The 2004 Feasibility Study identified that the exploration programs completed by Alamos, Placer Dome, Kennecott and Minera Real de Angles had delineated measured and indicated resources of 62.2 million tonnes @ 1.51 grams per tonne Au and 0.6 grams per metric tonne Ag, totalling 3,020,000 ounces of gold and a small amount of silver. These resources were contained only in the Estrella, Mina Vieja and Escondida areas of the Mulatos deposit. The Gap, El Victor and San Carlos portions were not included in this determination of resources.

On March 20, 2007 the Company reported a revised global resource for the Mulatos deposit. The updated measured and

indicated global resource exclusive of material mined to date was reported to be 91.2 million tonnes at a grade of 1.26 grams per tonne (g/t) Au (0.5 g/t cut-off), for 3.71 million contained ounces of gold, compared to 75.6 million tonnes at 1.34 g/t Au (0.5 g/t cutoff) in the 2004 Feasibility Study, a net increase of 453,000 ounces of gold. The updated global resource includes previously announced resource updates in the El Salto, Mina Vieja, and Escondida areas, but does not include recent development drilling at Gap, El Victor and San Carlos. The Company also reported 14.5 million tonnes at 0.99 g/t Au in the inferred category, for 458,700 contained ounces of gold at a 0.5 g/t cutoff, compared with 14.6 million tonnes at 1.05 g/t Au for 491,000 contained ounces gold at 0.5 g/t cut-off in the 2004 Feasibility Study.

After accounting for all resources mined through to December 31, 2006, the measured and indicated resource was reported to contain 86.4 million tonnes at a grade of 1.24 g/t Au at a 0.5 g/t cutoff, for 3.44 million contained ounces. Resource expansion exploration projects have replaced all ounces mined since production began through the end of 2006, plus added an additional 182,000 measured and indicated gold resource ounces. The table below presents measured and indicated resources as at December 31, 2006:

Mineral Reserves

An updated mineral reserve estimate was calculated as at December 31, 2006 using a price of $500 per ounce of gold, and indicates proven and probable reserves of 2.1 million contained ounces. This reflects a 7% increase from the mineral reserves for the Estrella Pit reported in the Company’s Feasibility Study dated June 17, 2004 of 1.92 million contained ounces. The updated mineral reserve estimate incorporates the Estrella, Mina Vieja, El Salto and Escondida areas.

The Company’s exploration and development program has been successful in adding reserves to areas outside of the existing Estrella Pit. The Company anticipates growing its reserve base in 2007 and 2008 as the results of drilling at the Gap and El Victor areas are incorporated into its global mineral reserve. Proven and probable reserves are summarized in the table below as at December 31, 2006:

1. Unless otherwise noted, the Company’s reserves are estimated using appropriate cut-off grades ranging from 0.4 g/t Au to 0.9 g/t Au derived using an estimated gold price of US$500 per ounce. Reserves are estimated using projected life-of-mine operating costs and gold recovery assumptions.
2. The Company’s reserves as at December 31, 2006 are classified in accordance with the Canadian Institute of Mining Metallurgy and Petroleum’s “CIM Standards on Mineral Resources and Reserves, Definition and Guidelines” as per Canadian Securities Administrator’s National Instrument 43-101 (“NI 43-101”) requirements.

Mineral reserves in the Estrella Pit were 31,900,000 tonnes at a grade of 1.64 g/t Au for total contained ounces of 1,682,000 as at December 31, 2006. The 12% reduction in contained ounces between the 2004 Feasibility Study and as at December 31, 2006 is the result of a combination of the following factors:

- A total of 268,000 contained ounces was mined from the Estrella Pit in the period from the start of mining operations in the third quarter of 2005 to December 31, 2006.

- Mineral reserves were estimated at December 31, 2006 using a gold price of US$500 per ounce as compared to US$350 per ounce used in calculating the reserves reported in the 2004 Feasibility Study.

- Mine operating costs and royalty costs used in the calculation of mineral reserves as at December 31, 2006 have increased from the assumptions used in the 2004 Feasibility Study estimate.

Mineral reserves in the Escondida project area contributed 232,000 contained ounces to the mineral reserve estimate as at December 31, 2006. The majority of these ounces (141,000) are derived from the Escondida High Grade Zone, where the Company believes that the grade used in the reserve calculation understates the actual grade due to coarse gold sampling issues. Further sampling tests and analysis are currently underway in order to report a more accurate grade for this area.

The El Salto – Mina Vieja area contributed 142,000 contained ounces to the mineral reserve estimate as at December 31, 2006. The 2004 Feasibility Study reserve estimate did not include the El Salto-Mina Vieja area.