The
Amalgamation will be considered a reverse takeover of War Eagle under the policies of the TSX Venture Exchange (the
"Exchange"). Upon completion of the Amalgamation, it is expected that the resulting issuers name will be Andromeda
Resources Inc.
Although the Amalgamation will result in a legal combination of War Eagle and Andromeda to form the Resulting
Issuer, because War Eagle does not meet the criteria for a business per IFRS 3, from an accounting perspective, the
Amalgamation is considered to be a takeover transaction. The Amalgamation is not considered to be a business
combination but a capital transaction whereby Andromeda is considered to issue additional shares in return for the net
assets of War Eagle. See Pro Forma Assumptions and Adjustments below. Since the Amalgamation resulted in the
former shareholders of Andromeda owning approximately 81% of the outstanding shares of War Eagle, the
Amalgamation has been accounted for in the pro-forma financial statements as a reverse takeover.
In accordance with IFRS 3 guidance on Business Combinations, based on the relative ownership percentages of the
consolidated Company by shareholders of War Eagle prior to the transaction and former Andromeda shareholders, and
composition of the Board of Directors of the newly consolidated Company, from an accounting perspective, Andromeda
is considered to be the accounting acquirer and therefore the Amalgamation has been accounted for as a reverse
takeover. For financial reporting purposes, the Company is considered a continuation of Andromeda, the legal
subsidiary, except with regard to authorized and issued share capital, which is that of War Eagle, the legal parent.
BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated statement of financial position as at June 30, 2011, has been
prepared by management of Andromeda to give effect to the Amalgamation. In the opinion of management, the
unaudited pro forma consolidated statement of financial position includes all adjustments necessary for the fair
presentation of the transaction in accordance with International Financial Reporting Standards.
The unaudited pro forma consolidated financial statements may not be indicative of the financial position and results of
operations that would have occurred if the transactions had taken place on the dates indicated or of the financial position
or operating results which may be obtained in the future. The unaudited pro forma consolidated financial statements are
not a forecast or projection of future results. The actual financial position and results of operations of the Newco for any
period following the Effective Date will likely vary from the amounts set forth in the unaudited pro forma consolidated
financial statements and such variation may be material.
The unaudited pro forma consolidated financial statements should be read in conjunction with the audited consolidated
financial statements of Andromeda as at August 31, 2011 and 2010 and the unaudited interim consolidated financial
statements of War Eagle as at June 30, 2011, and the audited consolidated financial statements of War Eagle as at March
31, 2011 and 2010.
The unaudited pro forma consolidated statement of financial position of Newco as at June 30, 2011, has been prepared
using information from the audited consolidated financial statements of Andromeda as at August 31, 2011, the

Andromeda Resources Inc.

Notes to the Pro-forma Consolidated Financial Statements
At June 30 2011
unaudited statement of financial position of War Eagle as at June 30, 2011 and the adjustments and assumptions outlined
below.
PRO-FORMA ASSUMPTIONS AND ADJUSTMENTS
The pro-forma consolidated financial statements incorporate the following pro-forma assumptions and adjustments:
1.

In accordance with reverse acquisition accounting, and IFRS 2:

(i)

The assets and liabilities of Andromeda are included in the pro forma consolidated statement of
financial position at their historic value.

(ii)

The net assets of War Eagle are included at fair value, assumed to be equal to their carrying value at
June 30, 2011.

(iii)

Share capital, reserve accounts, and the deficit of War Eagle are eliminated.
Fair value of War Eagles transaction was based on the concurrent private placement share value. The
preliminary purchase price of $3,349,022 has been allocated as follows:
Cash
Receivables
Prepaid expenses and deposits
Exploration and evaluation asset
Accounts payable and accrued liabilities
Listing costs expensed

29,485
3,901
22,051
64,488
(305,730)
3,534,827

$ 3,349,022
2.

Costs associated with the transaction are estimated to be $250,000 and will be expensed on completion of the
acquisition. Previously deferred transaction costs of $65,000 are expensed on completion of the acquisition.

3.

The outstanding options of War Eagle are deemed to be re-issued under the terms of the Amalgamation. Using the
Black-Scholes valuation model as at June 30, 2011, these options and warrants have been valued at $245,000. This
value is allocated to reserve for share based payments and reduces the value of the shares issued as part of the
transaction.

4.

The unaudited pro forma consolidated statement of financial position as at June 30, 2011 includes a
proposed brokered financing of Andromeda (the Concurrent Financing) of $7,000,000 in units of Andromeda (the
"Andromeda Units") at $0.45 per Andromeda Unit, to be completed concurrently with the completion of the
Amalgamation. Each Andromeda Unit shall consist of one (1) Andromeda Share and one-half of one Andromeda
Warrant, with each whole Andromeda Warrant exercisable to acquire one (1) Andromeda Share at $0.60 for a period
of 24 months from the date of issuance.
The fair value of the 7,777,778 share purchase warrants was estimated at $1,598,000 using the Black-Scholes
pricing model with the following assumptions: dividend yield 0%; risk free interest 1.12%; volatility 100% and an
expected life of 2 years.

5.

As compensation for acting as agents in the concurrent financing, Canaccord Genuity Corp (Canaccord) and
Union Securities Ltd. ("Union") will receive compensation warrants (the "Agent's Warrants") to purchase a number
of Andromeda Shares equal to 8% of the Andromeda Units sold pursuant to the Concurrent Financing, exercisable at
$0.45 for a period of 24 months from the closing of the Concurrent Financing.

Andromeda Resources Inc.

Notes to the Pro-forma Consolidated Financial Statements
At June 30 2011
The fair value of the 1,244,444 share purchase warrants was estimated at $294,000 using the Black-Scholes pricing
model with the following assumptions: dividend yield 0%; risk free interest 1.12%; volatility 100% and an expected
life of 2 years.
6.

As compensation for acting as agent in the Concurrent Financing, Canaccord and Union will also receive a cash
commission equal to 8% of the gross proceeds received pursuant to the Concurrent Financing.
In consideration for Canaccord providing fiscal advisory services to Andromeda, Andromeda has agreed to pay a
cash fee of $24,000 plus 166,750 units valued at $74,978. Each Unit consist of one (1) Share and one half Warrant,
with each whole Warrant exercisable to acquire one (1) Share at $0.60 for a period of 24 months from the date of
issuance.
The fair value of the 83,375 share purchase warrants was estimated at $17,000 using the Black-Scholes pricing
model with the following assumptions: dividend yield 0%; risk free interest 1.12%; volatility 100% and an expected
life of 2 years.

7.

The financial statements of Andromeda have been adjusted to comply with IFRS to be consistent with War Eagle
which is already reporting under IFRS. As a result, Andromeda has booked adjustments to reflect its IFRS
accounting policies to expense all acquisition, exploration and evaluation expenditures, and to record foreign
exchange difference from translation of foreign operations to a separate component of equity. This has resulted in
an adjustment to mineral properties of a reduction of $1,341,973 and increase in accumulated deficit of $1,334,280
representing the expensing of the acquisition, exploration and evaluation expenditures offset by $7,693 foreign
exchange loss on translation of foreign operations booked to reserve for foreign currency translation.
The financial statements of War Eagle as reported under IFRS, have been adjusted to comply with Andromedas
IFRS accounting policy to expense all acquisition, exploration and evaluation expenditures. This has resulted in an
adjustment to mineral properties of a reduction of $64,488 and increase in accumulated deficit of $64,488
representing the expensing of the acquisition, exploration and evaluation expenditures.

8.

The unaudited pro forma consolidated statement of financial position as at August 31, 2011 includes a brokered
financing of War Eagle of $990,000 in units of War Eagle (the "War Eagle Units") at $0. 25 per War Eagle Unit.
Each War Eagle Unit consist of one (1) War Eagle Shares and one War Eagle Warrant, with each whole War Eagle
Warrant exercisable to acquire one (1) War Eagle Share at $0.34 for a period of 24 months from the date of
issuance.
The fair value of the 3,960,000 share purchase warrants was estimated at $447,000 using the Black-Scholes pricing
model with the following assumptions: dividend yield 0%; risk free interest 1.12%; volatility 100% and an expected
life of 2 years.

9.

In connection with the above private placement, the Company paid a $49,800 cash commission and issued 199,200
compensation warrants (the "Broker's Warrants with each Broker's Warrant entitles the holder thereof to purchase
one (1) Common Share at the exercise price of $0.34 for a period of 24 months from closing.
The fair value of the 199,200 share purchase warrants was estimated at $22,000 using the Black-Scholes pricing
model with the following assumptions: dividend yield 0%; risk free interest 1.12%; volatility 100% and an expected
life of 2 years.

10. The unaudited pro forma consolidated statement of financial position of Andromeda as at August 31, 2011, includes
25,000 shares with a value of $50,000 issued in respect to property option agreement payments due.

Andromeda Resources Inc.

Notes to the Pro-forma Consolidated Financial Statements
At June 30 2011
PRO-FORMA SHARE CAPITAL
Pro-forma capital stock as at June 30, 2011 has been determined as follows:

Andromeda common shares outstanding as at August 31, 2011

Shares issued for property
Less: Andromeda shares held by War Eagle
Split of Andromeda shares issued and outstanding as a result of the 6.67 for 1
share split

Newco

Pro Forma

Number

Amount

2,875,000

1,634,508

25,000

50,000

(500,000)

13,608,000

16,008,000

1,684,508

War Eagle common shares outstanding as at June 30, 2011

3,482,272

38,506,429

War Eagle September 2011 private placement

3,960,000

990,000

Fair value assigned to warrants

(447,000)

Cost of issue
Cash commissions paid
Fair value assigned to brokers' warrants

(49,800)
(22,000)

Elimination of Andromeda common shares for legal purposes and the value of
War Eagle share capital for accounting purposes
Issuance of War Eagle shares to Andromeda shareholders

(16,008,000)
16,008,000

(38,506,429)
-

Acquisition of War Eagle at fair value.

3,349,022

Fair value assigned to replacement options

(245,000)

Concurrent financing of 15,555,556 units

Fair value assigned to warrants
Issuance of units for services

23,450,272

5,259,730

15,555,556

7,000,000

166,750

(1,598,000)
74,978

Fair value assigned to warrants

(17,000)

Cost of issue
Fair value assigned to brokers' warrants

(294,000)

Pro forma balance at June 30, 2011

39,172,578

10,425,708

Andromeda Resources Inc.

Notes to the Pro-forma Consolidated Financial Statements
At June 30 2011
PRO-FORMA WARRANTS
Pro-forma warrants at June 30, 2011, are as follows:
No. of
Warrants

Date of Expiry

Type

December 29, 2011

War Eagle warrants

December 29, 2011

Broker warrants

January 30, 2012

War Eagle warrants

January 30, 2012

239,417

Exercise Price $
3.00

1,373

3.00

100,208

3.00

Broker warrants

16,034

3.00

January 30, 2012

War Eagle warrants

53,750

3.00

January 30, 2012

Broker warrants

8,600

3.00

September 26, 2013

War Eagle warrants

3,960,000

0.34

September 26, 2013

Broker warrants

199,200

0.34

August 31, 2013

Concurrent financing warrants

7,777,778

0.60

August 31, 2013

Concurrent financing broker warrants

1,244,444

0.45

August 31, 2013

Total

Broker warrants for services

83,375

0.60

13,684,179

PRO-FORMA STOCK OPTIONS

Pro-forma Stock options as at June 30, 2011 are as follows:

No. of
Options
Outstanding

Weighted
Average
Remaining
Life (Years)

Weighted
Average
Exercise
Price ($)

No. of
Options
Currently
Exercisable

Weighted Average
Exercise
Price ($) of
Exercisable Options

3.00

213,250

1.80

3.00

213,250

3.00

3.00

213,250

1.80

3.00

213,250

3.00

Range of
Exercise
Prices ($)

PRO-FORMA EFFECTIVE INCOME TAX RATE

As at June 30, 2011, War Eagle has operating losses available for deduction against future taxable income of
approximately $6,096,000 and Andromeda has approximately $386,000. As Andromeda is in the exploration stage,
no income is expected in the foreseeable future, and Andromeda has provided a valuation allowance against its
future income tax asset as it is more likely than not that the losses will not be realized. The pro-forma effective
income tax rate for Andromeda following the transaction is as follows:
Canadian effective income tax rate

31%

Mexican effective income tax rate

28%

Valuation allowance on unrecognized Canadian tax losses

(31%)

Valuation allowance on unrecognized Mexican tax losses

Total

(28%)
0%

SCHEDULE I
Audit Committee Charter of War Eagle and the Resulting Issuer

WAR EAGLE MINING COMPANY INC.

AUDIT COMMMITEE CHARTER
The following Audit Committee Charter was adopted by the Audit Committee and the Board of Directors
of the Company:
1.
Members. The Board of Directors will appoint an Audit Committee of at least three (3) members,
a majority of whom should be independent directors of the Board. Independent means a director who
meets the definition of independence under National Instrument 52-110 or any successor policy
promulgated by securities regulatory authorities
All members of the Audit Committee should be financially literate. An individual is financially literate
if he or she has the ability to read and understand a set of financial statements that present a breadth and
level of complexity of accounting issues that are generally comparable to the breadth and complexity of
the issues that can reasonably be expected to be raised by the Companys financial statements. Each
appointed member of the Audit Committee shall be subject to annual reconfirmation and may be removed
by the Board of Directors at any time.
2.
Purposes, Duties, and Responsibilities. The Audit Committee represents the Board of Directors
in discharging its responsibility relating to the accounting, reporting and financial practices of the
Company and its subsidiaries, and has general responsibility for oversight of internal controls, accounting
and audit activities and legal compliance of the Company and its subsidiaries; however, the Audit
Committees function shall not relieve the Companys management of its responsibilities for preparing
financial statements which accurately and fairly present the Companys financial results and conditions or
the responsibilities of the independent accountants relating to the audit or review of financial statements.
Specifically, the Audit Committee will:
(a)

Recommend to the Board of Directors the appointment (including terms of appointment

such as compensation and scope of duties) and discharge the external auditor of the
Company (the auditor) who perform the annual audit or other audit, review or attest
services in accordance with applicable securities laws, which auditor shall be ultimately
accountable to the Board of Directors through the Audit Committee. The auditor of the
Company must report directly to the Audit Committee;

(b)

Have the authority to communicate directly with the auditor of the Company;

(c)

Review with the auditor the scope of the audit and the results of the annual audit
examination by the auditor and any reports of the auditor with respect to reviews of
interim financial statements or other audit, review or attest services. The Audit
Committee will be responsible for resolving any disagreements between management and
the auditor regarding financial reporting;

(d)

Review information, including written statements, if any, from the auditor concerning
any relationships between the auditor and the Company or any other relationships that

I-1 AC/1463772.11

may adversely affect the independence of the auditor and assess the independence of the
auditor;
(e)

Review and discuss with management and the auditor the Companys annual audited
financial statements prior to their public disclosure, including a discussion with the
auditors of their judgments as to the quality of the Companys accounting principles;

(f)

Review the Companys financial statements, MD&A and annual and interim earnings
press releases before the Company publicly discloses this information;

(g)

Review the services to be provided by the auditor to assure that the auditor does not
undertake any engagement for services for the Company that would constitute prohibited
services under applicable securities laws under the rules of any stock exchange or trading
market on which the Companys shares are listed for trading, or could be viewed as
compromising the auditors independence. The Audit Committee must pre-approve all
non-audit services to be provided to the Company or its subsidiaries by the auditor;

(h)

Review with management and the auditor the results of any significant matters identified
as a result of the auditors interim review procedures prior to the filing of each quarterly
financial statements or as soon thereafter as possible;

(i)

Review the annual program for the Companys internal audits, if any, and review audit
reports submitted by the internal auditing staff, if any;

(j)

Periodically review the adequacy of the Companys internal controls;

(k)

Review changes in the accounting policies of the Company and accounting and financial
reporting proposals that are provided by the auditor that may have a significant impact on
the Companys financial reports, and make comments on the foregoing to the Board of
Directors;

(l)

Review and approve the Companys hiring policies regarding partners, employees and
former partners and employees of the present and formal external auditor of the issuer;

(m)

Periodically review the adequacy of this Audit Committee Charter;

(n)

Make reports and recommendations to the Board of Directors within the scope of its
functions;

(o)

Approve material contracts where the Board of Directors determines that it has a conflict;

(p)

Establish procedures for receipt, retention and treatment of complaints received by the
Company regarding auditing, internal accounting controls or accounting matters and
establish procedures for the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing matters;

(q)

Where considered necessary by the Audit Committee to carry out its duties, have the
authority to engage independent counsel and/or other advisors at the Companys expense
upon the terms and conditions, including compensation, determined by the Audit
Committee;

(r)

Satisfy itself that management has put into place procedures that facilitate compliance
with the disclosure and financial reporting controls provisions of applicable securities

-2 AC/1463772.11

laws, including adequate procedures for the review of the Companys public disclosure of
financial information extracted or derived from the Companys financial statements. The
Audit Committee will assess the adequacy of these procedures annually;
(s)

Review all loans to officers;

(t)

Review and monitor all related party transactions which may be entered into by the
Company as required by rules of the stock exchange or trading market upon which the
Companys shares are listed for trading;

(u)

Ensure all public disclosure regarding the audit committee is made in compliance with
applicable stock exchange rules and securities legislation.

3.
Meetings. The Audit Committee will, when expedient, meet to review the Companys quarterly
and annual financial statements and MD&A, and will hold special meetings as it deems necessary or
appropriate in its judgment. The Audit Committee will endeavor to meet at any time that the auditor
believes that communication to the Audit Committee is required. As it deems appropriate, but not less
than once each year, the Audit Committee will meet in private session with the independent accountants.
The majority of the members of the Audit Committee constitute a quorum and shall be empowered to act
on behalf of the Audit Committee. The members of the Audit Committee will designate one member as
chair. Meetings may be held in person or by telephone, and shall be at such times and places as the Audit
Committee determines.

-3 AC/1463772.11

SCHEDULE J
Proposed By-Law of the Resulting Issuer
BY-LAW NO. 1
a by-law relating generally to the
conduct of the business and affairs of
ANDROMEDA RESOURCES INC.
(hereinafter called the "Corporation")
BE IT ENACTED as a by-law of the Corporation as follows:

I.
1.01

INTERPRETATION

In this by-law, unless the context otherwise clearly requires:

(a)

"Act" means the Business Corporations Act (Ontario) and includes the Regulations
made pursuant thereto;

(b)

"Articles" means the Articles of Incorporation of the Corporation as then in force;

(c)

"board" means the board of directors of the Corporation, or if there shall only be one
director of the Corporation at any particular time, such director, and all references
herein to the directors or the board means the directors of the Corporation acting as
such or any duly empowered committee of the board;

(d)

"by-laws" means all by-laws, including special by-laws, of the Corporation as

amended from time to time;

(e)

"Corporation" means this Corporation;

(f)

"person" includes an individual, sole proprietorship, partnership, unincorporated

association, unincorporated syndicate, unincorporated organization, trust, corporation
and a natural person in his capacity as trustee, executor, administrator or other legal
representative.

1.02

In this by-law where the context permits words importing the singular include the plural and

vice versa, and words importing gender include the masculine, feminine and neuter genders.

1.03

All words and terms appearing in this by-law which are defined by the Act as having a

particular meaning shall be deemed to have the same meanings they are respectively thereby defined as
having, unless the context otherwise reasonably requires.

J-1 AC/1463772.11

II.
2.01

Place of Meetings.

DIRECTORS

Meetings of the board may be held at the place where the registered

office of the Corporation is then located, or at any place within Metropolitan Toronto; and may be held at
any other place within or outside of Ontario with the written consent of all of the directors for the time
being of the Corporation. Subject to the foregoing, a majority of the meetings of the board held in any
financial year of the Corporation need not be held at places within Canada.

2.02

Calling of Meetings. Meetings of the board may be called for the transaction of any business

by the Chairman, the President or a Vice-President who is a director, or any two directors, and the
Secretary shall by written notice call meetings when directed or authorized by the Chairman, the
President, any Vice-President who is a director, or any two directors. Written notice of the time and place
for the holding of every meeting of the board specifying the general nature of the business to be
transacted at the meeting shall be sent to every director of the Corporation not less than 48 hours
(excluding Sundays and holidays) before the time when the meeting is to be held and need not be given
on any longer notice.

2.03

Regular Meetings. The board may appoint a day or days in any month or months for regular

meetings at a place and hour to be named. A copy of any resolution of the board fixing the place and time
of regular meetings of the board shall be sent to each director forthwith after being passed, but no other
notice shall be required for any such regular meeting.

2.04

Chairman. The chairman of any meeting of the board shall be the first-mentioned of such of

the following officers as has then been appointed and who is then a director and is present at the meeting.
Chairman of the Board
President
A Vice-President who is then a director, if there shall be not more than one
Vice-President who is a director, and
the most senior of those Vice-Presidents who are then directors, if more than one VicePresident is a director
and if no such officer is present, the directors present shall choose one of their number to act as the
chairman of the meeting.

2.05

Votes to Govern. At all meetings of the board, every question shall be decided by a majority

of the votes cast on the question, and in the case of an equality of votes on any question at a meeting of
the board, the chairman of the meeting shall not be entitled to a second or casting vote.

J-2 AC/1463772.11

2.06

Remuneration. Any remuneration of the directors fixed by the board shall, in the absence of

a provision to the contrary set forth in the resolution of the board fixing the same, be in addition to any
salary or professional fees payable to a director who serves the Corporation in any other capacity. In
addition, the directors shall be paid such sums as the board may from time to time determine in respect of
their out-of-pocket expenses incurred in attending board, committee or shareholders' meetings or
otherwise in respect of the performance by them of their duties.

2.07

Limitation of Liability. No director or officer of the Corporation shall be liable as such for

the acts, receipts, neglects or defaults of any other director or officer or employee, or for joining in any
receipt or act for conformity, or for any loss, damage or expense happening to the Corporation through
the insufficiency or deficiency of title to any property acquired for or on behalf of the Corporation, or for
the insufficiency or deficiency of any security in or upon which any of the monies of the Corporation
shall be invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any
person with whom any of the monies, securities or effects of the Corporation shall be deposited, or for
any loss occasioned by any error in judgment or oversight on his part, or for any other loss, damage or
misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto,
unless the same are occasioned by his own wilful neglect or default; provided that nothing herein shall
relieve any director or officer from the duty to act in accordance with the Act or from liability for any
breach thereof.

2.08

Indemnity of Directors and Officers.

Except as provided in the Act, every director and

officer of the Corporation, every former director and officer of the Corporation, and every person who
acts or acted at the Corporation's request as a director or officer of another corporation of which the
Corporation is or was a shareholder or creditor, and his heirs and legal representatives, shall at all times
be indemnified and saved harmless by the Corporation from and against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect
of any civil, criminal or administrative action or proceeding to which he is made a party by reason of or
having been a director or officer of the Corporation or such other corporation if, (a) he acted honestly and
in good faith with a view to the best interests of the Corporation; and (b) in case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for
believing that his conduct was lawful.

2.09

Quorum At Meetings. The quorum at a meeting of the directors shall be as provided for in

the Act.

III.

OFFICERS

J-3 AC/1463772.11

3.01

Term, Remuneration or Removal. The terms of employment and remuneration of all officers

of the Corporation shall be determined from time to time by resolution of the board. The fact that any
officer or employee is a director or shareholder of the Corporation shall not disqualify him from receiving
such remuneration. All officers shall be subject to removal by resolution of the board at any time with or
without cause.

3.02

Officers. Nothing contained in this section 3 shall be in limitation of the powers conferred

upon the board by the Act to designate the offices of the Corporation, appoint officers, specify their duties
and delegate them powers to manage the business and affairs of the Corporation. In the absence of any
provision to the contrary contained in any resolution of the board, the persons appointed to the following
respective offices shall have the following respective duties and powers, but, for certainty, the board may
from time to time vary, add to, withhold, or limit the powers and duties of any officer or officers:
(a) Chairman of the Board - the Chairman of the Board, if one shall be appointed, shall be
a director of the Corporation. The Chairman of the Board shall preside at each meeting of the board at
which he is present and shall preside as Chairman of each meeting of the shareholders at which he is
present. Unless his power as chief executive officer of the Corporation shall have been withheld by the
board, the Chairman of the Board shall be the chief executive officer of the Corporation and as such shall
be charged, subject to the authority of the board, with the general supervision of the business and affairs
of the Corporation.
(b) President

the board shall at all times have elected or appointed a President. The

President need not be a director of the Corporation. The President shall be the chief operating officer of
the Corporation. As such, subject to the supervision, control and direction of the Chairman of the Board,
so long as one shall have been elected and his authority as the chief executive officer of the Corporation
shall not have been withheld, and subject to the authority of the board, the President shall be charged with
the general supervision of the day-to-day business and affairs of the Corporation, and subject as aforesaid
the President shall have the power to appoint or remove any and all officers, employees and agents of the
Corporation not elected or appointed directly by the board and to settle the terms of their employment and
remuneration. The President shall exercise all of the powers and be charged with all of the duties of the
office of Chairman of the Board during those respective periods of time during which such office shall be
vacant. In the absence of the Chairman of the Board, if one has then been elected, the President shall
preside as chairman of each meeting of the board at which he is present and acting as a director and as
chairman of each meeting of the shareholders at which he is present. During the absence or inability of
the Chairman of the Board, if one has then been elected, the President may perform the other duties and
exercise the other powers of that office, if any, and if the President shall perform any of such duties or
exercise any of such powers the absence or inability of the Chairman of the Board shall be presumed with

J-4 AC/1463772.11

respect thereto. If the authority of the Chairman of the Board to act as chief executive officer of the
Corporation shall have been withheld by the board, the President shall also be the chief executive officer
of the Corporation and as such charged, subject to the authority of the board, with the general supervision
of the business and affairs of the Corporation.
(c) Secretary

the board shall at all times have elected or appointed a Secretary. The

Secretary shall attend all meetings of the board and the shareholders and shall enter or cause to be entered
in books kept for that purpose minutes of all proceedings at such meetings; he shall give, or cause to be
given, when instructed, notices required to be given to shareholders, directors, auditors and others entitled
to notices of meetings; he shall be the custodian of the corporate seal of the Corporation, if the
Corporation has a corporate seal, and of all books, papers, records, documents or other instruments
belonging to the Corporation; and he shall perform such other duties as may from time to time be
prescribed by the board.
(d) Vice-President - the board may from time to time appoint one or more Vice-Presidents.
The Vice-President, or if there are more than one, the Vice-Presidents in order of seniority (as determined
by the board) shall be vested with all of the powers and shall perform all of the duties of the President in
the absence or disability or refusal to act of the President, except that a Vice-President shall not preside at
meetings of the board or of the shareholders except as may be specifically provided in the Corporation's
by-laws. If a Vice-President exercises any duty or power of the President, the absence or inability of the
President shall be presumed with reference thereto. A Vice-President shall also perform such other duties
and exercise such other powers as the President may from time to time delegate to him or the board may
prescribe.
(e) Treasurer

the Treasurer, if one shall be appointed, shall keep, or cause to be kept,

proper accounting records as required by the Act; he shall deposit or cause to be deposited all monies
received by the Corporation in the Corporation's bank account; he shall, under the direction of the chief
executive officer of the Corporation and the board, supervise the safekeeping of securities and the
disbursement of the funds of the Corporation; he shall render to the board, whenever required, an account
of all his transactions as Treasurer and of the financial position of the Corporation; and he shall perform
such other duties as may from time to time be prescribed by the board.
(f) Other Officers - the duties of all other officers of the Corporation shall be such as the
terms of their engagement call for or the board requires of them. Any of the powers and duties of an
officer to whom an assistant has been appointed may be exercised and performed by such assistant, unless
the board otherwise directs.

J-5 AC/1463772.11

3.03

Agents and Attorneys. The board shall have the power from time to time to appoint agents

or attorneys for the Corporation within or outside of Ontario with such powers of management or
otherwise (including the power to sub-delegate) as may be thought fit.

3.04

Fidelity Bonds.

The board may require such officers, employees and agents of the

Corporation as it deems advisable to furnish bonds for the faithful performance of their duties, in such
form and with such surety as the board may from time to time prescribe.

IV.
4.01

SHAREHOLDERS

Who is to Preside At Meetings. The Chairman of the Board or, in his absence, the President,

or in his absence a Vice-President who is a director, shall preside as Chairman at any meeting of
shareholders, but if there is no Chairman of the Board, the President or such Vice-President, or if at a
meeting none of them is present within fifteen minutes after the time appointed for the holding of the
meeting, the shareholders present shall choose a person from their number to be the Chairman.

4.02

Persons Entitled To Be Present.

The only persons entitled to attend a meeting of

shareholders shall be those entitled to vote thereat, the directors and the auditor of the Corporation and
others who although not entitled to vote are entitled or required under any provision of the Act or the bylaws of the Corporation to be present at the meeting. Any other person may be admitted only on the
invitation of the Chairman of the meeting or with the consent of the meeting.

4.03

Scrutineers. At each meeting of shareholders one or more scrutineers may be appointed by a

resolution of the meeting or by the Chairman of the meeting with the consent of the meeting to act as
scrutineers at the meeting. Such scrutineers need not be shareholders of the Corporation.

4.04

Quorum At Meetings. The quorum at a meeting of the shareholders shall be a shareholder or

shareholders present in person or represented by proxy and holding in excess of one-half of the number of
shares of the Corporation entitled to be voted at such meeting.

V.
5.01

SHARES

Transfer Agent and Registrar. The Board may from time to time appoint a registrar to

maintain any securities register and a transfer agent to maintain the register of transfers of such securities
and may also appoint one or more branch registrars to maintain branch security registers and one or more
branch transfer agents to maintain branch registers of transfers, and any one person may be appointed
both registrar and transfer agent. The board may at any time terminate any such appointment.

J-6 AC/1463772.11

VI.
6.01

Payment.

DIVIDENDS

A dividend payable in cash shall be paid by cheque drawn on the Corporation's

bankers or any one of them to the order of each registered holder of shares of the class in respect of which
it has been declared, which cheque may be mailed by prepaid ordinary mail to such registered holder at
his last address appearing on the records of the Corporation. In the case of joint holders the cheque shall,
unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and if
more than one address appears in the books of the Corporation in respect of such joint holders the cheque
shall be mailed to the first address so appearing. The mailing of such cheque as aforesaid shall satisfy and
discharge all liability for the dividend to the extent of the sum represented thereby, unless such cheque
shall not be paid on presentation. Upon proof being given to the Corporation of the non-receipt of any
such cheque by the person to whom it was so sent, as aforesaid, and upon satisfactory indemnity being
given to the Corporation in that regard, the Corporation shall issue to such person a replacement cheque
for a like amount.

6.02

Purchase of Business as of Past Date. Where any business is purchased by the Corporation

as from a past date (whether such date be before or after the incorporation of the Corporation) upon terms
that the Corporation shall as from that date take the profits and bear the losses of the business, such profits
or losses, as the case may be, shall, at the discretion of the directors, be credited or debited wholly or in
part to revenue account and in that case the amount so credited or debited shall, for the purpose of
ascertaining the funds available for dividends, be treated as a profit or loss arising from the business of
the Corporation.

VII.
7.01

FINANCIAL YEAR

The financial or fiscal year of the Corporation shall be as determined from time to time by the

Board.

VIII.
8.01

NOTICES

Omissions and Errors. The accidental omission to give any notice to any shareholder,

director, officer or auditor or the non-receipt of any notice by any such person, or any error in any notice
not affecting the substance thereof, shall not invalidate any action taken at any meeting held pursuant to
such notice or otherwise founded thereon.

8.02

Notice to Joint Shareholders. All notices with respect to any shares registered in the name of

more than one holder may if more than one address appears in the records of the Corporation in respect of

J-7 AC/1463772.11

such holders be given to such holders at the first address so appearing, and notice so given shall be
sufficient notice to all of the holders of such shares.

8.03

Persons Entitled by Death or Operation of Law. Every person who by operation of law, by

transfer, by the death of a shareholder, or otherwise, becomes entitled to shares, is bound by every notice
in respect of such shares which has been duly given to the registered holder of such shares prior to the
name and address of such person being entered on the records of the Corporation as the holder of such
shares.

8.04

Signature to Notices. The signature to any notice to be given by the Corporation may be

written, stamped, type-written or printed or partly written, stamped, type-written or printed.

IX.
9.01

EXECUTION OF DOCUMENTS

Deeds, transfers, assignments, contracts and obligations of the Corporation may be signed as

follows:
(i)

if the offices of President and Secretary are held by one person, by that person alone; or

(ii)

by the Chairman of the Board together with the President, if two different persons hold such
offices; or

(iii)

by the President, a Vice-President or a director, together with the Secretary, Treasurer, Assistant
Secretary, Assistant Treasurer.

Notwithstanding the foregoing, the board may at any time and from time to time direct the manner in
which and the person or persons by whom any particular deed, transfer, contract or obligation or any class
of deeds, transfers, contracts or obligations may be signed.

9.02

Seal.

Any person authorized to sign any document may affix the corporate seal of the

Corporation thereto, if the Corporation has a corporate seal.

X.
10.01

EFFECTIVE DATE

This by-law comes into force upon confirmation by the shareholders of the Corporation in

accordance with the Act.

J-8 AC/1463772.11