10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 29, 2012

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to _____

Commission file number: 000-23561

___________________________

PAN AMERICAN GOLDFIELDS LTD.

(Exact name of registrant as specified in its charter)

Delaware	84-1431797
(State or other jurisdiction of incorporation)	(IRS Employer Identification Number)

595 Howe Street, Unit 906 Vancouver, BC	V6C 2T5
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (604) 681-1163

Securities registered under Section 12(b) of the Act:

None

Securities registered under Section 12(g) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. o

1

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the ExchangeAct.

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o	(Do not check if a smaller reporting company)	Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of voting Common Stock held by non-affiliates of the Registrant, based upon the average of the closing bid and asked price of Common Stock on the OTC Bulletin Board system on August 31,2011 of $0.23 was approximately $14,126,043.

As of  May 30, 2012, the Registrant had 71,977,691 shares of Common Stock issued and outstanding.

2

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Background

We are an exploration stage company focused on mineral exploration activities in Mexico, Argentina and Mongolia. Through our wholly owned Mexican subsidiary, Sunburst Mining de Mexico, S.A. de C.V., (“Sunburst”), we are currently engaged in the exploration ofonegold and silver project, named the Cieneguita Project made up of several mining concessions. The Cieneguita Project is located in the Sierra Madre region of the State of Chihuahua, Mexico. We also have the rights to another exploration project named Cerro Delta located in Argentina. We previously owned three other projects in Mexico known as Sahuayacan, Guazapares and Encino Gordo Projects. After poor drilling results in 2010, we dropped the Sahyua can project. We agreed to sell the Guazapares Project pursuant to the terms of a definitive agreement, dated July 10, 2009, to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount Gold and Silver Corp., for a total consideration of up to $5.3 million. We also sold the Encino Gordo Project in May 2012 for a total consideration of $300,000.

To help support our exploration activities, we entered into a development agreement with Minera Rio Tinto, S.A. de C.V. (“MRT”), a mining operator in Chihuahua, Mexico, which is owned by our former Chairman, Mario Ayub. Under the development agreement, we authorized MRT to commence a small scale milling operation at our Cieneguita Project.As of February 2012,MRT’s start-up operations had progressed as planned, and all essential systems and construction for initial plant facilities for crushing, gravity and flotation circuits were complete. Operations had also commenced for one 12-hour shift per day with a processing rate up to 550 tons per day. The terms of our arrangement with MRT are discussed in detail below.

Recent Developments

On January 17th 2012 Hernan Celorrio was appointed as a member of the Board of Directors. In August 2011, we appointed Hernan Celorrio as an advisor to the board of directors and as a director of Recursos Argentinos SA, our newly formed subsidiary in Argentina. Mr. Celorrio, a lawyer, is an expert in Argentinean mining law and has an extensive background in the industry. He was the President of Barrick Exploraciones Argentina S.A. and a Vice President of Minera Peñoles in Argentina, in addition to sitting on the board of Directors of Northern Orion Resources and Yamana Resources (Compañia Minera Polimet S.A.) in Argentina. He is currently the vice president of the Argentine-ChileanChamber of Commerce and a director of the executive committee and president of the Mining Committee of the Argentine Canadian Chamber of Commerce. He is also the president of the Argentine Mining Foundation (FUNDAMIN).

Also on January 17th Dr. Fedor Zhimulev MSc. PhD Honors, Novosibirsk State University was appointed as the company’s Chief Exploration Geologist. He was a former senior researcher at the Sobolev Institute of Geology and Mineralogy and has extensive experience conducting fieldwork in the Far East, Middle Asia and India.

On December 19th 2012  Alexander Borisenko Dr. Sci. was appointed, as advisor to our board of directors.   Dr. Borisenko is the head of the ore-deposit geology department at Novosibirsk State University in Russia and he is the Deputy Director of the Institute for Geology and Mineralogy, Siberia Branch Russian Academy of Sciences.

Dr. Borisenko is an expert regarding ore-deposit formation and metallogeny. His work resulted in the discovery of a silver belt currently estimated to contain 3.8 billion ounces of silver at SE Altai and NW Mongolia where he also identified a number of economic Ag-Sb deposits. Dr. Borisenko is also credited with the discovery of the Central Khangai gold-belt and the resulting discovery of large gold placers including Harguyt and Twin-goal. In Southern Mongolia he discovered several gold deposits including Bumbat and Unegen-Del. For his discovery of the silver belt at SE Altai and NW Mongolia he received a Medal from the Union of Communist Republics.

In July 2011, we entered into an agreement with M3 Engineering and Technology Corporation (“M3”) for the execution and completion of a National Instrument 43- 101 (“NI 43-101”) compliant Preliminary Economic Assessment (“PEA”) for the Cieneguita project.

In May 2011, we appointed Dr. Alexander Becker as advisor to our board of directors, who has a Ph.D. in Structural Geology, and an extensive, history as an exploration geologist. He was a director of Perseus Mining Limited when it was formed in 2002 and identified and acquired the original assets of Perseus spin-out Manas Resources. He was also Vice President Exploration, Asia, for Apex Silver Mines, which went on to accumulate one of the largest, privately controlled portfolios of silver exploration properties in the world at that time. He is also credited with identifying the gold potential of a known antimony occurrence called the Chaarat, where a 4.4 million ounce gold resource was subsequently outlined. Dr. Becker has advised a variety of companies including Santa Fe Gold prior to its acquisition by Newmont and BarrickGold (Asia). He was a senior scientific researcher at Ben Gurion University and won the Peres Award for tectonic research. Dr. Becker has authored numerous papers in international scientific journals including Geological Society of America, Tectonophysics, Structural Geology, and International Geology Review.

3

In March 2011, we appointed Bruno Le Barber as a member of the board of directors. Mr. Le Barber has extensive financial expertise and is a co-founder of Vortex Capital (“Vortex”), a Hong Kong based gold fund. Previously he was a Vice President at Morgan Stanley in London where he advised trading desks and a large investor base while publishing macro-economic studies. Mr. Le Barber was also a global technical strategist with ABN Amro in Paris.He manages Vortex together with Emilio Alvarez, former Executive Director, Equity Research with Morgan Stanley in London.

In February 2011, weentered into an agreement with Compañia Minera Alto Rio Salado S.A., a private Argentine entity, for the acquisition of the 15,000 hectares Cerro Delta Project in northwest La Rioja Province, Argentina. Under the terms of the agreement, we are required to pay $150,000 upon signing (paid) the agreement, $200,000 on the first anniversary, $500,000 on the second anniversary, $750,000 on the third anniversary, $1.2 million on the fourth anniversary, and $2.2 million on the fifth anniversary of the signing, with a final option payment of $5 million to purchase a 100% interest in the Cerro Delta project payable on the sixth anniversary of the signing. The vendor will retain a 1% NSR.

In conjunction with the acquisition of the Cerro Delta project, we completed a private placement of 6,560,000 units at $0.20 per unit, for total proceeds of $1,312,000. Each unit consisted of one share of common stock and a warrant to purchase one share of common stock. Each warrant is exercisable for one share of common stock at an exercise price of $0.30 per share for a period of two years from the closing date.

In October 2010, we appointed Miguel F. Di Nanno as President and Chief Operating Officer, replacing George Young effective as of October 15, 2010. Mr. Young remains on our board of directors. Mr. Di Nanno is an Argentina-based mining engineer with extensive mining experience in Argentina. He was the Country Manager in Argentina for Phelps Dodge Corporation developing the Arroyo Cascada Gold deposit, an early stage gold exploration project in Chubut Province he was also Commercial Development Manager, Argentina for the Queensland Government and the COO in Argentina for the Grosso Group. In the areas of acquisition, development and exploration, his clients included MIM Exploration, developing a comprehensive regional geological study of northern Patagonia in Argentina; COMINCO, cooperating on a metallogenic Patagonia zone data base; Viceroy Resources, working on the acquisition of gold exploration projects in  such as Cerro Choique, a disseminated gold deposit and others; Cyprus Minerals; Mauricio Hochschild, collaborating on issues related to permitting of the San Jose project; Bema Gold;, and Northern Orion, acquisition of polimetallic projects in Chubut Province. Mr. Di Nanno is credited with discovering the 3.2 million oz gold Aeropuerto deposit in Chubut Province when he was the Zone Manager for Canyon Resources. The Aeropuertodepositwas later renamed Esquel. He has a degree in Mining Engineering – Ore Dressing from the National University of San Juan - Argentina.

In July 2010, we appointed Neil Maedel, Randy Buchamer and Gary Parkison to our board of directors. Mr. Maedel is an investment banker specializing in international resource projects; Mr. Buchamer has extensive experience in business administration and finance; and Mr. Parkison is qualified geologist and project manager with expertise in exploration and development of minerals and metals projects. He is credited with the Terrazas discovery – now one of Mexico’s largest silver-zinc deposits, and he identified and outlined the San Javier the largest iron oxide copper gold deposit found to date in Mexico. All of the newly appointed directors have technical and financial industry experience base that will assist us with operations and our planned listing on either the Toronto Stock Exchange or the TSX Venture Exchange, consistent with our status as a producing resource company.

In July 2010, we reincorporated from the State of Colorado to the State of Delaware. The reincorporation was effected pursuant to an agreement and plan of merger (the “Merger Agreement”), by and between us and Pan American Goldfields Ltd.,a Colorado corporation (formerly Mexoro Minerals Ltd.), with Pan American Goldfields Ltd. (“Pan American”) being the surviving corporation. Accordingly, the rights of our shareholders are now governed by Delaware General Corporation Law and the certificate of incorporation and bylaws of Pan American filed with the State of Delaware.

In May 2010, management decided to drop the Sahuayacan project when results from a drilling program indicated that the main auriferous zone at the project did not contain economic concentrations of gold. By dropping this exploration project we eliminate any future concession payments on this project.

4

Market Overview

Chihuahua, Mexico: The Chihuahua region of Mexico is currently attracting significant mineral exploration, development and mining activities. Propelled by advances in mining technology and a resurgence of the global gold markets, a number of intermediate and major companies have returned to or commenced mining activities in this region, including: the San Miguel Project operated by Paramount Gold, the Pinos Altos Project operated by Agnico Eagle and the San Miguel Project operated by Paramount Gold. The map below shows the location of the Cieneguita Projectin the Sierra Madre Sierra region of the State of Chihuahua, Mexico.

5

Argentina (Maricunga Belt):  Similar to the Chihuahua region in Mexico, in response to higher prices and improved methods of precious and base metals extraction, a number of exploration and mining projects are being pursued in eastern Argentina, in a region known as the Maricunga Belt. The Maricunga belt is approximately 20 miles wide and 120 miles long. The two largest discoveries to date in the Maricunga Belt are the Cerro Casale and Caspiche Projects. Our Cerro Delta Project is located in the east portion of the Maricunga Belt, in Argentina. It is approximately 12 miles to the east of the Cerro Casale Project, which is in Chile. The map below indicates the location of our Cerro Delta Project:

6

Our Strategy

Since taking effective management and board control of the company in 2010, Pan American has attracted an exceptional team of established explorationists and mine developers. Our strategy is to leverage this considerable capability, as we develop and continue to produce revenue from our Cieneguita project while locating, acquiring and eventually developing major exploration assets in Central Asia, Mongolia and South America. Our Cieneguita Project is our most advanced stage project. Using the considerable skill set we have available, our plan is, as economically as possible, to identify and then analyze in an extremely cost effective manner and subsequently eliminate or if of sufficient merit, acquire and develop additional precious metals exploration and development projects. The priority is to advance dramatically or eliminate prospects in an extremely cost effective manner. For example the initial drilling campaign at Cerro Delta which is designed to test a 1 km wide by 1.5 km long gold porphyry, is expected to cost approximately $700,000.

In Mexico, we have mineral concession rights for one Project, Cieneguita. A pilot operation at the Cieneguita is producing revenues for that company which helps offset overhead, costs related to its proposed expansion, and the development of our pipeline of prospects in Mongolia, and South America. In Argentina our first prospect to be acquired and advanced to being 'drill ready' is called the Cerro Delta Project. Both the Cieneguita and the Cerro Delta are located near where large mining companies already have pre-existing or are starting operations. The presence of the existing large mining companies already operating in the area or commencing operations near us can reduce risk while making operations more cost effective, just as the potential is increased that the project will be acquired by the already existing gold producer.   

Our Cieneguita Project is smaller than the other exploration opportunities we are pursuing. However, because in our opinion it is relatively a low risk development project,and is already cash flowing, its considerable potential for revenue growth, combined with the potential for its value to be increased by completing a feasibility study make it an ideal starting point and foundation from which to pursue other growth opportunities.  

 Our goal is to establish a pipeline of two new drill-stage or near-to-drill stage projects per year. Our proposed exploration program consists of two main components: 

· Create a pipeline of quality properties providing a steady stream of new prospects and/or projects to explore, contract-out and/or enter into development agreements with other mining companies in South America, Mongolia and Central Asia.

· Focus on large-sized prospects (minimum size 5,000,000 ounces gold-equivalent).

The proposed exploration program is being undertaken by our exploration team using in-house knowledge along with the support and guidance of consultants with expertise in these regions. We believe our existing management team and key advisors have the necessary exploration and mining expertise to locate, evaluate and bring mining properties to production.

For our Cerro Delta Project, we entered into an agreement with Compania Minera Alto Rio Salado S.A., a private Argentine entity, for the acquisition of the 15,000 hectares Cerro Delta project in northwest La Rioja Province, Argentina. This project is drill ready and we believe it is a high impact exploration project which contains a large anomalous gold zone and other similarities to other deposits in the area. We anticipate working aggressively on this property in concurrence with our work in Mexico. See Cerro Delta below.

We are continuing to evaluate potential new projects, but we currently do not have sufficient funds to implement our strategy of establishing two new drill-stage or near-to-drill stage projects per year.

7

Our Cieneguita Project

Summary

Our Cieneguita Project is located in the Baja Tarahumara in Cieneguita Lluvia De Oro, an area of canyons in the Municipality of Urique, in southwest Chihuahua, Mexico. The concessions on the Cieneguita Project cover a total area of 822 hectares (approximately 2,031 acres). A new gold discovery was made by our wholly-owned subsidiary Sunburst de Mexico in early 2008. As a feasibility study has not been completed nor is there any assurance that one can be successfully completed, there are no known reserves on the Cieneguita Project.

Property Ownership

The property associated with our Cieneguita Project is currently owned by Corporativo Minero. Our wholly-owned subsidiary, Sunburst, with the permission of Corporativo Minero, obtained an exclusive option to acquire the Cieneguita property for $2 million. We are required to make yearly payments to Corporative Minero on May 6th of each year in the amount of $120,000 until the outstanding balance owed on the $2 million is paid in full to keep the option in good standing. In the alternative, when the Cieneguita Projectis put into production, we are required to pay Corporativo Minero $20 per ounce of gold produced from the Cieneguita Project, in lieu of the yearly payment of $120,000, until we pay Corporativo Minero an aggregate of $2 million. In the event that the price of gold is above $400 per ounce, the payments payable from production will be increased by $0.10 for each dollar increment the spot price of gold trades over $400 per ounce. The total payment of $2 million does not change with fluctuations in the price of gold. Non-payment of any portion of the $2 million total payment will constitute a default, in which case we will lose our rights to the Cieneguita property and the associated concessions, but we will not incur any additional default penalty. Because of the mining operations being conducted by MRT at the Cieneguita Project discussed below, we are currently paying Corporativo Minero based on the gold being produced from the Cieneguita Project.

As of February 29, 2012, we have paid $1,177,000 to Corporativo Minero. Once the full $2 million payment has been made, we will own the Cieneguita property and we will have no further obligation to Corporativo Minero. Corporativo Minero has the obligation to pay, from the funds they receive from us, any royalties that may be outstanding on the properties from prior periods. Corporativo Minero has informed us that there were royalties of up to 7% net smelter return (“NSR”) owned by various former owners of the Cieneguita property. They have informed us that the corporations holding those royalties have been dissolved and that there is no further legal requirement to make these royalty payments. We can make no assurance that these former owners will not contend that we are ultimately responsible to pay all or some of the 7% NSR to these former royalty holders if the Project was ever put into production and Corporativo Minero did not make the payments to the royalty holders. MRT no longer has any ownership interest or payment obligations with respect to the Cieneguita property. There is no affiliation between Corporativo Minero and Pan American or its officers, directors or affiliates.

Development Agreement and Project Ownership

To help fund our exploration activities, we entered into a development agreement (amended in December 2011) with MRT in February 2009, which we amended in December 2009. Pursuant to the terms of the development agreement, as amended, MRT has agreed to invest up to $8 million to initiate the first phase of productionand to complete a feasibility study on the Cieneguita Project. The first phase of production is limited to the mining of the mineralized material that is available from the surface to a depth of 15 meters (“First Phase Production”). In exchange, we assigned MRT a 74%interest of the net cash flows from First Phase Production and a 54% ownership interest in the Cieneguita project.

To fund our continued operations, we issued $1.5 million of convertible debentures in March 2009, of which an aggregate of $880,000 was issued to Mario Ayub, one of our directors, and to his affiliated entity, MRT. Pursuant to the terms of the convertible debentures, the holders irrevocably converted the debentures into a 10% ownership interest in the Cieneguita Project and a 10% interest in the net cash flow from First Phase Production. In December 2009, Mario Ayub and MRT agreed to resell an aggregate 4% ownership interest in the Cieneguita Project back to us, along with 4% of the net cash flow from First Phase Production, in return for $550,000. In a private transaction not involving us, the other holders contributed their remaining 6% ownership interest in the Cieneguita Project to a newly formed entity, Marje Minerals SA (“Marje Minerals”).

8

As a result of our amended development agreement and our agreements with the debenture holders, the ownership interest in the Cieneguita project and the net cash flows from the First Phase Production are held by us, MRT and Marje Minerals as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase  Production	Net Cash Flow Interest Following First Phase Production
MRT	54%	74%	54%
Marje Minerals	6%	6%	6%
Pan American	40%	20%	40%

Any additional costs for the First Phase Production and the feasibility study for the Cieneguita project, after MRT invests $8million, will be shared by us, MRT and Marje Minerals on a pro-rata basis based on their respective ownership percentages in the Cieneguita project.

The major terms of the development agreement with MRT and Marje Minerals are as follows:

●   MRT purchased $1 million of secured convertible debentures at 8% interest (payable in stock or cash). The proceeds from this investment were used for continued exploration and development of the Cieneguita Project and general working capital. In November 2009, MRT exercised its conversion rights on the debenture and MRT was issued 3,333,333 common shares and a warrant to purchase 1,666,667 shares of common stock at an exercise price of $0.50 per share.

●   MRT agreed to provide the necessary working capital to begin and maintain mining operations, estimated to be $3 million, to put the first phase of the Cieneguita Project into production. In exchange for these funds, we assigned MRT an interest to 74% of the net cash flow from First Phase Production. The agreement limits the mining during First Phase Production to the mineralized material that is available from the surface to a depth of 15 meters.

●   MRT committed to spend up to $4 million to take the Cieneguita Project through the feasibility stage. In doing so, we would assign MRT a 54% interest in our rights to the Cieneguita Project. After the expenditure of the $4 million, all costs will be shared on a pro-rata ownership basis (i.e. 54% to MRT, 40% to us and 6% to Marje Minerals). If any party cannot pay its portion of the costs after the $4 million has been spent, then their ownership position in the Cieneguita project will be reduced by 1% for every $100,000 invested by the other owners. Our ownership interest in the Cieneguita project, however, cannot be reduced below 25%. In addition, we have the right to cover Marje Minerals’ pro rata portion of costs if they cannot pay their portion of the costs. In return, we will receive 1% of Marje Minerals’ ownership position in the Cieneguita Project for every $100,000 we invest on their behalf.

●   The MRT agreement was contingent on our repaying a debenture to Paramount. In March 2009, we repaid $1 million, or approximately two-thirds of the debt, and Paramount released a security interest it had on the Cieneguita project. In October 2009, we repaid the remaining amount of the debt, and Paramount released its security interests on the Sahuayacan, Guazapares and Encino Gordo properties.

Current Operations

Under the original development agreement, we had authorized MRT to commence a small scale milling operation at our Cieneguita Project. As of February 2011,MRT’s start-up operations had progressed as planned, and all essential systems and construction of the initial plant facilities for crushing and gravity and flotation circuits were complete. Operations had also commenced for two 12-hour shifts per day with an approximate processing rate of 700 tons per day. As reported by us, MRT has periodically experienced water supply problems during the dry season that has forced it to limit or curtail the processing of ore. MRT’s right to conduct mining operations at our Cieneguita Project both under the original agreement and under the current agreement terminates on December 31, 2012. MRT is required to comply with applicable environmental laws and permits in conducting its operations at the Cieneguita Project.

All the plant and equipment utilized by MRT at the Cieneguita Project were paid for and are owned by MRT. Because MRT has a limited time on which to conduct operations at the Cieneguita Project (i.e., through December 31, 2012), MRT primarily utilizes used mining equipment that is more than 10 years old. MRT has also constructed and operates a tailings pond at the Cieneguita Project. Under the development agreement, MRT is required to remove all of its equipment from the Cieneguita Project at the end of 2012. As part of that obligation, MRT is required to remediate the tailings pond in accordance with applicable environmental laws by the end of 2012.

Under the former and current agreement, MRT is responsible for all mining operations though the sale of concentrate. MRT starts with primary ore mined from an open pit mine at the west end of the Cieneguita Project. In Cieneguita de los Trejo, Chihuahua, MRT produces a bulk sulfide flotation concentrate that it later ships to Choix Sinaloa, for cleaning and production of a saleable lead concentrate containing gold and silver. In accordance with the development agreement, MRT pays us 20% of the net cash flows from MRT’s mining operations at the Cieneguita Project. The revenues earned by us are the result of the extraction and sale of minerals from the Cieneguita Project, and are not incidental income related to our exploration activities.

9

Property Location

Cieneguita is located in the Baja Tarahumara in Cieneguita Lluvia De Oro, an area of canyons in the Municipality of Urique, in southwest Chihuahua State, Mexico. The property is located within one half mile of the small village of Cieneguita Lluvia de Oro. Access to the property is by an all-weather dirt road.

The concessions of the CieneguitaProject cover a total area of 822 Hectares (approximately 2,031 acres). The following table is a summary of the concessions on the Cieneguita Project:

Lot Name	Title Number	Area (Ha)	Term of Validity
Aurifero	196356	492.00	7/16/1993 to 7/15/2043
Aurifero Norte	196153	60.00	7/16/1993 to 7/15/2043
La Maravilla	190479	48.00	4/29/1991 to 4/24/2041
Aquilon Uno	208339	222.00	9/23/1998 to 9/22/2048

Claim Status and Licensing

In April 2006, we applied to the Mexican government for a change of use of land permit for 30 hectares of the La Maravilla concession. The La Maravilla concession is the concession that contains the mineralized rock that is the interest of our exploration. We are currently extracting mineralized material from the La Maravilla concession as Tuscon, Arizona based M3 Engineering firm completes a Preliminary Economic Assessment regarding the project’s economics. The purpose of the change of use permit was to allow us, if necessary, to extract the rock from this concession for the purposes of processing the rock to extract the precious metals that it may contain. Because the permitting process takes a period of time, we made the application in advance of any known reserves being discovered on the property. We cannot assure you that we will have sufficient ore reserves, if any, to continue extraction. This permit required negotiations with the government and municipality concerning such things as the removal of timber, building and maintaining roads, and reclamation. The government agency responsible for this permit met with our representatives and toured our property in May 2006 as part of the permit process. The application fee for this permit was approximately $800, but there was an additional negotiated fee charged for the permit in the approximate amount of $67,000 (720,000 Mexican Pesos). In January 2007, the government agency issued the change of use permit, and we subsequently made the required payment of approximately $67,000 (720,000 Mexican Pesos).

In July 2006, we submitted an environmental impact study and a risk analysis study to the Mexican government for a permit to build a heap leach mining operation on the Aurifero concession of our Cieneguita Project. The purpose of this permit was to allow us to construct an ore processing facility through heap leach mining methods. We do not have any ore reserves on our Cieneguita Project and applied for permits in advance of any conclusive results. In January 2007, the necessary permits to allow for the building and operation of a heap leach operation were granted to us. Currently, the permit has been updated to allow us to build a crushing and floatation mining operation. The permit is valid until 2016 as long as we continue to provide yearly reports to SEMERNANT (the governing Mexican environmental agency responsible for permitting).

History and Geology

The Cieneguita mines were in limited production in the 1990s. Over a four-year period, the Cieneguita Gold Mine was operated by Mineral Glamis La Cieneguita S. De R.L. De C.V. (“Glamis”), a subsidiary of the Canadian company Glamis Gold Ltd. (“Glamis Gold”). According to Glamis’ records, Glamis mined and processed ore on the property in 1995. Glamis stopped production in the mid-1990s. At that time, Corporativo Minero, the operator of the mine for Glamis, acquired the property. MRT entered into an agreement with Corporativo Minero on January 12, 2004 pursuant to which MRT acquired all of the mineral rights from Corporativo Minero to explore and exploit the Cieneguita concessions and to purchase them for $2 million. Under our agreements with MRT, MRT has assigned this agreement to our wholly-owned subsidiary, Sunburst de Mexico.

Our exploration work shows that the geology in the mineralization in the zone of sulfides includes pyrite, galena, sphalerite, tennantite and tetrahedrite, pirargirite and traces of chalcopyrite and pyrhotite. These minerals mainly occur as uniform disseminations and as micro-veins. The previous exploration drilling by Cominco and Glamis Gold delineated a zone of altered volcanics, represented by silica, sericite and argillite that are believed to be 1,000 meters long (strike length) and up to 200 meters wide. Within this zone, the oxidation has been shallow and reaches a maximum depth of 20 meters.

10

Glamis Gold performed a test pilot heap leach operation on the property in the mid 1990’s. The exploration on the property is still in its early stages and significant work needs to be completed before any type of ore reserve calculations, if any, could be made. Our operations are currently exploratory. We have done some initial sampling on the La Maravilla concessions as described below.

A total of 51 diamond drill holes (6,700 meters) drilled by Cominco (now Teck Cominco Ltd.) defined an auriferous zone approximately 1,000 meters long by 200 wide. On such a zone, two mineralized structures were drilled during their exploration program in 1981 and 1982. Later, two drilling programs were performed by Glamis: 135 holes were drilled during 1994 and 62 holes were drilled during 1997. Both programs confirmed the delineation of the two mineralized ore bodies. We have had access to these reports from Cominco and Glamis. The initial exploration conducted by our Company will focus on further delineating the oxide mixed mineralized structures and the sulfide structures.

We used the original data from Cominco and Glamis to delineate the mineralized zone and to plan our present trenching and sampling programs. In April 2006, we completed a sampling of the property that included more than 500 meters of deep trenches from which we took comprehensive channel sampling. The trenches comprised 8 trenches approximately 200 meters long and 2 to 10 meters deep spaced equally along the 1,000 meters strike length of the property. From the walls of these trenches, we took approximately 550 rock samples. We sent one half of these samples to ALS Chemex’s laboratory in Chihuahua for assaying. The sampling protocol followed the best mining practices. The purpose of the sampling was to further define the ore grade and potential of the property. The other half of the sample was used to complete column tests to determine the leachability of the precious metals from the rock. Subsequent drilling indicated that the mineralized material was much larger than originally anticipated and that the heap leaching process was not the best method for extracting the precious metals from the bulk of the mineralized material.

Infrastructure

The town site near the former mine has the following services: electrical power from the public utility, cellular phone, radio communication (CB), a health center and a school. Because the property was previously in production, it has existing infrastructure such as power, water, railroad transportation (within 20 kilometers), and all weather road access year round. We have an existing source of well water, which MRT is currently utilizing for the milling process it is conducting on the Cieneguita Project. Well water has been scarce during the dry season. There are all weather roads to the area that were previously mined allowing easy access for production and exploration. Also, the haul roads to the milling area have been significantly upgraded and are in good condition. We are not required to pay fees to use the roads.

If we put the Cieneguita Project into full development, it is our intention to use the existing heap leach pad area to build the mill site and tailings site to help reduce our costs to re-open the mine. Because some of the infrastructure exists, such as roads and pads, we believe that the investment needed to put this mine into production would be smaller than the investment which would be needed for a mine that was never in production. Because other operating mines exist in the area, infrastructure, such as roads, already exists. There is no other equipment or facilities available to us on the property. Further study needs to be done on the feasibility of using the existing infrastructure of the old mine. We do not own any of the plant or equipment currently be used by MRT to conduct its operations at the Cieneguita Project

Current Exploration

The main exploration activities for the Cieneguita Project are described below:

●   100 diamond drill holes completed for a total of 20,215 meters of drilling;

●   Broad mineralized intercepts identified, including 111.5 meters with 1.24 g/t Au, 99.6 g/t Ag, 0.45% Pb and 0.73% Zn (Drill Hole C-21) and 94 meters with 1.21 g/t Au, 79.8 g/t Ag, 0.78% Pb and 1.2% Zn (Drill Hole CI-30);

●   Mineralization has been traced over 900 meters along strike and still remains open to the southwest and to depth; and

●   Infill drilling program designed to identify size of the mineralized material.

We have conducted a series of exploration programs at Cieneguita since March 2007. The drilling exploration program commenced in December 2007 with one drill rig and a second rig was added in July 2008. The drilling was completed in December 2008. The figure below shows the location of the 100 diamond drill holes on the Cieneguita Project:

11

Assay results and an analysis of the drilling and exploration work are compiled and described in our recently filed Technical Report on National Instrument Form NI43-101 (“NI 43-101”), which wascompleted following the end of fiscal 2010, and is in compliance with the standards and requirements of Canadian security regulatory authorities. The NI 43-101 report is also available on our website, www.panamericangoldfields.com.

The figure below showsthe main mineralization zones our drilling work identified at the Cieneguita Project. Areas in red on the figure represent zones exhibiting mineralization areas where grades are>1.5 g/t Au.

12

Planned Exploration

The recent exploration activities in Cieneguita have shown that additional exploration is warranted. Considering the latest results and findings the proposed work program for Cieneguita will include:

1.Completing the infill drilling program by doing an additional 10,000 meters of drilling to further identify and support mineralization zones;

2.Continue conducting metallurgical tests; and

3.Complete a Preliminary Economic Assessment and a feasibility study;

The proposed exploration budget for the Cieneguita Project for 2012 willtotal $790,000 and is for the funding of a Preliminary Economic Assessment (PEA) of the economics for a larger scale of gold and silver production that is currently occurring. The PEA has been initiated by us and is being conducted by M3 Engineering. The PEA is expected to be completed in Q3 2012.

There are no known reserves on the Cieneguita property.

13

Encino Gordo Project

In May 2012, wesold the concessions at the Encino Gordo project located in the Barranca region of Chihuahua State in Mexico, which included two concessions owned by us and two additional concessions we had the option to acquire, to MRT.  In connection with the transfer, MRT paid $100,000 cash, waived $200,000 in payments the Company owed to MRT in connection with the Encino Gordo Project and agreed to assume all of the Company’s obligations related to the transferred concessions.The Company’s Board of Directors determined to sell the concessions in order to focus its resources on completing the PEA study for the Cieneguita Project

Cerro Delta Project

Summary

In February 2011, we entered into an agreement with Compania Minera Alto Rio Salado S.A., a private Argentine entity, for the acquisition of the 15,000 hectare Cerro Delta Project in northwest La Rioja Province, Argentina. Under the agreement,wepaid $150,000 on signing (paid), and agreed to pay $200,000 ($135,000 paid)on the first anniversary, $500,000 on the second, $750,000 on the third, $1.2 million on the fourth, and $2.2 million on the fifth anniversary, with a final option payment of $5 million due on the sixth anniversary to purchase a 100% interest in the Cerro Delta Project. The vendor will retain a 1% net smelter revenue. All payments are completely optional, and we have no work commitments beyond the minimal requirements to maintain the mining rights under Argentine law.The environmental permits and water rights are already in place for the Cerro Delta Project.

Property Location

The Cerro Delta Project is located approximately 20 kilometers east of the 28.8 million ounce (resource) Cerro Casale gold project which is being developed by Barrick and Kinross and 29 kilometers southeast of the even larger Caspiche project currently being evaluated by Exeter Resource Corporation. Cerro Delta is located along a regional fault structure trending west-northwest to east-southeast which is associated with theAldebaran, CerroCasale, QuebradaSeca, and Maricela deposits in Chile before crossing into Argentina and intersecting the Cerro Delta Project.

History

The first sampling campaigns of the Cerro Delta Project were conducted in 1993 and 1994 detecting strong gold anomalies in soils south of the Cerro Delta. The major sampling work was done by Minas Argentinas S.A. showing the gold mineralization in highly altered granitic rocks placed West and South of the Cerro Delta. In 1996, Campo de Oro Andino S.A., subsidiary of ElDorado (Canada) conducted a geochemical and geophysical and trenching program (magnetometry, resistivity and IP) defining two drilling targets.

Later, in 2008, Golden Peaks Minera conducted another geophysical study which confirmed the former results and added more detail and precision response.

Infrastructure

The Cerro Delta Project is located 35 kilometers north of the international paved road Nº 22 from Vinchina (La Rioja) to Copiapo, Chile. The Project can also be accessed with existing roads from the City of Copiapo. There is no local electricity or water currently available. We will need to supply our own diesel generated electrical power.

Claim Status

The Cerro Delta Project has three mining concessions:

Mining Concession	Title Number	Area (Ha)	Term of Validity	Royalties and Payments
Pablo	·   9755-C-1991	4,000	-	1% NSR
Roberto	·   9756-C-1991	3,850	-	1% NSR
Delta 1	·   34-C-2007	10,000	-	1% NSR

14

The following figure shows the location of the mining concessions on the Cerro Delta Project.

Geological Setting and Mineral Deposit

The deposits of the Maricunga Belt are often very large but low grade porphyry gold-copper type deposits with variably oxidized sulfide stockwork or veinlets with or without associated copper (Maricunga, Volcan, Caspiche, Cerro Casale) or high sulfidation type epithermal quartz veins and stockworks with better grades and without copper (La Coipa, Lobo-Marte). It is common to have both deposit types in a single large deposit area such as is the case with the Cerro Delta project. In addition, most deposits in the Maricunga Belt exhibit a zoned alteration pattern with an area of potassic alteration flanked by argillic and advanced argillic alteration with some amount of silicification, which is also common to Cerro Delta. Also common to deposits of the Maricunga Belt are large scale faults and lineaments of a general north-south trend and which tend to localize the emplacement of mineralized intrusions. At Cerro Delta these regional structures are mostly N-S, NNW and E-W with several intersecting zones which appear related to alteration and mineralization.

Current Exploration

The main exploration activities for the Cerro Deltahave included soil sample and rock chip samples. Assay results and an analysis of the exploration work are compiled and described in our recently filed NI 43-101 for Cerro Delta, and is in compliance with the standards and requirements of Canadian security regulatory authorities. The NI 43-101 report is also available on our website, www.panamericangoldfields.com.

Planned Exploration Activities

The Cerro Delta project is drill ready and we intend to begin drilling in the fourth quarter of 2012.

15

Recent Financing Activities

In December 2011, wecompleted a private placement of 4,400,000 units at $0.20 per unit, for total proceeds of $880,000. Each unit consists of one share of common stock and a warrant to purchase one share of common stock. Each warrant is exercisable for one share of common stock at an exercise price of $0.30 for a period of two years from the closing date. The securities were issued to U.S. “accredited investors” and Canadian and non-U.S. investors. We paid $61,600 in finders’ fees in conjunction with the private placement.

In March 2011, wecompleted a private placement of 6,560,000 units at $0.20 per unit, for total proceeds of $1,312,000. Each unit consists of one share of common stock and a warrant to purchase one share of common stock. Each warrant is exercisable for one share of common stock at an exercise price of $0.30 for a period of two years from the closing date. The securities were issued to U.S. “accredited investors” and Canadian and non-U.S. investors. We paid $89,000 in finders’ fees in conjunction with the private placement.

In September 2009, we entered into private placement subscription agreements, as thereafter amended, with certain U.S. accredited investors and certain non-U.S. investors for the private placement of 12,500,000 unregistered shares of the common stock with 100% warrant coverage at a purchase price of $0.20 per unit. The warrants have an exercise price of $0.30 per share, a two-year term and will not be exercisable until 12months after their date of issuance. We received aggregate gross proceeds, prior to any expenses, from the private placement of $2,500,000.

Principal Products

Our principal product is the exploration for precious minerals. Because our properties are in the exploration stage, there is no guarantee that any ore body will be found or extracted. The proposed exploration program is being undertaken by our exploration team using in-house knowledge along with the support and guidance of consultants with expertise in these regions. We believe our existing management team and key advisors have the necessary exploration and mining expertise to locate, evaluate and bring mining properties to production.

Competition

We compete with other mining and exploration companies in connection with the acquisition of mining claims and leases on gold and other precious metals prospects and in connection with the recruitment and retention of qualified employees. Many of these companies are much larger than we are, have greater financial resources and have been in the mining business much longer than we have. As such, these competitors may be in a better position through size, finances and experience to acquire suitable exploration properties. We may not be able to compete against these companies in acquiring new properties and/or qualified people to work on any of our properties.

Given the size of the world market for gold and silver relative to individual producers and consumers of gold and silver, we believe that no single company has sufficient market influence to significantly affect the price or supply of gold and silver in the world market.

Governmental Regulations

Our business is subject to various levels of government controls and regulations, which are supplemented and revised from time to time. Any mineral exploration activities conducted by us requires permits from governmental authorities. The various levels of government controls and regulations address, among other things, the environmental impact of mining and mineral processing operations and establish requirements for the decommissioning of mining properties after operations have ceased. With respect to the regulation of mining and processing, legislation and regulations in various jurisdictions establish performance standards, air and water quality emission standards and other design or operational requirements for various components of operations, including health and safety standards. Legislation and regulations also establish requirements for decommissioning, reclamation and rehabilitation of mining properties following the cessation of operations, and may require that some former mining properties be managed for long periods of time. In addition, in Argentina, we are subject to foreign investment controls and regulations governing our ability to remit earnings abroad.

Our operations and properties are subject to a variety of governmental regulations including, among others, regulations promulgated by SEMARNAT, Mexico’s environmental protection agency; the Mexican Mining Law; and the regulations of the Comisión National del Agua with respect to water rights. Mexican regulators have broad authority to shut down and/or levy fines against facilities that do not comply with regulations or standards.Currently the mining of gold and silver containing material at the Cieneguita is being conducted by Minera Rio Tinto which has the necessary permits and approvals for the operation in place.As we put any of our properties into production, operations may also be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety. In Argentina we are subject to comply with the Codigo de Mineria (Argentina´s Mining Law) and all the provincial regulations.

16

The need to comply with applicable laws, regulations and permits will increase the cost of operation and may delay exploration. All permits required for the conduct of mining operations, including the construction of mining facilities, may not be obtainable, which would have an adverse effect on any mining project we might undertake. Additionally, failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing exploration to cease or be curtailed. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current governmental laws and regulations affecting mining companies, or the more stringent application thereof, could adversely affect our operations. The extent of any future changes to governmental laws and regulations cannot be predicted or quantified. Generally, new laws and regulations result in increased compliance costs, including costs for obtaining permits, delays or fines resulting from loss of permits or failure to comply with the new requirements.

To keep our mineral concessions in good standing with the Government of Mexico, we must pay yearly property taxes. These taxes are based on a tariff per hectare and per the number of years (maturity)of each concession. The taxes are paid twice a year. We have paid:

July 2009	MXN $133,626 ($10,179)
January 2010	MXN $141,376 ($10,779)
July 2010	MXN $110,888 ($8,735)
January 2011	MXN $117,215 ($9,685)
July 2011	MXN $117,213 ($8,623)
January 2012	MXN $146,238 ($11,369)

We are in compliance with all of our tax payments to the government. We believe that we are in compliance with all material current government controls and regulations at each of our properties.

Compliance with Environmental Laws

Our current exploration activities and any future mining operations (of which we currently have none planned) are subject to extensive laws and regulations governing the protection of the environment, waste disposal, worker safety, mine construction, and protection of endangered and protected species. We have made, and expect to make in the future, significant expenditures to comply with such laws and regulations. Future changes in applicable laws, regulations and permits or changes in their enforcement or regulatory interpretation could have an adverse impact on our financial condition or results of operations. In the event that we make a mineral discovery and decide to proceed to production, the costs and delays associated with compliance with these laws and regulations could stop us from proceeding with a project or the operation or further improvement of a mine or increase the costs of improvement or production.

In Mexico, we are required to submit, for government approval, a reclamation plan for each of our mining sites that establishes our obligation to reclaim property after minerals have been mined from the site. In some jurisdictions, bonds or other forms of financial assurances are required as security for these reclamation activities. We may incur significant costs in connection with these restoration activities. The unknown nature of possible future additional regulatory requirements and the potential for additional reclamation activities create uncertainties related to future reclamation costs.

In Argentina, every two years, we are required to submit an Environmental Study update for every exploration right for government approval and for every main exploration step (i.e., a new drilling campaign). The same requirement is applicable to every new exploration right we claim.

Employees

We currently have five persons working for Sunburst de Mexico, of which, one is a geologist and the rest are employed in administrative capacity. Except for our general manager, Manuel Flores, all of these persons are provided to Sunburst de Mexico under third party contract, either directly or via a personnel service agency. We have hired Miguel F. Di Nanno as our President and Chief Operating Officer, Salil Dhaumya as our Chief Financial Officer, Dr. Fedor Zhimulevas our Chief Geologist and Manuel Flores as our Operations Manager. Other than these employees and our geologists, all of the employees we hire are contracted from third parties specializing in providing employees for Mexican companies. In using third party contractors, we minimize our exposure to Mexican employment law, and all liabilities are undertaken by the third party contractors providing the services. Currently, we do not have any operations in Argentina. Other than our President and Chief Operating Officer, Mr. Di Nanno, who is based in Argentina, we have no employees or personnel contracted under third party contracts in Argentina. In order to deploy our working capital as efficiently as possible we pay a flat rate to the third parties for their services. In the event that our exploration projects are successful and warrant putting any of our properties into production, all such operations would be contracted out to third parties. Also, we rely on members of our management to handle all matters related to business development and business operations.

17

ITEM IA. RISK FACTORS

Risks Relating to Our Business and Industry

We have a limited operating history; therefore, it is difficult to evaluate our financial performance and prospects.

We have only completed the initial stages of exploration on our mineral concessions and have no way to evaluate the likelihood that we will be able to operate and develop a successful business. We are considered to be an exploration stage corporation because we are currently engaged in the search for mineral deposits. We will be in the exploration stage until we exploit commercially viable mineral deposits on our properties. Our limited operating history makes it difficult to evaluate our financial performance and prospects, as well as our ability to successfully identify and develop mining projects. We have earned minimal revenues from mineral extraction activities to date at our Cieneguita Project, and we have not emerged from being an exploration stage to a development stage corporation. Because of our limited financial history, we believe that period-to-period comparisons of our results of operations will not be meaningful in the short term and should not be relied upon as indicators of future performance.

Because of our recurring operating losses, stockholder’s deficit, working capital deficit and negative cash flows, our auditor has raised substantial doubt about our ability to continue our business.

We have received a report from our independent auditors on our financial statements for the fiscal years ended February 29, 2012 and February 28, 2011, in which our auditors have included explanatory paragraphs indicating that our recurring operating losses, working capital deficiency, and cumulative losses during our exploration stage cause substantial doubt about our ability to continue as a going concern. By issuing this opinion, our auditors have indicated that they are uncertain as to whether we have the capability to continue our operations.

We have a history of incurring net losses. We expect our net losses to continue as a result of planned increases in operating expenses, and therefore, may never achieve profitability.

We have a history of operating losses and have incurred significant net losses in each fiscal quarter since our inception. Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing significant revenues. We expect to continue to incur net losses and negative cash flows for the foreseeable future. Our ability to generate and sustain significant revenues or to achieve profitability will depend upon numerous factors outside of our control, including the precious metals market and the economy. We have no history upon which to base any assumption as to the likelihood that we will prove successful, and we may not be able to generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business, financial condition or results of operations could be materially adversely affected and the business will most likely fail.

If we do not obtain financing when needed, we will need to cease our operations.

As of February 29, 2012, we had cash on hand in the amount of approximately $118,000 and outstanding payables of $ 1.37 million. In order for us to perform any further exploration or extensive testing, we will need to obtain additional financing. We will require additional financing if the costs of the exploration of our mineral concessions are greater than anticipated. We also will need supplementary financing to sustain our business operations if we are not successful in earning revenues once exploration is complete. If our exploration programs are successful in discovering and extracting ore of commercial tonnage and grade, we will require a significant amount of additional funds in order to place our mineral concessions into commercial production. We currently do not have any arrangements for additional financing, and we may not be able to obtain financing when required. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustment to reflect the possible future effect on the recoverability and classification of the assets or the amounts and classification of liabilities that may result should we cease to continue as a going concern. If we are unable to obtain additional financing when sought, we will be required to curtail our business plan. Any additional equity financing may involve substantial dilution to our then existing shareholders. There is a significant risk to investors who purchase shares of our common stock because there is a risk that we may not be able to generate and/or raise enough resources to remain operational for an indefinite period of time.

18

Our success is dependent on retaining key personnel and on hiring and retaining additional personnel.

Our ability to continue to explore and develop our mineral concessions is, in large part, dependent upon our ability to attract and maintain qualified key personnel. There is competition for such personnel, and there can be no assurance that we will be able to attract and retain them. Our development now and in the future will depend on the efforts of key management and directors. The loss of any of these key people could have a material adverse effect on our business, financial condition or results of operations. We do not currently maintain key-man life insurance on any of our key employees. We may not be able to find qualified geologists and mining engineers on a timely basis or at all to further expand our business plan. Furthermore, if we are able to find qualified employees, the cost to hire them may be too great as there may be other opportunities elsewhere at a higher rate than we are able to pay.

As we undertake exploration and potential development of our mineral claims, we will be subject to compliance with government regulations that may increase the anticipated cost of our exploration program.

There are several governmental regulations that materially restrict mineral exploration or exploitation. We expect to be subject to federal, state and local laws and regulations in Mexico and Argentina regarding environmental matters, the abstraction of water, and the discharge of mining wastes and materials and other similar laws and regulations. Amendments to current laws, regulations and permits governing operations and activities of exploration and development companies, or more stringent implementation thereof, could have a material adverse impact on us and our operating, increase our expenditures and costs and require abandonment or delays in developing new mining properties. Environmental laws and regulations change frequently, and the implementation of new, or the modification of existing, laws or regulations could harm our business, financial condition or results of operations. We cannot predict how agencies or courts in Mexico or Argentina will interpret existing laws and regulations or the effect that these adoptions and interpretations may have on our business, financial condition or results of operations. We may be required to make significant expenditures to comply with governmental laws and regulations.

Any significant mining operations that we undertake in the future will have some environmental impact, including land and habitat impact, arising from the use of land for mining and related activities, and certain impact on water resources near the project sites, resulting from water use, rock disposal and drainage run-off. No assurances can be given that such environmental issues will not have a material adverse effect on our business, financial condition or results of operations in the future. MRT is required to comply with applicable environmental laws and permits in conducting its operations at the Cieneguita Project. While we believe we do not currently have any material environmental obligations, exploration and development activities may give rise in the future to significant liabilities on our part to the government and third parties and may require us to incur substantial costs of remediation.

Additionally, we do not maintain insurance against environmental risks. As a result, any claims against us may result in liabilities we will not be able to afford, resulting in the failure of our business. Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in exploration and development operations may be required to compensate those suffering loss or damage by reason of the exploration and development activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.

Because our directors and officers may serve as directors or officers of other companies, they may have a conflict of interest in making decisions for our business.

Our directors and officers may serve as directors or officers of other companies or have significant shareholdings in other resource companies and, to the extent that such other companies may participate in ventures in which we may participate, our directors or officers may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of our directors, we expect that the director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. Our directors are required to act honestly, in good faith and in our best interests. In determining whether or not we will participate in a particular program and the interest therein to be acquired by us, we expect that the directors and officers will be guided by their fiduciary duties and take into account such matters as they deem relevant, including considering the degree of risk to which we may be exposed and our financial position at that time.

Because our officers and directors may allocate their time to other business interests or may be employed by other companies, they may not be able or willing to devote a sufficient amount of time to our business operations, which may adversely affect our business, financial condition or results of operations and cause our business to fail.

It is possible that the demands on our officers and directors, from their existing employment and from other obligations could increase with the result that they would no longer be able to devote sufficient time to the management of our operations and business. This conflict of interest could adversely affect our business, financial condition or results of operations and cause our business to fail.

19

We are controlled by our directors and officers, and, as such, you may have no effective voice in our management.

Our current directors and officers beneficially own a significant percentage of our issued and outstanding shares of common stock. Accordingly, for the foreseeable future, we expect that our directors and officers will exercise control over all matters requiring shareholder approval, including the possible election of additional directors and approval of significant corporate transactions. If you purchase shares of our common stock, you may have no effective voice in our management.

U.S. investors may experience difficulties in attempting to enforce judgments based upon U.S. federal securities laws against us and our non-U.S. resident directors.

All of our operations in Mexico and Argentina are conducted through subsidiary corporations organized and located outside the United States, all of our assets are located outside of the U.S. and certain of our directors and officers are resident outside of the U.S. As a result, it may be difficult or impossible for U.S. investors to enforce judgments of U.S. courts for civil liabilities against us or against any of our individual directors or officers. In addition, U.S. investors should not assume that courts in the countries in which our subsidiary is incorporated or where the assets of our subsidiary are located (i) would enforce judgments of U.S. courts obtained in actions against us or our subsidiary based upon the civil liability provisions of applicable U.S. federal and state securities laws or (ii) would enforce, in original actions, liabilities against us or our subsidiary based upon these laws.

We do not carry title insurance and do not plan to secure any in the future. We are therefore, vulnerable to loss of title.

We do not maintain insurance against title. Title on mineral properties and mining rights involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mining properties. We cannot give any assurance that title to our properties and claims will not be challenged or impugned and cannot be certain that we will have or will acquire valid title to these mining properties and claims. We cannot assume that counterparties to our title transfer agreements will meet their contractual obligations and transfer title on a timely basis. Furthermore, there is a risk that the Mexican government may in the future grant additional titles in excess of our expectations to currently illegal miners or that disputes may arise as to existing title ownership or planned acquisitions. Furthermore, although we believe that mechanisms exist to integrate the titles of mineral properties currently not owned by us, there is a risk that this process could be time consuming and costly. The possibility also exists that title to existing properties or future prospective properties may be lost due to an omission in the claim of title. As a result, any claims against us may result in liabilities we may not be able to afford resulting in the failure of our business.

In the event that we are unable to successfully compete within the mineral exploration and development business, we may not be able to achieve profitable operations.

The mineral exploration and development business is highly competitive. This industry has a multitude of competitors and many competitors dominate this industry. Many of our competitors have greater financial resources than us. As a result, we may experience difficulty competing with other businesses when conducting mineral exploration and development activities or in the retention of qualified personnel. No assurances can be given that we will be able to compete effectively.

We are required to evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the price of our shares of common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our annual report on Form 10-K for the fiscal year ended February 28, 2011, were required to furnish a report by management on our internal controls over financial reporting. Such report will contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management.

Failure to comply with the new rules may make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage and/or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors, or as executive officers.

There are no known reserves on the Cieneguita Project and we have made a production decision at our Cieneguita property without a feasibility study.

20

Under our development agreement with MRT, limited production operations have commenced at our Cieneguita Project without completing a feasibility study. A feasibility study would determine if the property has ore reserves and where such reserves are located; the information for such study would come from a completed drill program. We have not completed a drill program to determine the exact location of ore reserves, if any. There is a high degree of risk involved in making a production decision without indicated or measured mineral resources, without a basis for economic analysis, and without an indication of favorable metallurgy by appropriate test work. There are no known reserves on the Cieneguita Project. Our development agreement with MRT may not be success, and may not result in the discovery and development of commercial quantities of ore at the Cieneguita Project.

Because of the speculative nature of exploration and development of mineral concessions and the unique difficulties and uncertainties inherent in the mineral exploration and development business, there is substantial risk that no commercially exploitable minerals will be found and developed and our business will fail.

Exploration for and development of minerals is a speculative venture involving substantial risk. Any figures presented in this report relating to gold deposits adjacent to our properties do not indicate that we will be successful in searching for and extracting gold deposits on our properties. New mineral exploration and development companies encounter difficulties, and there is a high rate of failure of such enterprises. The expenditures we may make in the exploration of the mineral concessions may not result in the discovery and development of commercial quantities of ore. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration and development of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration and development and additional costs and expenses that may exceed current estimates. In addition, problems such as unusual or unexpected mineral formations and other geological conditions often result in unsuccessful exploration and development efforts. In such a case, we would be unable to complete our business plan. The search for and development of valuable minerals also involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins, the use of explosives, waste disposal, worker safety and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.

Our mineralization figures are based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.

Unless otherwise indicated, the mineralization figures calculated from our exploration efforts and presented in this report and in our filings with securities regulatory authorities, press releases and other public statements that may be made from time to time are based upon estimates made by independent geologists and our internal geologists. When making determinations about whether to advance any of our projects for further exploration and development, we must rely upon such estimated calculations as to the mineral reserves and grades of mineralization on our properties. Until ore is actually mined and processed, mineral reserves and grades of mineralization must be considered as estimates only. These estimates are imprecise and depend upon geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable.

We cannot assure you that:

●   these estimates will be accurate;

●   reserve, resource or other mineralization estimates will be accurate; or

●   this mineralization can be mined or processed profitably.

Any material changes in mineralization figures and grades of mineralization will affect the economic viability of placing a property into production and a property’s return on capital. In addition, the grade of ore ultimately mined, if any, may differ from that indicated by our technical reports and drill results. There can be no assurance that minerals recovered in small scale tests will be duplicated in large-scale tests under on-site conditions or in production scale. Any material reductions in estimates of mineralization, or of our ability to extract this mineralization, could have a material adverse effect on our results of operations or financial condition.

The amount of our working capital could be adversely affected in the event claims are made against us alleging that certain shares we previously issued pursuant to Form S-8 registration statements constituted an illegal public offering because the company was a “shell company” at the time and, as a result, was not eligible to use Form S-8 for registration of shares under the Securities Act of 1933.

21

In August and October of 2005, we issued shares of common stock to an officer of Pan American, as compensation for consulting services. The two share issuances were for a combined total of 30,000 shares and each of the share issuances was made pursuant to a registration statement on Form S-8 under the Securities Act of 1933 (the “Act” or “Securities Act”). Although we believe these shares were properly issued, a claim could be made that issuance of the shares constituted an illegal public offering because we were a “shell company” at the time. Shell companies, i.e. companies which have no or nominal operations and either (i) no or nominal assets; (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets, are not eligible to use Form S-8 for registration under the Securities Act of 1933. If either of these transactions did violate federal securities laws, subsequent purchasers of the shares may have claims against us for damages or for rescission of their purchase transaction and recovery of the full subscription price paid, together with interest. As of the date of this prospectus, no one has made or threatened any claim against us alleging violation of the federal securities laws. In the event such claims were successfully asserted, there is no assurance that we would have sufficient funds available to pay and it is likely that we would be required to use funds currently designated as working capital for that purpose. That would substantially reduce the amount of working capital available for other purposes and, in that event, we could be forced to cease or discontinue certain operations and to liquidate certain assets to pay our liabilities, including, but not limited to, rescission claims.

Due to numerous factors beyond our control which could affect the marketability of gold and silver, including their respective market price, we may have difficulty selling any gold or silver if commercially viable deposits are found to exist.

The availability of markets and the volatility of market prices are beyond our control and represent a significant risk. Even if commercially viable deposits of gold or silver are found to exist on our property interests, a ready market may not exist for the sale of the reserves. Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations, the proximity and capacity of markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. These factors could inhibit our ability to sell the gold or silver in the event that commercially viable deposits are found to exist.

Our due diligence activities with respect to our property interests cannot assure that these properties will ultimately prove to be commercially viable.

Our due diligence activities have been limited, and to a great extent, we have relied upon information provided to us by third-party advisors. Accordingly, no assurances can be given that the properties or mining rights we possess will contain adequate amounts of gold, silver and base metals for commercialization. Further, even if we recover gold, silver and base metals from such mining properties, we cannot guarantee that we will make a profit. If we cannot acquire or locate commercially exploitable precious metal deposits, or if it is not economical to recover the precious metal deposits, our business and operations will be materially adversely affected. At present, none of our properties have proven or probable reserves and the proposed programs are an exploratory search for proven or probable reserves. The mining areas presently being assessed by us may not contain economically recoverable volumes of minerals or metals. We have relied and may continue to rely, upon consultants and others for operating expertise.

Non-payment of our obligations under the agreement with Corporativo Minero could result in Corporativo Minero retaining ownership of the Cieneguita concessions.

MRT entered into an agreement with Corporativo Minero on January 12, 2004 by which it acquired the right to explore and exploit the Cieneguita Property and purchase it for $2,000,000. This agreement gave MRT the exclusive right and option, but not the obligation, to purchase, during the term of the mining concessions of the property, an undivided 100% title to the mining concessions and the exclusive right to carry out mining activities on any portion of the mining concessions. Under our agreements with MRT, MRT has assigned this agreement and all of its rights and obligations to us.

As the small scale operation continues at Cieneguita, our contract calls for any remaining payments to be paid from the sale of gold, up to a total of $2,000,000. The payments are as follows: the remainder of the $2,000,000 payment is being paid out of production from the Cieneguita Property at a rate of $20 dollars per ounce of gold sold, plus an additional $0.10 for every $1.00 the price of gold exceeds $400. This amount is paid by MRT to Corporativo Minero and is deducted from net profits. Once $2,000,000 is paid, there is no further obligation to Corporativo Minero. Non-payment of any portion of the $2,000,000 total payment will constitute a default. In such case, Corporativo Minero would retain ownership of the concessions, but we will not incur any additional default penalty.

We may be required to pay up to a 7% Net Smelter Royalty fee on any production from Cieneguita Property and seek repayment from Corporativo Minero. If so, our cost of operations will increase, which will decrease any potential profits we might have.

We entered into an agreement with Corporativo Minero in regard to the mineral concessions on the Cieneguita Property. Corporativo Minero has the obligation to pay, from the funds they receive from us, any royalties that may be outstanding on the properties from prior periods. Corporativo Minero has informed us that various former owners of the property owned royalties of up to a 7% Net Smelter Return. They have also informed us that the corporations holding those royalties have been dissolved and that there is no further legal requirement to make these royalty payments. We can make no assurance that Corporativo Minero will satisfy its obligations, and that we will not ultimately be responsible to pay all or some of the 7% Net Smelter Return to these former royalty holders if Corporativo Minero did not make the payments to the royalty holders. If we have to make these royalty payments, any profits from production would be reduced and we will be forced to seek repayment from Corporativo Minero.

22

If we are unable to obtain all of our required governmental permits, our operations could be negatively impacted.

Our future operations, including exploration and development activities, required permits from various governmental authorities. Such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to acquire all required licenses or permits or to maintain continued operations at economically justifiable costs.

Our financial position and results are subject to fluctuations in foreign currency values.

Any mining operations we undertake outside of the United States will be subject to currency fluctuations. Fluctuations in the exchange rate between the U.S. dollar and any foreign currency may adversely impact our operations. We do not anticipate that we will enter into any type of hedging transactions to offset this risk. In addition, with respect to commercial operations in Mexico, Argentina or other countries, it is possible that material transactions incurred in local currency, such as engagement of local contractors for major projects, will be settled at a U.S. dollar value that is different from the U.S. dollar value of the transaction at the time it was incurred. This could have the effect of undermining profits from operations in that country.

Our property interests in Mexico and Argentina are subject to risks from instability in those countries.

We have property interests in Mexico and Argentina which may be affected by risks associated with political or economic instability in those countries. The risks with respect to Mexico, Argentina or other developing countries include, but are not limited to: military repression, extreme fluctuations in currency exchange rates, criminal activity, lack of personal safety or ability to safeguard property, labor instability or militancy, mineral title irregularities and high rates of inflation.

In addition, changes in mining or investment policies or shifts in political attitude in Mexico may adversely affect our business. We may be affected in varying degrees by government regulation with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. The effect of these factors cannot be accurately predicted but may adversely impact our proposed operations in any foreign jurisdiction.

We are in competition with companies that are larger, more established and better capitalized than we are.

We compete with other mining and exploration companies in connection with the acquisition of mining claims and leases on gold and other precious metals prospects and in connection with the recruitment and retention of qualified employees. Many of our potential competitors have:

●   greater financial and technical resources;

●   longer operating histories and greater experience in mining; and

●   greater awareness of the political, economic and governmental risks in operating in foreign countries.

As such, these competitors may be in a better position through size, finances and experience to acquire suitable exploration properties. We may not be able to compete against these companies in acquiring new properties and/or qualified people to work on any of our properties.

Risks Relating to Our Common Stock

There are a large number of shares underlying our warrants that may be available for future sale and the sale of these shares may depress the market price of our common stock.

As of February 29, 2012, we had 71,192,397shares of common stock issued and outstanding and warrants that may be convertible into 32,011,733 shares of common stock. Each warrant may be exercised to purchase one share of common stock. The sale of these shares may adversely affect the market price of our common stock.

There is a limited trading market for our common stock and if an active market for our common stock does not develop, our investors may not be unable to sell their shares.

23

Our common stock is presently quoted on the National Association of Securities Dealers Inc.’s Over the Counter Bulletin Board (the “OTC Bulletin Board”) and the Frankfurt Stock Exchange. Quotations and trading volume of our common stock on the OTC Bulletin Board has been sporadic. There is currently very little active trading in the market for our common stock and an active public market may not develop or be sustained in the future. Also, we cannot provide our investors with any assurance that our common stock will continue to be traded on the OTC Bulletin Board or the Frankfurt Stock Exchange. If our common stock is not quoted on the OTC Bulletin Board or Frankfurt Stock Exchange or if an active public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock that they have purchased and may lose all of their investment.

Shares of our common stock are subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges or quoted on the over-the-counter bulletin board administered by FINRA). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.

The trading market for our common stock is currently subject to rules adopted by the Securities and Exchange Commission which regulates broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00, except for securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to make a special written determination that the penny stock is a suitable investment for the purchaser and to receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock and making it more difficult for holders of our stock to sell their shares, as long as the shares are subject to the penny stock rules.

Because our common stock is quoted and traded on the OTC Bulletin Board and the Frankfurt Stock Exchange, short selling could increase the volatility of our stock price.

Short selling occurs when a person sells shares of stock which the person does not yet own and promises to buy stock in the future to cover the sale. The general objective of the person selling the shares short is to make a profit by buying the shares later, at a lower price, to cover the sale. Significant amounts of short selling, or the perception that a significant amount of short sales could occur, could depress the market price of our common stock. In contrast, purchases to cover a short position may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on over-the-counter bulletin board or any other available markets or exchanges. Such short selling if it were to occur could impact the value of our stock in an extreme and volatile manner to the detriment of our shareholders.

Because we do not expect to pay dividends for the foreseeable future, investors seeking cash dividends should not purchase shares of our common stock.

We have never declared or paid any cash dividends on shares of our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors must rely on sales of their own common stock after price appreciation, which may never occur, as the only way to realize their investment. Investors seeking cash dividends should not purchase our common stock.

Because our stock price can be volatile, investors may not be able to recover any of their investment.

24

Stock prices in general, and stock prices of mineral exploration companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance or any specifics of the company. Factors that may influence the market price of our common stock include:

●   actual or anticipated changes or milestones in our operations;

●   our ability or inability to acquire mining properties or interests in such properties in Mexico and Argentina;

●   our ability or inability to generate revenues;

●   increased competition within Mexico and elsewhere;

●   government regulations, including mineral exploration regulations that affect our operations;

●   predictions and trends in the gold mining exploration industry;

●   volatility of the gold and silver market prices;

●   sales of common stock by “insiders”; and

●   announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors.

Our stock price may also be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuation, as well as general economic, political and market conditions, such as, but not limited to, armed hostilities or acts of terrorism, recessions, acts of God, interest rates or international currency fluctuations, may adversely affect the market price of our common stock.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market, including shares being offered for sale pursuant to this prospectus or upon the expiration of any statutory holding period, under Rule 144, or upon expiration of lock-up periods applicable to outstanding shares, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. Recent revisions to Rule 144 may result in shares of our common stock that we may issue in the future becoming eligible for resale into the public market without registration in as little as six months after their issuance.

ITEM IB. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We currently maintain an office at 595 Howe Street, Unit 906, Vancouver, BC. V6C 2T5, operating under a month-to-month lease, with a monthly rent of $500.

We also operate a Mexican office located at C. General Retana #706, Col. San Felipe, Chihuahua, Chihuahua, Mexico, CP 31203, operating under the terms of this lease on a month-to-month basis, with a monthly rent of $900.

As described in Item 1 above, we have property rights in the Cieneguita Project in Mexico and in the Cerro Delta Project in Argentina.

ITEM 3. LEGAL PROCEEDINGS

Neither our Company nor our properties are the subject of any material pending legal proceedings.

ITEM 4.  Mine sefety Disclosure Just applicable because all of our mining properties are atside the United States.

PART II

25

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is currently traded on the Over the Counter Bulletin Board (“OTCBB”) under the symbol “MXOM.OB”. The following table sets forth the high and low closing prices for our common stock as reported on the OTCBB for the periods indicated.

Fiscal Year Ending February 29, 2012	High		Low
First Quarter	$	0.32	$	0.18
Second Quarter	$	0.24	$	0.15
Third Quarter	$	0.22	$	0.17
Fourth Quarter	$	0.20	$	0.16

Fiscal Year Ending February 28, 2011	High		Low
First Quarter	$	0.52	$	0.29
Second Quarter	$	0.32	$	0.21
Third Quarter	$	0.27	$	0.16
Fourth Quarter	$	0.25	$	0.18

The prices presented are bid prices which represent prices between broker-dealers and do not include retail mark-ups and mark-downs or any commission to the dealer. The prices may not reflect actual transactions.

As of February 29, 2012, there were approximately 295 stockholders of record of our common stock. The closing price of our common stock on May 25, 2012 was $0.09 per share.

There have been no cash dividends declared or paid on the shares of common stock, and management does not anticipate payment of dividends in the foreseeable future.

ITEM 6.  SELECTED FINANCIAL DATA

Not applicable.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Special Note of Caution Regarding Forward Looking Statements

Certain statements contained in this Form 10-K, including statements in the following discussion which are not statements of historical fact,constitute "forward-looking statements". These statements, which may be identified by words such as “plans”, “intends”, "anticipates", “hopes”, “seeks”, “will”, "believes", "estimates", "should", "expects" and similar expressions include Pan American’s expectations and objectives regarding our present and future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in such forward-looking statements. Numerous factors and future events could cause us to change such plans and objectives or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits. Such risks and uncertainties include those set forth under this Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). These forward-looking statements represent beliefs and assumptions only as of the date of this report. We undertake no obligation to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.We advise you to carefully review the reports and documents we file from time to time with the SEC, particularly our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K.

Overview

We are an exploration stage company and have generated only limited revenues from our Cieneguita Project to date, and have not yet generated or realized any revenue from our other two exploration projects. As of February 29, 2012, we had $118,000in our bank account.

In September 2011, we executed an amended and restated development agreement (the ”Agreement”)pursuant to a binding letter agreement signed in June 2011 with Minera Rio Tinto, S.A. de C.V. an entity organized under the laws of the United Mexican States (“MRT”) and Marje Minerals S.A., an entity organized under the laws of the United Mexican States (“Marje Minerals”), concerning the restructuring of the prior agreements between the parties, including their respective ownership interests in our Cieneguita project in Chihuahua State, Mexico.

26

The parties agreed to restructure their respective ownership interests in the Cieneguita project as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase Production	Net Cash Flow Interest Following First Phase Production
MRT	20%	74%	20%
Marje Minerals	0%	6%	0%
Pan American	80%	20%	80%

We receive 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, our interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions.

Pan American and MRT shall be responsible for the cost of the feasibility study on a pro rata basis based on their respective amended ownership percentages of the Cieneguita project.

In August 2011, we appointed Hernan Celorrio as an advisor to the board of directors and as a director of Recursos Argentinos SA, our newly formed subsidiary in Argentina. Mr. Celorrio, a lawyer, is an expert in Argentinean mining law and has an extensive background in the industry. He is currently the vice president of the Argentine-ChileanChamber of Commerce and a director of the executive committee and president of the Mining Committee of the Argentine Canadian Chamber of Commerce. He is also the president of the Argentine Mining Foundation (FUNDAMIN).

In July 2011, we entered into an agreement with M3 Engineering and Technology Corporation (“M3”) for the execution and completion of a National Instrument 43- 101 (“NI 43-101”) compliant Preliminary Economic Assessment (“PEA”) for the Cieneguita project.

In March 2011, we appointed Bruno Le Barber as a member of the board of directors. Mr. Le Barber has extensive financial expertise and is a co-founder of Vortex Capital (“Vortex”), a Hong Kong based gold fund. Previously he was a Vice President at Morgan Stanley in London where he advised trading desks and a large investor base while publishing macro-economic studies. Mr. Le Barber was also a global technical strategist with ABN Amro in Paris.He manages Vortex together with Emilio Alvarez, former Executive Director, Equity Research with Morgan Stanley in London.

In February 2011, we entered into an agreement with Compania Minera Alto Rio Salado S.A., a private Argentine entity, for the acquisition of the 15,000-hectare Cerro Delta Project in northwest La Rioja Province, Argentina. Under the terms of the agreement, we must pay $150,000 upon signing (paid), $200,000 on the first anniversary, $500,000 on the second anniversary, $750,000 on the third anniversary, $1.2 million on the fourth anniversary, and $2.2 million on the fifth anniversary of the signing, with a final option payment of $5 million to purchase a 100% interest in the Cerro Delta Project payable on the sixth anniversary of the signing. The vendor will retain an 1% net smelter revenue (“NSR”).

In conjunction with the acquisition of the Cerro Delta Project, we completed a private placement of 6,560,000 units at $0.20 per unit, for total proceeds of $1,312,000. Each unit consists of one share of common stock and a warrant to purchase one share of common stock. Each warrant is exercisable for one share of common stock at a conversion price of $0.30 for a period of two years from the closing date.

In October 2010, we appointed Miguel F. Di Nanno as President and Chief Operating Officer, replacing George Young effective as of October 15, 2010. Mr. Young remains on our board of directors. Mr. Di Nanno has experience in mining and energy exploration and most recently served as president of Somuncurah S.R.L. and AupaS.A., both exploration and development firms focused in Argentina. He has also previously served as the chief operating officer of the Grosso Group, an exploration and new mining business development firm and as the representative and country manager in Argentina for Palladon Ventures Ltd., a gold and silver exploration company. He has a degree in Mining Engineering – Ore Dressing from the National University of San Juan.

In July 2010, we appointed Neil Maedel, Randy Buchamer and Gary Parkison to our board of directors. Mr. Maedel is an investment banker specializing in international resource projects; Mr. Buchamer has extensive experience in business administration and finance; and Mr. Parkison is qualified geologist and project manager with expertise in exploration and development of minerals and metals projects. All of the newly appointed directors have technical and financial industry experience base that will assist us with operations and our planned listing on either the Toronto Stock Exchange or the TSX Venture Exchange, consistent with our status as a producing resource company.

In July 2010, we reincorporated from the State of Colorado to the State of Delaware. The reincorporation was effected pursuant to an agreement and plan of merger (the “Merger Agreement”), by and between us and Pan American Goldfields Ltd.,a Colorado corporation (formerly Mexoro Minerals Ltd.), with Pan American being the surviving corporation. Accordingly, the rights of our shareholders are now governed by Delaware General Corporation Law and the certificate of incorporation and bylaws of Pan American are filed with the State of Delaware.

27

In May 2010, management decided to drop the Sahuayacan Project due to lack of economic thicknesses and grades of gold mineralization encountered in the drilling program, eliminating any future concession payments for this Project.

Our continued existence and plans for future growth depend on the receipt of funds from our partner MRT from the ongoing operations at the Cieneguita Project. Should there be an interruption in this cash flow it will be necessary to obtain additional capital to operate either through the issuance of additional debt or equity.

For the year ended February 29, 2012, the joint venture with MRT, as described further below, had generated net cash flows from the tuning and start-up operations of approximately $3,969,000 of which $794,000is attributable to us under the joint venture agreement. A drought combined with an inadequate water collection system resulted in a reduced water supply and, consequently, the volume of mined material that could be processed was sharply curtailed until June 2011. Since the return of the rainy season, the production has increased to between 400 and 500 tonnes per day (“tpd”). To reduce the risk of another water shortage small dams have been built to store water. MRT recently advised us that given recent rains, an adequate supply of water was expected to be available for at least the next several months. This is a pilot operation by MRT which is to end December 31, 2012 after which MRT will have the opportunity to earn a 20% interest from our 100% interest in the deposit as it is developed according to the results of an ongoing preliminary economic assessment which is progressing under the guidance of M3 Engineering of Tucson, Arizona. Despite the improvements there remains significant risk to us for this type of extracting of mineralized material because we will not have established reserves at Cieneguita until an independent feasibility study is completed. Consequently, without a feasibility study we cannot predict if the extraction and processing of mineralized material from the Cieneguita property will result in future cash flow.

Accordingly, for the 12-month period from March 2012 through February 2013, we need to raise additional capital to pursue our business plan of preparing a feasibility study and acquiring, exploring and developing additional high impact mineral properties and to provide a buffer for the possibility that the expected net cash flow currently generated by MRT is interrupted.

During this period, we will need to receive from production at the Cieneguita operations a minimum of $2,400,000, a portion of which will be used for general and administrative costs. As continuous operations have only recently begun, we cannot ascertain how reliable this income will be. This does not include any capital needed to pay our accounts payables and to execute our exploration programs as described below.

Plan of Operation

Summary

Our business plan is to focus on the exploration and development of our Mexican and Argentine mineral properties to determine whether they contain commercially exploitable reserves of gold, silver or other metals. We are also assessing a number of opportunities in Mongolia and Central Asia.

In the event that our exploration and development program finds exploration targets that warrant additional exploration work, including exploration by drilling, we will not have enough cash available to fund an expanded exploration program. If we decide to expand our exploration and development program, we would need to raise additional capital to meet these needs. We currently do not have any sources of additional capital available to us and we may not have any in the future. The failure to raise additional capital would severely curtail our ability to conduct any additional exploration work that might be warranted because of the results of our current exploration program.

In May 2012, we appointed AndreyKoniuhov as a member of the board of directors.

In January 2012, we appointed Hernan Celorrio as a member of the board of directors.

In July 2011, we entered into an agreement with M3 Engineering for the execution and completion of a NI 43- 101 compliant Preliminary Economic Assessment (PEA) for the Cieneguita project.

In June 2011, we appointed Neil Maedel as chairman of the board.

In May 2011, we appointed Dr. Alexander Becker as advisor to the board of directors, who has a PhD in Structural Geology, and an extensive history as an exploration geologist to assist us with the selection and development of exploration projects.

In February 2011, we entered into an agreement with Compania Minera Alto Rio Salado S.A., a private Argentine entity, for the acquisition of the 15,000-hectare Cerro Delta Project in northwest La Rioja Province, Argentina. Under the terms of the agreement, we must pay $150,000 upon signing (paid), $200,000 on the first anniversary ($135,000 has been paid), $500,000 on the second anniversary, $750,000 on the third anniversary, $1.2 million on the fourth anniversary, and $2.2 million on the fifth anniversary of the signing, with a final option payment of $5 million to purchase a 100% interest in the Cerro Delta Project payable on the sixth anniversary of the signing. The vendor will retain a 1% NSR.

28

In conjunction with the acquisition of the Cerro Delta Project, we completed a private placement of 6,560,000 units at $0.20 per unit, for total proceeds of $1,312,000. Each unit consists of one share and one share purchase warrant. Each warrant is convertible into one share at a conversion price of $0.30 for a period of two years from the closing date.

In March 2011, we appointed Bruno Le Barber as a member of the board of directors. Mr. Le Barber has extensive financial expertise and is a co-founder of Vortex, a Hong Kong based gold fund. Previously he was a Vice President at Morgan Stanley in London where he advised trading desks and a large investor base while publishing macro-economic studies. Mr. Le Barber was also a global technical strategist with ABN Amro in Paris.He manages Vortex together with Emilio Alvarez, former Executive Director, Equity Research with Morgan Stanley in London.

In October 2010, we appointed Miguel F. Di Nanno as president, replacing George Young effective as of October 15, 2010. Mr. Young remains on our board of directors. Mr. Di Nanno has experience in mining and energy exploration and most recently served as president of Somuncurah S.R.L. and AupaS.A., both exploration and development firms focused in Argentina. He has also previously served as the chief operating officer of the Grosso Group, an exploration and new mining business development firm and as the representative and country manager in Argentina for Palladon Ventures Ltd., a gold and silver exploration company. He has a degree in Mining Engineering – Ore Dressing from the National University of San Juan.

In July 2010, we appointed Neil Maedel, Randy Buchamer and Gary Parkison to our board of directors. Mr. Maedel is an investment banker specializing in international resource projects; Mr. Buchamer has extensive experience in business administration and finance; and Mr. Parkison is a qualified geologist and project manager with expertise in exploration and development of minerals and metals projects. All of the newly appointed directors have technical and financial industry experience base that will assist us with operations and our planned listing on either the Toronto Stock Exchange or the TSX Venture Exchange, consistent with our status as a producing resource company.

In July 2010, we reincorporated from the State of Colorado to the State of Delaware. The reincorporation was effected pursuant to an agreement and the Merger Agreement, by and between us and Pan American Goldfields Ltd.,a Colorado corporation (formerly Mexoro Minerals Ltd.), with Pan American being the surviving corporation. Accordingly, the rights of our shareholders are now governed by Delaware General Corporation Law and the certificate of incorporation and bylaws of Pan American are filed with the State of Delaware.

In May 2010, management decided to drop the Sahuayacan properties due to lack of economic thicknesses and grades of gold mineralization encountered in the drilling program, eliminating any future concession payments on these properties.

In May 2009, we entered into a letter of agreement and in July 2009, we signed the definitive agreement to sell our Guazapares project, located in south western Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., and the Mexican subsidiary of Paramountfor a total consideration of up to $5.3million. The Guazapares Project is comprised of 12 claims close to Paramount’s San Miguel discovery. The purchase price is to be paid in two stages, with the first payment of $3.7 million released from escrow in February 2010, as the transfer of the 12 claims to Paramount was completed. An additional payment of $1.6 million is due if, by July 10, 2012, either (i) Paramount sells its Mexican subsidiary or (ii) Guazapares is put into production.The definitive agreement closed in October 2009 and a 5.7% commission was paid on the closing of the sale.

In February 2009, we entered into a development agreement with MRT, which we amended in December 2009. Pursuant to the terms of the development agreement, as amended, MRT has agreed to invest up to $8million to initiate the first phase of productionand to complete a feasibility study on the Cieneguita Project. The first phase of production is limited to the mining of the mineralized material that is available from the surface to a depth of 15 meters (“First Phase Production”). In exchange, we assigned MRT a 74%interest of the net cash flows from First Phase Production and a 54% ownership interest in the Cieneguita Project.

To fund our continued operations, we issued $1.5 million of convertible debentures in March 2009, of which an aggregate of $880,000 was issued to Mario Ayub, one of our former directors, and to his affiliated entity, MRT. Pursuant to the terms of the convertible debentures, the holders irrevocably converted the debentures into a 10% ownership interest in the Cieneguita project and a 10% interest in the net cash flow from First Phase Production. In December 2009, Mario Ayub and MRT agreed to resell an aggregate 4% ownership interest in the Cieneguita project back to us, along with 4% of the net cash flow from First Phase Production, in return for $550,000. In a private transaction not involving us, the other holders contributed their remaining 6% ownership interest in the Cieneguita project to Marje Minerals.

29

As a result of our amended development agreement and our agreements with the debenture holders, the ownership interest in the Cieneguita Project and the net cash flows from the First Phase Production are held by us, MRT and Marje Minerals as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase Production	Net Cash Flow Interest Following First Phase Production
MRT	54%	74%	54%
Marje Minerals	6%	6%	6%
Pan American	40%	20%	40%

Any additional costs for the First Phase Production and the feasibility study for the Cieneguita Project, after MRT invests $8million, will be shared by us, MRT and Marje Minerals on a pro-rata basis based on their respective ownership percentages in the Cieneguita Project.

The major terms of the development agreement with MRT and Marje Minerals are as follows:

●   MRT purchased $1 million of secured convertible debentures at 8% interest (payable in stock or cash). The proceeds from this investment were used for continued exploration and development of the Cieneguita Project and general working capital. In November 2009, MRT exercised its conversion rights on the debenture and MRT was issued 3,333,333 common shares and a warrant to purchase 1,666,667 shares of common stock at an exercise price of $0.50 per share.

●   MRT agreed to provide the necessary working capital to begin and maintain mining operations, estimated to be $3 million, to put the first phase of the Cieneguita Project into production. In exchange for these funds, we assigned MRT an interest to 74% of the net cash flow from First Phase Production. The agreement limits the mining during First Phase Production to the mineralized material that is available from the surface to a depth of 15 meters.

●   MRT committed to spend up to $4 million to take the Cieneguita Project through the feasibility stage. In doing so, we assigned MRT a 54% interest in our rights to the Cieneguita Project. After the expenditure of the $4 million, all costs will be shared on a pro-rata ownership basis (i.e. 54% to MRT, 40% to us and 6% to Marje Minerals). If any party cannot pay its portion of the costs after the $4 million has been spent, then their ownership position in the Cieneguita Project will be reduced by 1% for every $100,000 invested by the other owners. Our ownership interest in the Cieneguita Project, however, cannot be reduced below 25%. In addition, we have the right to cover Marje Minerals’ pro rata portion of costs if they cannot pay their portion of the costs. In return, we will receive 1% of Marje Minerals’ ownership position in the Cieneguita Project for every $100,000 we invest on their behalf.

●   The MRT agreement was contingent on our repaying a debenture to Paramount. In March 2009, we repaid $1 million, or approximately two-thirds of the debt, and Paramount released a security interest it had on the Cieneguita Project. In October 2009, we repaid the remaining amount of the debt, and Paramount released its security interests on the Sahuayacan, Guazapares and Encino Gordo properties.

In September 2011, we entered into the Agreement with MRT and Marje Minerals pursuant to the Letter Agreement of June 2011, concerning the restructuring of the amended development agreements between the parties, including their respective ownership interests in our Cieneguita project.

We receive 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31st 2012. For all other material processed from the property, our interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions.

Under the Agreement, the parties agreed to restructure their respective ownership interests in the Cieneguita project as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase Production	Net Cash Flow Interest Following First Phase Production
MRT	20%	74%	20%
Marje Minerals	0%	6%	0%
Pan American	80%	20%	80%

Pan American and MRT shall be responsible for the cost of the feasibility study on a pro rata basis based on our respective amended ownership percentages of the Cieneguita project.

30

In December 2011, we hired Dr. Fedor Zhimulev as our chief geologist. In September 2009, we hired George Young as our chief operating officer, Salil Dhaumya as our chief financial officer and Manuel Flores as our operations manager. In November 2009, Mr. Young was appointed president upon the resignation of Francisco “Barry” Quiroz. In October 2010, we appointed Miguel F. Di Nanno as president replacing Mr. Young. Other than these employees, all of the employees we hire are contracted from third parties specializing in providing employees for Mexican companies. In using third party contractors we minimize our exposure to Mexican employment law and all liabilities are undertaken by the third party contractors providing the services. We pay a flat rate to the third parties for their services.

Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity. Additionally, if our exploration during that time period is successful, we may need to raise additional capital to fund those exploration programs. At this time, we cannot assess with any accuracy our total capital needs to fund an expanded exploration program beyond our basic program.

For the 12-month period from March 2012 through February 2013, we need to raise additional capital to maintain operations. We will need a minimum of $2,400,000, a portion of which will be for general and administrative costs. This does not include any capital needed to pay our accounts payables and to execute our exploration programs as detailed below.

In the event that we do discover a mineral deposit on one of our properties, of which there is no guarantee, we would need to expend substantial amounts of capital to put any of our properties into production, if so warranted. The amount of such expenditures is indeterminable at this time as our exploration and development program has not advanced far enough to provide us with results to determine this information.

Such expenditures depend upon the size of the mineralized body, the grade of the mineralized body and the type of mining that is required to extract any minerals that may be found. Regardless, we do not have enough capital available to us to make any such expenditure that would be required to put any mineral property into production, and we therefore would have to raise the additional capital or, if possible, enter into a joint venture for the production phase. If we were to form a joint venture, we cannot assess what our final position in the Project would be. We do not have any sources of capital available to us at this time to fund such a Project if one should be discovered.

In the event that we should find a mineable reserve, it is management’s intention to contract the mining and milling of any mineralized reserves out to third parties. We do not have any known reserves at this time.

Exploration Projects – Current Status

To date the exploration program has been focused on preparing the Cerro Delta, Argentina exploration project for a drill program that is scheduled to begin in March 2012. We are continuing a small reconnaissance program at the Encino Gordo to map potentially gold-bearing limestone outcrops.

In December 2011, we hired Mr. Fedor ZhimulevMSc. PhD Honors as our chief geologist while actual management of exploration programs will be under the guidance of Alexander Becker PhD. He was a former senior researcher at the Sobolev Institute of Geology and Mineralogy and has extensive experience conducting fieldwork. In 2009 -2011 he was appointed as leader of the institute’s junior Scientists Community and last year was awarded the AcademicanSobolev prize for junior scientists from the Siberian Branch of the Academy of Sciences.

In December 2011, a geological advisor team visited the Cerro Delta project area. The team was headed by Dr. Aleksandr Borisenko and composed of Dr. Alexander Becker, board advisor, and geologistDr. Fedor Zhimulev. The exploration work developed on the project and the knowledge of similar geological systems in the Maricunga Belt allows us to prepare the immediate drilling stage. It is proposed to start the first drilling campaign for the beginning of this year. The targets are the zones showing gold results at surface and good geophysical responses in terms of resistivity, chargeability and ground magnetics.

Dr. Borisenko is Dr. of Geology and Mineralogy and the Deputy Director on Scientific Work of the Sobolev Institute of Geology and Mineralogy, Siberian Branch of Russian Academy of Sciences where approximately 680 researchers work under his direction.

Cieneguita Preliminary Economic Assessment (PEA)

Work on the Cieneguita NI43-101 compliant PEA started in October 2011 with an on-site project kickoff meeting. The primary consultant is M3 Engineering, based in Tucson, Arizona, which has extensive recent and relevant experience with mining projects in Mexico.

31

At this time, 1,600 kilograms of core samples are being used to generate metallurgical composite samples at Resource Development Inc. (‘RDi’) labs of Denver, Colorado. These composites will undergo a rigorous metallurgical testing program focusing on the optimization of concentrate flotation characteristics. Initial results have demonstrated excellent base and precious metal recoveries at fairly coarse grinds to the bulk sulfide rougher concentrate.  Differential flotation tests have demonstrated that separate lead and zinc concentrates can be produced with gold and silver values split between these two concentrates. Testing is now focused on cleaner flotation tests with results available in June 2012. Hydrogeological and water supply investigations are currently underway with positive results. Geotechnical studies related to the sitting of various project components such as the waste rock dump, tailings pond, process plant are underway. An updated geologic model has been prepared.Environmental baseline studies have been completed.

Following the definition of the most appropriate metallurgical process option, the optimal processing rate will be defined and capital and operating costs estimated. Concurrent with this work an updated mineral resource will be generated as well as a mining schedule. It is anticipated that the results of the PEA will be available in mid third quarter of 2012.

Cerro Delta Exploration

Preparation for 3,500 meters of core drilling at the Cerro Delta project isunderway. Geophysical results are being evaluated. The initial field campaign, including 3,500 meters of initial drilling, will be developed at an estimated cost of $3,000,000.The access road has been repaired in preparation for the drilling campaign.

Over the next 12 months, we intend to explore our two projects, Cieneguita and Cerro Delta, to determine whether there are economically attractive concentrations of gold and gold-silver mineralization. We intend to hire additional employees but do not plan to make any purchase of equipment over the next 12 months. At this time, though, the exploration program is only planned for the next 12 months, which we will undertake when the necessary capital has been raised to complete these programs. We do not have any sources of capital identified at this time and no assurance can be given that we will be able to complete the proposed exploration program.

Critical Accounting Estimates

The preparation of our financial statements requires management to make various judgments with respect to estimates and assumptions. On an ongoing basis, management regularly reevaluates its estimates and assumptions; however actual amounts could differ from those based on such estimates and assumptions.

We have made certain accounting estimates that have a material bearing on the financial statements. The most significant estimates are:

Mineral property costs

We have been in the exploration stage since March 1, 2004, and have not yet realized any significant revenues from its planned operations. We are presently engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

Impairment or disposal of long-lived assets

We account for the impairment or disposal of long-lived assets according to ASC 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimate fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.

Stock based compensation

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. Stock options and warrants are valued at their fair value utilizing the Black-Scholes option-pricing model.

32

Results of Operations

Year ended February 29, 2012 compared to the year ended February 28, 2011.

In this discussion of our results of operations and financial condition, amounts, other than per-share amounts, have been rounded to the nearest thousand dollars.

In fiscal 2011, MRT, our joint venture partner,started commercial production at Cieneguita.The following is the information on the ore processed, concentrate produced and average sale price of metals. In the year ended February 2010, MRT had only completed a pilot test and there was no commercial production in place.

Mineralized Materials Processed

	Feed Grade (g/t)	Feed Grade (g/t)	Recovery (%)	Recovery (%)	Ore Processed	Bulk Concentrate Produced
	Au	Ag	Au	Ag	(tonnes)	(tonnes)
Fiscal 2012	1.54	82	89.10	90.32	129,915	12,187
Fiscal 2011	1.36	92.84	91.41	89.58	41,310	4,040

Tons and Grade of Concentrate Produced

	Net Dry Weight	merma 99.50%	Assay Grams/TMS		31.1035 Oz/MT		OUNCES/LOTE
			Gold	Silver	Gold	Silver	Gold	Silver
Fiscal 2012	1,199	1,193	74.77	4,730	2.326	147.13	2,774	1,75,494
Fiscal 2011	996	991	72.02	4,094	2.240	127.35	2,219	126,146

Average Price Received

	Gold	Silver	Lead
	(per ounce)	(per ounce)	(per tonne)
	$	$	$
Fiscal 2012	1,614.49	35.24	2,237.12
Fiscal 2011	1,288.21	24.08	2,256.65

This concentrate information was provided to us by MRT pursuant to the terms of the development agreement between the parties. Under the development agreement, MRT is responsible for mining, processing and selling the concentrate from the Cieneguita Project. We are entitled to receive 20% of the net cash flows from MRT’s operations at the Cieneguita Project. Wedo not have any direct agreement with any third party regarding the sale of concentrate from the Cieneguita Project.

Revenues

We earned 20%of proportionate net income of $3,969,000(February 28, 2011 - $1,136,000)from the joint venture with MRT from the gold production during the year ended February 29, 2012. Other than the revenue from the joint venture with MRT, we did not have commercial production of any of our properties in the year ended February 29, 2012. We cannot provide any assurances that we will continue to earn revenues of any significance from the joint venture with MRT, if ever. We are presently in the exploration stage of our business. We can provide no assurance that we will discover commercially exploitable levels of mineral resources on our properties or, if such resources are discovered, that we will enter into commercial production of our mineral properties.

Operating Costs

We incurred operating costs of $423,000 during the year ended February 29, 2012 (February 28, 2011- $326,000) as a portion of the operating costs of production at Cieneguita in the joint venture with MRT. We did not incur any operating costs during the year ended 2010 due to the fact that we did not achieve production from exploration activities during that year.

33

Expenses

Our operating loss increased to $4,196,000for the year ended February 29, 2012 compared to $3,122,000 for the year ended February 28, 2011, representing anincrease of $1,074,000. The increase is primarily attributable to higher exploration costs at Cerro Delta project andhigher non-cash stock-based compensation expenses.

In fiscal 2012, we incurred highergeneral and administrative expenses of $3,630,000 compared to $2,578,000 in fiscal 2011and higher mineral exploration expenses of $891,000in fiscal 2012 compared to $400,000 in fiscal 2011, which resulted in increase of expenses. Weinitiatedour exploration activity on our Cerro Delta project in Argentina in the current fiscal year.

In the general and administrative expense category for the fiscal year ended February 29, 2012, we expensed $1,274,000 for stock-based compensation expense compared to $824,000 in 2011 as we issued options and warrants to new directors, investor relation consultants and officers to retain their services for the long term. Management feesdecreased slightly to$326,000 in 2011 compared to $336,000 in 2011 and office and administration fees increased slightly to$427,000 in 2012 compared to $419,000 in 2011 due to higher administration expenses in Argentina.

For the year ended February 29, 2012, we incurred $950,000in mineral property costs as payments for our Mexican and Argentine properties. At February 29, 2012, we tested the carrying amounts of all our Mexican properties for recoverability. Based on our tests, we concluded that the sum of undiscounted cash flows expected to result from the use and eventual disposition of all such properties was $nil as the properties have no known reserves. Accordingly, a mineral property impairment loss of $950,000 has been recognized for the year ended February 29, 2012.Impairment of mineral property costs in 2012 increased from $719,000 for 2011. If we are able to raise additional funds to continue with our business plan, we anticipate that exploration expenditures will increase in fiscal 2013as a result of anticipated exploration activities on our Mexican and Argentine mineral properties.

Our interest expense decreased to $41,000 for 2012 compared to $90,000 for 2011. The lower interest expense in 2012 pertains exclusively to the promissory notes that were converted into equity during the year and loans payables, whereas the 2011 expense includes non-cash interest expensed for warrant amortization and beneficial conversion feature of convertible debentures issued by us in May and June of 2008 along with the interest accrued on promissory notes and loans payables.

Net Loss

Our net loss increased to $3,408,000for 2012 compared to $3,238,000 for 2011. This increase in our loss was primarily attributable to higher impairment of mineral property costs and higher stock-based compensation expense offset by gain on foreign exchange.The non-cash component of stock-based compensation costs was $1,274,000compared to $824,000 for 2011.

We anticipate that we will continue to incur losses until such time that we can identify mineral deposits and achieve significant revenues from sale of gold recovered from our Mexican mineral property, if ever. There is no assurance that we will commence the development stage of our operations at any of our Mexican mineral properties or achieve revenues.

Liquidity and Capital Resources

Since inception, we have undergone two unsuccessful business combinations, which have caused us to incur significant liabilities and have resulted in the accumulation of a substantial deficit during the exploration stage. As of February 29, 2012, we had total assets of $682,000,total current liabilities of $1,371,000,and a deficit of $49,702,000accumulated during the exploration stage.

Cash and Working Capital

During the year ended February 29, 2012, we did not increase the activities for our exploration program but have continued to incur corporate administrative expenses, for which, we were unable to raise sufficient funds to pay many of our suppliers. Our accounts payable and accrued liabilities decreased to $1,371,000as of February 29, 2012from $2,587,000in the year ended February 28, 2011 by paying some of our suppliers in cash and converting some of the debt into equity. Most of the payables are being carried forward from fiscal 2010.

We will require additional financing during the current fiscal year according to our planned exploration activities. We have initiated our plan to carry out exploration and administration activities on our Mexican and Argentine mineral properties in the current fiscal year. We also anticipate spending approximately $1,500,000 during the next 12 months on general and administrative costs. At this time we do not have the necessary capital to initiate the exploration program and to cover general and administrative costs.

34

We will need to raise additional working capital to maintain basic operations. We plan to raise those funds through the sale of equity or debt. Other than our definitive agreements signed with MRT, we do not have any other sources to raise additional capital for us at this time and no assurance may be given that we will be able to find sources to raise additional capital. Failure to raise any additional capital would most likely require us to cease operations and abandon all of our exploration properties.

The amount of working capital could be adversely affected further in the event claims are made against us alleging that certain shares we previously issued pursuant to Form S-8 registration statements constituted an illegal public offering because the company was a “shell company” at the time and, as a result, was not eligible to use Form S-8 for registration of shares under the Securities Act of 1933. In August and October of 2005, we issued shares of common stock to an officer of the company, as compensation for consulting services. The two share issuances were for a combined total of 30,000 shares and each of the share issuances was made pursuant to a registration statement on Form S-8 under the Securities Act of 1933. Although we believed these shares were properly issued, a claim could be made that issuance of the shares constituted an illegal public offering because the company was a “shell company” at the time. Shell companies  [i.e. companies which have no or nominal operations and either (i) no or nominal assets; (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets] are not eligible to use Form S-8 for registration under the Securities Act of 1933. If either of these transactions did violate federal securities laws, subsequent purchasers of the shares may have claims against us for damages or for rescission of their purchase transaction and recovery of the full subscription price paid, together with interest. As of the date of this quarterly report, no one has made or threatened any claim against us alleging violation of the federal securities laws. In the event such claims were successfully asserted, there is no assurance that we would have sufficient funds available to pay and it is likely that we would be required to use funds currently designated as working capital for that purpose. That would substantially reduce the amount of working capital available for other purposes and, in that event, we could be forced to cease or discontinue certain operations and to liquidate certain assets to pay our liabilities, including, but not limited to, rescission claims.

Cash Used in Operating Activities

Cash used in operating activities amounted to $1,649,000for the fiscal year ended February 29, 2012 compared to$3,586,000 used for operating activities in the fiscal year ended February 28, 2011. The cash was used for general and administrative costs and for the exploration programs on the properties.

Cash Used in Investing Activities

Cash used in investing activities amounted to $1,000 for the fiscal year ended February 29, 2012compared to $14,000for the fiscal year ended February 28, 2011for purchase of equipment.

Financing Activities

Cash provided by financing activities increased to $1,387,000 for the fiscal year ended February 29, 2012 compared to $563,000for the fiscal year ended February 28, 2011. Most of the cash provided by financing activities in 2011 was provided by private placement. Cash provided by financing activities was used to fund our operating and investing activities.

In December 2011, wecompleted a private placement of 4,400,000 units at $0.20 per unit, for total proceeds of $880,000. Each unit consists of one share of common stock and a warrant to purchase one share of common stock. Each warrant is exercisable for one share of common stock at an exercise price of $0.30 for a period of two years from the closing date. The securities were issued to U.S. “accredited investors” and Canadian and non-U.S. investors. We paid $61,600 in finders’ fees in conjunction with the private placement.

In March 2011, we completed a private placement of 6,560,000 units at $0.20 per unit, for total proceeds of $1,312,000. Each unit consists of one share and one share purchase warrant. Each warrant is exercisable for one share of common stock at an exercise price of $0.30 for a period of two years from the closing date.

We anticipate continuing to rely on equity sales of our common stock or issuance of debt in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders.

In February2009, we entered into a development agreement with MRT, which we amended in December2009. Pursuant to the terms of the development agreement, as amended, MRT has agreed to invest up to $8million in First Phase Production and to complete a feasibility study. In exchange, we assigned MRT an interest to 74% of the net cash flows from First Phase Production and a 54% ownership interest in the Cieneguita Project.

35

To fund our continued operations, we issued $1.5million of convertible debentures in March 2009, of which an aggregate of $880,000 was issued to Mario Ayub, a director of Pan American, and to his affiliated entity, MRT. Pursuant to the terms of the convertible debentures, the holders irrevocably converted the debentures into a 10% ownership interest in the Cieneguita Project and a 10% interest in the net cash flows from First Phase Production. In December 2009, Mario Ayub and MRT agreed to resell an aggregate 4% ownership interest in the Cieneguita Project back to us, along with 4% of the net cash flows from First Phase Production, in return for $550,000. In a private transaction not involving us, the other holders contributed their remaining 6% ownership interest in the Cieneguita Project to a newly formed entity, Marje Minerals SA.

As a result of our amended development agreement and our agreements with the debenture holders, the ownership interest in the Cieneguita Project and the net cash flows from the First Phase Production are held by us, MRT and Marje Minerals as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase Production	Net Cash Flow Interest Following First Phase Production
MRT	54%	74%	54%
Marje Minerals	6%	6%	6%
Pan American	40%	20%	40%

Any additional costs for the First Phase Production and the feasibility study for the Cieneguita Project, after MRT invests $8 million, will be shared by us, MRT and Marje Minerals on a pro-rata basis based on their respective ownership percentages in the Cieneguita Project.

The major terms of the development agreement, as amended, with MRT and Marje Minerals are as follows:

●   MRT purchased $1 million of secured convertible debentures at 8% interest (payable in stock or cash). The proceeds from this investment were used for continued exploration and development of the Cieneguita Project and general working capital. On November 5, 2009, MRT exercised its conversion rights on the debenture and MRT was issued 3,333,333 common shares and a warrant to purchase 1,666,667 shares of common stock at an exercise price of $0.50 per share.

●   MRT agreed to provide the necessary working capital to begin and maintain mining operations, estimated to be $3 million, to put the first phase of the Cieneguita Project into production. In exchange for these funds, we assigned MRT an interest to 74% of the net cash flow from First Phase Production. The agreement limits the mining during First Phase Production to the mineralized material that is available from the surface to a depth of 15 meters.

●   MRT committed to spend up to $4 million to take the Cieneguita Project through the feasibility stage. In doing so, we assigned MRT a 54% interest in our rights to the Cieneguita Project. After the expenditure of the $4 million, all costs will be shared on a pro rata ownership basis (i.e. 54% to MRT, 40% to us and 6% to Marje Minerals). If any party cannot pay its portion of the costs after the $4 million has been spent, then their ownership position in the Cieneguita Project will be reduced by 1% for every $100,000 invested by the other owners. Our ownership interest in the Cieneguita Project, however, cannot be reduced below 25%. In addition, we have the right to cover Marje Minerals’ pro rata portion of costs if they cannot pay their portion of the costs. In return, we will receive 1% of Marje Minerals’ ownership position in the Cieneguita Project for every $100,000 we invest on their behalf.

In May 2009, we entered into a letter of agreement to sell our Guazapares Project located in southwestern Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount for a total consideration of up to $5.3 million. A definitive agreement was signed on July 10, 2009 but the closing was subject to the satisfaction of various conditions. The first payment of $3.7 million was released from escrow in February 2010, as the transfer of the 12 claims to Paramount was completed. An additional payment of $1.6 million is due if, within 36 months following execution of the letter of agreement (July 10, 2009), either (i) Paramount Gold de Mexico SA de C.V. is sold by Paramount, either through a stock sale or a sale of substantially all of its assets, or (ii) Paramount’s San Miguel Project is put into commercial production.

Going Concern

Our financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/ or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

36

We have a history of operating losses and will need to raise additional capital to fund its planned operations. As at February 29, 2012, we had a working capital deficit of $856,000(2011 - $1,483,000 working capital deficit) and an accumulated deficit during the exploration stage of$49,702,000(2011 – $46,294,000). These conditions raise substantial doubt about our ability to continue as a going concern.

There is no assurance that our operations will be profitable. We have conducted private placements of convertible debt and common stock, which have generated funds to satisfy all of the initial cash requirements of our planned Mexican extraction of its mineralized material and exploration ventures. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements which have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our investors.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. We maintain such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our certifying officer, to allow timely decisions regarding the required disclosure.

Internal Control Over Financial Reporting

37

Management is responsible for the preparation of the financial statements and related financial information appearing in this Annual Report on Form 10-K. The financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America. Management is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company's internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management, including the chief executive officer and chief financial officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.

With the participation of the chief executive officer and chief financial officer, our management evaluated the effectiveness of our internal control over financial reporting as of February 28, 2011 based upon the framework in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that, as of February 29, 2012, wehave a material weakness in its internal control over financial reporting. Specifically, the management determined that we did not have sufficient personnel resources within the accounting function to segregate the duties and lack of oversight by an audit committee. Accordingly, our internal control over financial reporting is ineffective as of February 29, 2012.

To remediate our internal control weaknesses, management intends to implement the following measures:

●   We will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.

The additional hiring is contingent upon us getting sufficiently funded through equity or debt for its continued exploration activities and corporate expenses. Our management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.OTHER INFORMATION.

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The directors and executive officers currently serving the company are as follows:

Name	Age	Tenure
Randy Buchamer	55	Director since July 2010
Hernan Celorrio	68	Director since January 2012
Miguel DiNanno	58	President and Chief Operating Officer since October 2010
Salil Dhaumya	46	Chief Financial Officer since September 2009
Bruno Le Barber	38	Director since March 2011
Neil Maedel	54	Director since July 2010; Chairman since June 2011
Gary Parkison	60	Director since July 2010
George Young	60	Director since September 2009
Andrey Koniuhov	49	Director since April 2012

38

The directors named above will serve until the next annual meeting of our stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders’ meeting. Officers will hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated. There is no arrangement, plan or understanding between any of the directors or officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current directors to our board. There are also no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs. Officers are elected by the board of directors and serve until their successors are appointed by the board of directors. Biographical resumes of each officer and director are as follows:

The following sets forth information regarding the business experience of our directors and executive officers as of February 29, 2012. In addition to the information regarding our directors and skills that led our Board to conclude that the individual should serve as a director, we also believe that all of our directors have a reputation for integrity, honesty and adherence to high ethical standards. We believe they each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our company and our Board.

Randy Buchamer

Mr. Randy Buchamer has served as a director since July 2010. Mr. Buchamer has an extensive background in business administration and finance. Mr. Buchamer has served as the Chairman of RewardStream, a private B.C.,Canada based technology company, since July 2002. From August 2001 to October 2009, Mr. Buchamer was the CEO of Voice Mobility and directed its transformation into a profitable company. From March 1999 to April 2000 Mr. Buchamer was the Managing Director, Operations of The Jim Pattison Group and was responsible for supporting the operations of the companies owned by The Jim Pattison Group. Prior to joining The Jim Pattison Group, Mr. Buchamer was the CIO and later the COO for Mohawk Oil during its restructuring and listing on the Toronto Stock Exchange. At the time, Mohawk was one of Canada’s largest independent petroleum and convenience store retailers. Mr. Buchamer holds an Executive Management Development Degree from SimonFraserUniversity and a Business Administration Degree from the University of Illinois. He also has significant experience in Securities and Exchange Commission, Toronto Stock Exchange and Sarbanes-Oxley compliance matters. Mr. Buchamer is qualified to sit on our board of directors due to his significant executive experience and his experience with other publicly traded companies.

Hernan Celorrio

Mr. Hernan Celorrio is an expert in Argentinean mining law. Previously Mr. Celorrio was an advisor to the board and he continues as a director of the company's subsidiary Recursos Argentinos SA. Mr. Celorrio was the president of BarrickExploraciones Argentina S.A. from 1999-2006 and a Vice President of Minera Peñoles in Argentina, in addition to sitting on the board of Directors of Northern Orion Resources and Yamana Resources (Compañia Minera Polimet S.A.) in Argentina. In 2000 and 2002, Hernan was awarded Mining Businessman of the Year in Argentina.Mr. Celorrio is qualified to sit on our board of directors due to his extensive legal and mining experience, specifically with projects within Argentina.

Miguel DiNanno

Mr. DiNanno has served as the president since October 2010. Mr. DiNanno previously served as President of Somuncurah S.R.L. and AupaS.A., both of which are mining and energy exploration and development firms focused in Argentina, since 2008. He previously served as the Chief Operating Officer of the Grosso Group, an exploration and new mining business development firm, from 2007 to 2008 and as the Representative and Country Manager in Argentina for Palladon Ventures Ltd., a gold and silver exploration company, from 2005 to 2008. From 2002 to 2005, Mr. Di Nanno served as the Commercial Development Manager in Argentina for Queensland Government and the Australian Industry Group. His prior experience also includes positions as Country Manager in Argentina for Phelps Dodge Corporation and Zone Manager for Canyon Resource Corporation. He has also previously provided consulting services to MIM Exploration, COMINCO, Brancote Holdings, Viceroy Resources, Cyprus Minerals, Mauricio Hochschild, Bema Gold, Northern Orion, and Lakefield Research Ltd. He earned a degree in Mining Engineering – Ore Dressing from the National University of San Juan. Mr. DiNanno is qualified to sit on our board of directors due to his extensive mining and engineering experience, and his special focus on mining projects within Argentina.

39

Salil Dhaumya

Mr. Dhaumya has served as the chief financial officer since September 2009. Mr. Dhaumya currently serves as the corporate controller for IBC Advanced Alloys Corp. since August 2008 and as chief financial officer of War Eagle Mining Company Inc. since August 2010, both Canadian reporting issuers listed on the TSX Venture Exchange. Prior to that time, he served as corporate controller for New Legend Group Ltd., a TSX Venture Exchange-listed capital pool company, from June 2007 to February 2009. Mr. Dhaumya served as our Chief Financial Officer from October 2007 to November 2007. From August 2006 to June 2007, Mr. Dhaumya served as a management consultant at MCSI, providing corporate financial consulting services to Canadian and U.S. listed small reporting companies. From August 2005 to May 2006, Mr. Dhaumya also worked as a business analyst with Heli-One, a division of CHC Helicopters, a company providing helicopter support to the CHC Global Operations and third parties. He has also served as controller of Aquilini Group (also known as Golden Eagle Group), a business conglomerate from March 2002 to July 2005. Mr. Dhaumya graduated with honors in cost accounting at PunjabUniversity in Chandigarh, India in 1986 and is a certified management accountant, a designation obtained in British Columbia, Canada in 2004. It is expected Mr. Dhaumya will spend approximately 70% of his time working for our Company as Chief Financial Officer.

Bruno LeBarber

Mr.Le Barber has served as a director since March 2011. He is a co-founder of Vortex Capital, its Managing Director and co-CIO of Vortex Capital Global Precious Metals Fund Ltd. Prior to that time, Mr. Le Barber spent over three years at Morgan Stanley in London in the GMTS (Global Market Trading Strategy) team. He served as a Vice President and their role was advising internally proprietary trading desk and a large base of Alternative Investment Funds, a global macro team publishing macro-economic studies on a regular basis. Mr. Le Barber also previously served as a global technical strategist and pan-European institutional sales person with ABN Amro in Paris for over two years. Mr. Le Barber began his career as an assistant portfolio manager at Leven Gestion in Paris in 1997, where he took part in the investment committee and was involved in stock selection. Mr. Le Barber holds a Business Degree from Bordeaux's Essica. Mr. LeBarber is qualified to sit on our board of directors due to his finance experience and his experience in raising funds for development stage mining companies.

Neil Maedel

Mr. Maedel has served as a director since July 2010. Mr. Maedel is a Thailand based financier specializing in international resource projects. Since June 2007, Mr. Maedel served as the Director, Business Development of Manas Petroleum during the period when it acquired interests in Tajikistan, Mongolia, Chile and Albania. Mr. Maedel previously served as a consultant and director of Eden Energy Corp. from October 2004 to December 2006. He is also a director of Andean Invest (Bahamas) through which he acted as an advisor to Pan American during its recent reorganization and continues to advise the company. Mr. Maedel worked as a professional stock trader and researcher in Canada during the 1980’s and has assisted in financing resource companies for the past two decades. Mr. Maedel is qualified to sit on our board of directors due to his finance experience and his experience in raising funds for development stage mining companies and his service to other mining or energy companies.

Gary Parkison

Mr. Parkison has served as a director since July 2010. Mr. Parkison is a geologist and project manager with diverse expertise regarding the exploration and development of base and precious metals, industrial minerals, and uranium projects. Mr. Parkison is currently President of Praxis Mining Consultants LLC where he has served since November 2008. Mr. Parkison previously served as the Vice President-Exploration and Development for Constellation Copper Corporation from April 2004 to December 2008 and Chief Geologist for Cambior USA, Inc. from 1992 to 2000. He also worked as an exploration geologist for Westmont Mining, Inc. from 1984 to 1992 and for Nicor Mineral Ventures from 1978 to 1984. Mr. Parkison has participated in or been credited for a number of large copper and gold discoveries, and also has had significant experience in the successful completion of feasibility studies and mine development projects. Mr. Parkison has a B.S. degree in geology from UCLA and an M.S. from the University of California at Berkeley. Mr. Parkinson is qualified to sit on our board of directors due his mining education and his extensive experience in working with development stage mining companies.

40

George Young

Mr. Young has served as a director of the company since September 2009. He is the chief executive officer and director of Fellows Energy Ltd., an early stage oil and gas company, since January 2004. Fellows Energy is a US reporting issuer trading on the over-the-counter bulletin board. Mr. Young previously served as Vice President and director of International Royalty Corporation from February 2005 to February 2008. International Royalty Corporation, a Canadian reporting issuer which trades on the Toronto Stock Exchange (“TSX”), is a company which acquires and creates natural resource royalties. Prior to that time, from January 2003 to January 2005, he served as President and director of MAG Silver Corp., a Canadian reporting issuer that trades on the TSX and the American Stock Exchange. MAG Silver is a silver exploration and emerging development company in Mexico. From October 2002 to July 2008, Mr. Young was a director of Palladon Ventures Ltd., a junior exploration and development company based in Salt Lake City, Utah, which trades on the TSX Venture Exchange in Canada. Mr.Young holds a Bachelor of Sciences degree from the University of Utah and a Juris Doctor from the University of Utah, College of Law. Mr. Young is qualified to sit on our board of directors given his previous mining experience, including his prior experience as a senior executive at International Royalty Corporation and MAG Silver and his prior service as director of Palladon Ventures.

Andrey Koniuhov

Mr. Koniuhov has served as a director since April 2012. Mr. Koniuhov has over 25 years of exploration and mining experience. He currently serves as Director of Geology and Advanced Projects for Polyus Gold, the third-largest gold company in the world by reserves. Prior to that, he was Deputy CEO of Polyus Exploration, a wholly owned subsidiary of Polyus Gold, where he directed the 2009-2011 brownfield exploration campaigns that led to the discovery of more than 40 million ounces of gold in the proven-probable, measured, indicated and inferred categories.Prior to joining Polyus Gold, Mr. Koniuhov served as Senior Consulting Geologist for Barrick Gold Corp. and Senior Geologist for Kentor Gold Ltd. He previously worked as Deputy Director for Apex Asia LDC, a subsidiary of Apex Silver Mines Corp., on its Kumushtak joint venture. He holds an M.Sc. in Geology with an emphasis on exploration geology and mining exploration from Leningrad State University.

The Board’s Role in Risk Oversight

The Board’s role in risk oversight includes receiving reports from members of management on a regular basis regarding material risks faced by us and applicable mitigation strategy and activity, not less than quarterly. The reports cover the critical areas of operations, development, regulatory affairs and legal and financial affairs. The Board and its committees consider these reports; discuss matters with management and identify and evaluate any potential strategic or operational risks, and appropriate activity to address those risks.

Director Independence

We have appointed the following directors in the past two fiscal years:Andrey Koniuhov in April 2012; Hernan Celorrio in January 2012; Bruno LeBarber in March 2011; and Gary Parkison and Randy Buchamer in July 2010. We believe that Mr. Koniuhov, Mr. Celorrio, Mr. LeBarberMr. Parkison, Mr. Buchamer are “independent directors,” as that term is defined by applicable listing standards of The Nasdaq Stock Market and SEC rules, including the rules relating to the independence standards of an audit committee and the non-employee director definition of Rule 16b-3 promulgated under the Exchange Act. There are no family relationships among any of our directors or executive officers.

Board Committees

Our Board currently performs the functions and duties generally performed by separately constituted audit, compensation and nominating and corporate governance committees. We intend to recruit additional directors to serve on our Board, and at such time, the Board will form separate Board committees. We intend that a majority of our directors will be independent directors, and that our Board and Board committees will meet the corporate governance requirements imposed by a national securities exchange, although we are not required to comply with such requirements until we seek listing on a securities exchange. Additionally, the Board will direct each committee to adopt a charter to govern its duties and actions.

Board and Committee Attendance

During the last fiscal year, each of our directors attended at least 75% of the total number of meetings of the Board on which such director served during that period.

Executive Sessions

Executive sessions of our independent directors are held at each regularly scheduled meeting of our Board and at other times as necessary. The Board’s policy is to hold executive sessions without the presence of management.

41

Board Leadership Structure

Neil Maedel serves as Chairman of our Board of Directors. Our Board’s general policy is that separate persons should hold positions of Chairman of the Board and Principal Executive Officer to enhance the Board’s oversight of management. Our Board believes our leadership structure enhances the accountability of our Principal Executive Officer to the Board, balances power on our Board and encourages balanced decision making. Our Board also separated the roles in recognition of the differences in roles. While our Principal Executive Officer is responsible for the day-to-day leadership of the company, the Chairman of the Board provides guidance to the Board, sets the agenda for Board meetings and presides over the meetings of the full Board and the meetings of the Board’s non-management directors. The Board Chairman also provides performance feedback on behalf of the Board to our Principal Executive Officer. The Board intends to carefully evaluate from time to time whether our Principal Executive Officer and Chairman positions should remain separate based on what the Board believes is best for the company and our stockholders.

Audit Review

Our Board is responsible for assuring the integrity of our financial control, audit and reporting functions and reviews with our management and our independent auditors the effectiveness of our financial controls and accounting and reporting practices and procedures. In addition, our Board reviews the qualifications of our independent auditors, is responsible for their appointment, compensation, retention and oversight and reviews the scope, fees and results of activities related to audit and non-audit services.

Executive Compensation

Our Board reviews and sets our general compensation policies and executive compensation, including officer salary levels, incentive compensation programs and share-based compensation. Our Board also has the exclusive authority to administer our stock option plan. Miguel DiNanno, our president, has abstained from any Board discussions with respect to his compensation.

Nominating and Corporate Governance

Our Board is responsible for identifying and selecting potential candidates for our Board. Our Board reviews the credentials of proposed members of the Board, either in connection with filling vacancies or the election of directors at each annual meeting of stockholders. The Board will consider qualified nominees recommended by stockholders. The Board intends to periodically assess how well it is performing, and make recommendations regarding corporate governance matters and practices. Nominees for director are selected on the basis of their depth and breadth of experience, integrity, ability to make independent analytical inquiries, understanding our business environment and willingness to devote adequate time to their board duties.

Stockholder Nominees

Our Board will consider written proposals from stockholders for nominees for director. Any such nominations should be submitted to the Board c/o the secretary of the company and should include the following information: (i) with respect to each nominee, (a) the name, age, business address and residence address of the nominee, (b) the principal occupation or employment of the nominee, (c) the class and number of shares of the company that are beneficially owned by the nominee, (d) a description of all arrangements or understandings between the stockholder submitting the nomination and the nominee pursuant to which the nomination is to be made by the stockholder, and (e)any other information relating to the nominee that is required to be disclosed in solicitations of proxies for the election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) with respect to the stockholder submitting the nomination, (a) the name and address of the stockholder, as they appear on our books, (b) the class and number of shares of the company that are beneficially owned by the stockholder and (c) any material interest of the stockholder in the nomination. Such information should be submitted in the time frame described under our proxy statement.

Process for Identifying and Evaluating Nominees

Our Board believes that we are well served by our current directors. In the ordinary course, absent special circumstances or a material change in the criteria for Board membership, the Board will re-nominate incumbent directors who continue to be qualified for Board service and are willing to continue as directors. If an incumbent director is not standing for re-election, or if a vacancy on the Board occurs between annual stockholder meetings, the Board will seek out potential candidates for Board appointment who meet the criteria for selection as nominees and have the specific qualities or skills being sought. Director candidates will be selected based on input from members of the Board, our senior management and, if the Board deems appropriate, a third-party search firm. The Board will evaluate each candidate’s qualifications and contact relevant references. Based on this input, the Board will evaluate which of the prospective candidates is qualified to serve as a director.

42

Communications with Directors

Stockholders who wish to communicate with our Board may do so by writing to our corporate secretary at our principal executive office located at 595 Howe Street, Unit 906, Vancouver, B.C. Canada, V6C 2T5.

Code of Ethics

Our Board of Directors adopted a code of business conduct and ethics policy, the “Code of Ethics”. The Code of Ethics allows us to focus our Board and each Director and officer on areas of ethical risk, provide guidance to Directors to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct and help foster a culture of honesty and accountability. A copy of our Code of Ethics may be obtained by writing to our corporate secretary at 595 Howe Street, Unit 906, Vancouver, B.C. Canada, V6C 2T5. Any amendments to, or waivers from, a provision of our code of ethics that applies to any of our executive officers will be posted on our website in accordance with the rules of the SEC.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, officers (including a person performing a principal policy-making function) and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities of ours. Directors, officers and 10% holders are required by SEC regulations to send us copies of all of the Section 16(a) reports they file. Based solely upon a review of the copies of the forms sent to us and the representations made by the reporting persons to us, except as set forth below, we believe that during the fiscal year ended February 29, 2012, our directors, officers and 10% holders complied with the filing requirements under Section 16(a) of the Exchange Act.

43

ITEM 11.EXECUTIVE COMPENSATION.

The following table sets forth executive compensation for our named executive officers for the fiscal years ended February 29, 2012 and February 28, 2011.

Summary Compensation Table

Name And Principal Position	Fiscal year Ended February	Salary ($)	Bonus ($)	Stock Awards ($)(1)	Options Awards ($)(1)	All Other Compensation ($)	Total ($)
Neil Maedel Chairman(2)	2012	125,000	-	-	71,333	-	196,333
Miguel DiNanno President(3)	2012 2011	120,000 44,194	- -	- -	62,400 187,000	- -	182,400 231,194
Salil Dhaumya CFO(4)	2012 2011	84,000 84,000	- -	- -	29,325 94,400	- -	113,325 178,400
George Young, Former President(5)	2011	76,645	-	-	-	-	76,645

(1) Column represents the aggregate grant date fair value of stock options/warrants granted to the named executives recognized for financial statement reporting purposesin accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.

(2) In June 2011, Mr. Maedel was appointed as the Chairman. $30,000 of this compensation was paid as corporate finance advisory fee prior to June 2011.

(3)           In October 2010, Mr. DiNanno was appointed President.

(4)           On September 21, 2009, Mr. Dhaumya was appointed as Chief Financial Officer.

(5) In October 2010, Mr. Young resigned as President.

Employment Agreements

On October 15, 2010, we entered into an employment agreement with Mr. Miguel DiNanno to serve as ourPresident and Chief Operating Officer. He receives a monthly salary of $10,000. On January 24, 2011, we also granted Mr. Di Nanno options to purchase 1,000,000 shares of our common stock pursuant to our 2009 Nonqualified Stock Option Plan and form of Nonqualified Stock Option Agreement. The options vest in six equal installments, with the first installment vesting on the grant date and the remaining installments vesting every six months thereafter. The options have an exercise price of $0.20 per share.

Outstanding Equity Awards at Fiscal Year End

Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Number of Securities  Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date
Miguel Di Nanno	500,000	500,000(1)	Nil	0.20	2/24/2021
George Young	1,000,000(2)	-	Nil	0.28	9/21/2019
Salil Dhaumya	25,000(3)	-	Nil	0.90	12/21/2017
	200,000(4)	-	Nil	0.16	02/10/2019
	500,000(5)	-	Nil	0.28	11/01/2019
Neil Maedel	750,000	250,000(6)	Nil	0.25	7/26/2020

44

(1)	Mr. DiNanno received 1,000,000 options under the 2009 Nonqualified Stock Option Plan. These options vest in six equal installments, with the first installment vesting on January 24, 2011. The remaining 833,333 options vest as: 166,667 options vested on July 24, 2011, 166,667 options vested on January 24, 2012, 166,667 options vest on July 24, 2012, 166,666 options vest on January 24, 2013 and 166,666 options vest on July 24, 2013.
(2)	Mr. Young received 1,000,000 options under the 2009 Nonqualified Stock Option Plan. These options vested in eight equal installments, with the first installment vesting on September 21, 2009. The remaining 750,000 options vested as: 125,000 options vested on March 21, 2010, 125,000 options vested on June 21, 2010, 125,000 options vested on September 21, 2010, 125,000 options vested on December 21, 2010, 125,000 options vested on March 21, 2011, and 125,000 options vested on June 21, 2011. These options were repriced from $0.36 to $0.28 on April 29, 2011.
(3)	Mr. Dhaumya received 25,000 options under the 2007 Nonqualified Stock Option Plan. These options vested every six months over a two and a half year period beginning on the initial grant date.
(4)	Mr. Dhaumya received 200,000 options under the 2008 Nonqualified Stock Option Plan. These options vested every six months over a two and a half year period beginning on the initial grant date.
(5)	Mr. Dhaumya received 500,000 options under the 2009 Nonqualified Stock Option Plan. These options vested in eight equal installments, with the first installment vesting on November 1, 2009. These options were repriced from $0.44 to $0.28 on April 29, 2011.
(6)	Mr. Maedel received 1,000,000 warrants. These warrants vested in eight equal installments, with the first installment vesting on October 26, 2010. The remaining 875,000 warrants vested as: 125,000 warrants vested on January 26, 2011, 125,000 warrants vested on April 26, 2011, 125,000 warrants vested on July 26, 2011, 125,000 warrants vested on October 26, 2011, 125,000 warrants vested on January 26, 2012, 125,000 warrants vested on April 26, 2012 and 125,000 warrants vest on July 26, 2012.

Options Granted During the Last Fiscal Year

As of February 29, 2012, we granted nil options under the 2009 Option Plan during the prior fiscal year.

Aggregate Option Exercises in Last Fiscal Year

None of the named executive officers exercised options during the year ended February 29, 2012.

45

Director Compensation

The following table sets forth information concerning the compensation paid to each of our non-employee directors during the fiscal year ended February 29, 2012 for their services rendered as directors.

DIRECTOR COMPENSATION FOR FISCAL YEAR ENDED FEBRUARY 29, 2012

Name	Fees Earned Or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)(1)	Non- Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
Neil Maedel	125,000(2)	-	71,333	-	-	-	196,333
Gary Parkison	24,000	-	71,333	-	-	-	95,333
George Young	24,000	-	42,000	-	-	-	66,000
Randy Buchamer	24,000	-	71,333	-	-	-	95,333
Bruno Le Barber	24,000	-	112,500	-	-	-	136,500
Hernan Celorrio	4,000	-	45,200	-	-	-	49,200

(1) All of the directors have been granted warrants except for Mr. Young and Mr. Le Barber who were granted options as compensation for their service as directors.

(2) Represents fees paid as chairman of the company.

Directors are reimbursed for their reasonable out-of-pocket expenses incurred while attending board or committee meetings.

46

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information regarding the beneficial ownership of our common stock as of May 18,2012 of each person known by us to be the beneficial owner of more than 5% of our common stock.

Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to the shares. Unless otherwise indicated, the persons named in the table below have sole voting and investment power with respect to the number of shares indicated as beneficially owned by them. Common stock beneficially owned and percentage ownership is based on 71,977,691 shares outstanding on May 18,2012, and assuming the exercise of any options, which are presently exercisable as of May 18, 2012.

Name and Address	Amount and Nature of Beneficial Owner	Percent of Class
Mario Ayub Pascual Orozco # 2117-A Chihuahua, Chih. 31310 Mexico	7,686,666	10.68%
Neil Maedel 173-4 Moo 4  Noppararhara 12 Muang, Krabi, Thailand	7,565,000(3)	9.72%
Bruno LeBarber P.O Box 309 Ugland House George Town, Grand Cayman, KY1 - 1104 Cayman Islands	4,200,000(5)	5.79%

The following table sets forth information regarding the beneficial ownership of our common stock as of May 18, 2012 by each of our directors; each of our executive officers; and our executive officers and directors as a group.

Name and Address	Amount and Nature of Beneficial Owner	Percent of Class
George Young 402 Linden Borger, TX79007	1,095,000(1)	1.50%
Salil Dhaumya 595 Howe Street, Unit 906 Vancouver, BC. CanadaV6C 2T5	975,000(2)	1.34%
Neil Maedel 173-4 Moo 4  Noppararhara 12 Muang, Krabi, Thailand	7,565,000(3)	9.72%
Gary Parkison 1194 Silverheels Drive Larkspur, CO 80118	875,000(4)	1.20%
Bruno LeBarber P.O Box 309 Ugland House George Town, Grand Cayman, KY1 - 1104 Cayman Islands	4,200,000(5)	5.79%
Randy Buchamer 4275 Canterbury Crescent North Vancouver, BC. Canada V7R 3A8	1,156,000(6)	1.59%
Hernan Celorrio Tte. Gral. J. D. Perón 555 – 2º piso C1038AAK Ciudad de Buenos Aires, Argentina	608,333(7)	0.84%
Andrey Koniuhov Bld. 11/5, Apr. 151, Rochdelskaya Str. Moscow, Russia	166,667(8)	0.23%
Miguel Di Nanno San Martin 3625 - San Carlos de Bariloche Rio Negro Province Argentina. 8400	500,000(9)	0.69%
All officer and directors as a group	17,141,000	23.81%

47

(1)	Includes 95,000 shares owned by Mr. Young. Also includes 1,000,000 vested optionsowned by Mr. Young.
(2)	Includes 125,000 shares and 125,000 warrants held by Koios Corporate Financial Services Ltd. Also includes 725,000 vested options owned by Mr. Dhaumya.
(3)	Includes 1,540,000 shares held by Andean Invest and 150,000 shares held by family members. Also includes 5,000,000 warrants held by Andean Invest and875,000 vested warrants held by Neil Maedel.
(4)	Includes 875,000 vested warrants held by Mr. Parkison.
(5)	Includes 500,000 vested warrants held by Mr. LeBarber and 3,700,000 shares held by Vortex Capital Ltd., of which, Mr. LeBarber is the managing director.
(6)	Includes 281,000 shares and375,000 vested warrants held by Mr. Buchamer.
(7)	Includes 250,000 shares and 358,333vested warrants held by Mr. Celorrio.
(8)	Includes 166,667 vested warrants held by Mr. Koniuhov.
(9)	Includes 500,000 vested options held by Mr. DiNanno.

48

EQUITY COMPENSATION PLAN

The following table summarizes our compensation plans under which our equity securities are authorized for issuance as of February 29, 2012:

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights(b)	Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	38,226,733	$0.35	10,000
Equity compensation plans not approved by security holders	-0-	$0.00	-0-
Total	38,226,733	$0.35	10,000

49

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Except for those noted below, we have not engaged in any transaction since February 28, 2011in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year end for fiscal 2012and 2011and in which any of our directors, named executive officers or any holder of more than 5% of our Class A common stock, or any member of the immediate family of any of these persons or entities controlled by any of them, had or will have a direct or indirect material interest.

Indemnification of Officers and Directors

Our articles of incorporation, as amended, provide that, to the fullest extent permitted by Delaware law, our directors or officers shall not be personally liable to us or our shareholders for damages for breach of such director's or officer's fiduciary duty. The effect of this provision of our articles of incorporation, as amended, is to eliminate our rights and our shareholders’ rights (through shareholders' derivative suits on behalf of our company) to recover damages against a director or officer for breach of the fiduciary duty of care as a director or officer (including breaches resulting from negligent or grossly negligent behavior), except under certain situations defined by statute. We believe that the indemnification provisions in our Articles of Incorporation, as amended, are necessary to attract and retain qualified persons as directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act" or "Securities Act") may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

Conflicts of Interest

Salil Dhaumya, our chief financial officer, will only devote a portion of his time to our affairs. In addition, other officers may have business interests outside our business. There will be occasions when the time requirements of our business conflict with the demands of the officers’ other business and investment activities. Such conflicts may require that we attempt to employ additional personnel. There is no assurance that the services of such persons will be available or that they can be obtained upon terms favorable to us.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed by Meyler& Company LLC for the audit of our annual financial statements were $50,000for the fiscal year ended February 29, 2012 and $50,000 for the fiscal year ended February 28, 2011. The aggregate fees billed by Meyler& Company LLC for review of our financial statements included in its quarterly reports on Form 10-Q were $15,000during the year ended February 29, 2012 and $15,000 during the year ended February 28, 2011.

Audit-Related Fees

The aggregate fees billed by Meyler& Company LLC for assurance and related services that were related to its audit or review of our financial statements were $nil and $nil during the fiscal years ending February 29, 2012 and February 28, 2011.

Tax Fees

The aggregate fees billed by Meyler& Company LLC for tax compliance, advice and planning were $nil for the fiscal year ended February 29, 2012 and $nil for the fiscal year ended February 28, 2011.

All Other Fees

Meyler& Company LLC billed us$nil for reviewing our response to SEC’s comment letter and $nil for providing an opinion letter for the Registration Statement during the fiscal year ended February 29, 2012 and $nil and $nil, respectively for the fiscal year ended February 28, 2011.

50

ITEM 15. EXHIBITS

Exhibit Number	Description
2.1	Agreement and Plan of Merger dated July 2, 2010, by and between Pan American Goldfields Ltd. (formerly known as Mexoro Minerals Ltd.), a Colorado corporation, and Pan American Goldfields Ltd., a Delaware corporation (filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on July 6, 2010).
3.1	Certificate of Incorporationof Pan American Goldfields Ltd. (filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on July 6, 2010).
3.2	Bylawsof Pan American Goldfields Ltd. (filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on July 6, 2010).
4.1	Registration Agreement dated April 20, 2004, by and among Sunburst Acquisitions IV, Inc., a Colorado company, and each of the purchasers in a private placement of shares of Sunburst (Herein incorporated by reference from the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on September 25, 2006).
4.2	Stock option plan approved by the shareholders of Mexoro Minerals, Ltd. on February 13, 2006. (Herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on April 7, 2006).
4.3	2008 Equity Compensation Plan (Herein incorporated by reference from the Company’s current report on Form 8-K/A dated April 7, 2008, and filed with the Securities and Exchange Commission on April 11, 2008).
4.4	2009 Nonqualified Stock Option Plan. (Herein incorporated by reference from the Company’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on December 24, 2009).#
10.1	Agreement made and entered in the City of Chihuahua, State of Chihuahua as of the 18th day of August, 2005 among Compania Minera De Namiquipa, S. A. de C.V. a company duly incorporated and validly existing pursuant to the laws of the United Mexican States, and Minera Rio Tinto, S. A. de C.V. a company duly incorporated and validly existing pursuant to the laws of the United Mexican States, and Mario Humberto Ayub Touche having a domicile at San Antonio No. 2036 Chihuahua, Chihuahua and Sunburst Mining De Mexico, S. A. de C.V., a company duly incorporated and validly existing pursuant to the laws of the United Mexican States (herein incorporated by reference from the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on December 18, 2006).
10.2	Agreement made and entered at the City of Chihuahua, State of Chihuahua on this the 18th day of August of the year 2005, among Minera Rio Tinto, S. A. de C.V. a company duly incorporated and validly existing pursuant to the laws of the United Mexican States, and Sunburst Mining de Mexico, S. A. de C.V. a company duly incorporated and validly existing pursuant to the laws of the United Mexican States (Encino Gordo) (Herein incorporated by reference from the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on September 25, 2006).
10.3	The New Agreement entered into on December 8, 2005 among the Company, Sunburst de Mexico, and MRT (herein incorporated by reference from the Company’s current report on Form 8-K for report date December 8, 2005 and filed with the Securities and Exchange Commission on December 14, 2005).
10.4	Amendment to the New Agreement, dated April 6, 2006 by and among Mexoro Minerals, Ltd., Sunburst Mining de Mexico S.A. de C.V., and Minera Rio Tinto, S.A. de C.V. (Herein incorporated by reference from the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on September 25, 2006).
10.5	Addendum To Purchase Contract Of Mining Rights To Lump Sum Entered Into On May 6, 2004 by Corporativo Minero, S.A. De C.V. And Sunburst Mining De Mexico, S.A. De C.V., dated March 24, 2006 (Herein incorporated by reference from the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on September 25, 2006).
10.6	Original Agreement between MRT and Corporativo Minero dated 2004 concerning the Cieneguita property (herein incorporated by reference from the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on December 18, 2006).

51

10.7	Agreement to Defer Cieneguita Property Payments, entered into on May 4, 2007 by Corporativo Minero S.A. de C.V. and Sunburst de Mexico S.A. de C.V. (herein incorporated by reference to the Quarterly Report on Form 10-QSB filed with the Securities and Exchange Commission on January 14, 2008).
10.8	Entry into a material definitive agreement for development of Cieneguita Project with Minera Rio Tinto (herein incorporated by reference from our current report on Form 8-K dated February 17, 2009 filed with the Securities and Exchange Commission on February 18, 2009).
10.9	Agreement for the Assignment of Mining Agreements dated July 8, 2009, by and between Mexoro Minerals, Ltd., its subsidiary, Sunburst Mining de México S.A. de C.V, Paramount Gold and Silver Corp., a Delaware corporation, and its subsidiary, Paramount Gold de Mexico S.A. de C.V., a Mexican corporation (herein incorporated by reference from the Company’s current report on Form 8-K dated July 8, 2009 and filed with the Securities and Exchange Commission on July 27, 2009).
10.10	Form of Private Placement Subscription Agreement, dated September 21, 2009, by and between the Company and the U.S. investors named therein (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).
10.11	Form of Private Placement Subscription Agreement, dated September 21, 2009, by and between the Company and the Canadian and Non-U.S. investors named therein (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).
10.12	Form of Warrant, by and between the Company and the U.S. subscribers (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).
10.13	Form of Warrant, by and between the Company and the Canadian and Non-U.S. subscribers (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).
10.14	Form of Director and Officer Indemnification Agreement (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).
10.15	Form of Nonqualified Stock Option Agreement (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).
10.16	Form of Warrant, by and between the Company and MRT Investments Ltd. (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).
10.17	Employment Agreement, dated September 21, 2009, by and between the Company and Manuel Flores (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).#
10.18	Employment Agreement, dated September 21, 2009, by and between the Company and George Young (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).#
10.19	Consulting Agreement dated September 21, 2009, by and between the Company and MRT Investments Ltd. (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).
10.20	Employment Agreement, dated September 21, 2009, by and between the Company and Salil Dhaumya (herein incorporated by reference from the Company’s current report on Form 8-K dated September 21, 2009, and filed with the Securities and Exchange Commission on September 25, 2009).#

52

10.21	Form of Amendment No. 1 to the Private Placement Subscription Agreement, dated November 5, 2009, by and between the Company and the U.S. investors named therein (herein incorporated by reference from the Company’s current report on Form 8-K dated November 5, 2009, and filed with the Securities and Exchange Commission on November 12, 2009).
10.22	Form of Amendment No. 1 to the Private Placement Subscription Agreement, dated November 5, 2009, by and between the Company and the Canadian and Non-U.S. investors named therein (herein incorporated by reference from the Company’s current report on Form 8-K dated November 5, 2009, and filed with the Securities and Exchange Commission on November 12, 2009).
10.23	Securities Purchase Agreement, dated December 23, 2009 by and between the Company and Mr. Ayub (herein incorporated by reference from the Company’s current report on Form 8-K dated December 23, 2009, and filed with the Securities and Exchange Commission on December 23, 2009).
10.24	Form of Warrant, by and between the Company and Mr. Ayub (herein incorporated by reference from the Company’s current report on Form 8-K dated December 23, 2009, and filed with the Securities and Exchange Commission on December 23, 2009).
10.25	Acknowledgment and Agreement, by and among the Company, Sunburst Mining De Mexico, S.A. De C.V., Minera Rio Tinto S.A. and Marje Minerals S.A. (herein incorporated by reference from our current report on Form 8-K dated December 23, 2009 filed with the Securities and Exchange Commission on December 23, 2009).
10.26	Amendment No. 1 to the material definitive agreement for development of Cieneguita Project with Minera Rio Tinto and Marje Minerals (herein incorporated by reference from our current report on Form 8-K dated December 23, 2009 filed with the Securities and Exchange Commission on December 23 2009).
10.27	Cancellation of Debt and Release Agreement, dated December 23, 2009, by and among the Company, and Minera Rio Tinto S.A. and Mr. Ayub (herein incorporated by reference from the Company’s current report on Form 8-K dated December 23, 2009, and filed with the Securities and Exchange Commission on December 23, 2009).
110.28	Form of Indemnification Agreement for officers and directors (filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on July 6, 2010).

10.29	Employment Agreement, dated October 15, 2010, by and between the Company and Miguel DiNanno.#
10.30	Form of the Private Placement Subscription Agreement, by and between the Company and the Canadian and Non-U.S. investors named therein (herein incorporated by reference from the Company’s current report on Form 8-K dated March 8, 2011, and filed with the Securities and Exchange Commission on March 8, 2011).
10.31	Form of the Private Placement Subscription Agreement, by and between the Company and the U.S. investors named therein (herein incorporated by reference from the Company’s current report on Form 8-K dated March 8, 2011, and filed with the Securities and Exchange Commission on March 8, 2011).
10.32	Form of Warrant, by and between the Company and the Canadian and Non-U.S. subscribers(herein incorporated by reference from the Company’s current report on Form 8-K dated March 8, 2011, and filed with the Securities and Exchange Commission on March 8, 2011).
10.33	Form of Warrant, by and between the Company and the U.S. subscribers(herein incorporated by reference from the Company’s current report on Form 8-K dated March 8, 2011, and filed with the Securities and Exchange Commission on March 8, 2011).
10.35	Material Agreement with Compania Minera Alto Rio Salado S.A., a private Argentine entity, for the acquisition of the 15,000 hectares Cerro Delta Project in northwest La Rioja Province, Argentina.
10.36	Contract to Transfer Mining Concessions, dated May 3, 2012 (filed as an exhibit to the Current Report on Form 8-K, filed with the SEC on May 5, 2012.)
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act.*
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act.*

53

32.1	Certification of the Chief Executive Officer Pursuant to Section 906, Sarbanes-Oxley Act of 2002.*
32.2	Certification of the Chief Financial Officer Pursuant to Section 906, Sarbanes-Oxley Act of 2002.*

* Filed herewith

54

SIGNATURES

Date: May 31, 2012	PAN AMERICAN GOLDFIELDS LTD.
	By: /s/ Miguel F. Di Nanno
	Miguel F. Di Nanno
	President

55

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 29, 2012 and February 28, 2011

Index to Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	56
Consolidated Balance Sheets	57
Consolidated Statements of Stockholders’ Deficiency	58
Consolidated Statements of Operations and Comprehensive Income (Loss)	63
Consolidated Statements of Cash Flows	64
Notes to Consolidated Financial Statements	65

56

AUDITOR’S REPORT

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Pan American Goldfields Ltd.

Vancouver, British Columbia

We have audited the accompanying consolidated balance sheets of Pan American Goldfields Ltd. (an Exploration Stage Company) as of February 29, 2012 and February 28, 2011 and the related consolidated statements of stockholders’ deficiency, operations and comprehensive income (loss), and cash flows for the two year period ended February 29, 2012 and for the period from March 1, 2004 (Inception of Exploration Stage) to February 29, 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of  Pan American Goldfields Ltd. as of February 29, 2012 and February 28, 2011, and the results of its operations and its cash flows for each of the two years in the period ended February 29, 2012 and for the period from March 1, 2004 (Inception of Exploration Stage) to February 29, 2012 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has a history of operating losses and a cumulative loss during the development stage of $49,701,810. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Meyler & Company, LLC

Middletown, NJ

May 31, 2012

57

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Consolidated Balance Sheets

(Expressed in U.S. Dollars)

	February 29, 2012			February 28, 2011
	$			$
Assets
Current
Cash and cash equivalents		117,892			407,912
Accounts receivable		282,683			409,692
Inventory		64,202			-
Prepaid expenses		50,686			136,141
Deposits		-			150,000
		515,463			1,103,745
Equipment (note 4)		166,204			217,875
Total assets		681,667			1,321,620
Liabilities
Current
Accounts payable and accrued liabilities		1,358,302			1,690,208
Loans payable (note 8)		12,887			12,876
Promissory notes (note 7)		-			884,022
Total liabilities		1,371,189			2,587,106
Stockholders’ deficiency
Capital stock
Preferred stock
Authorized: 20,000,000 shares without par value (note 9)
Issued: nil
Common stock
Authorized: 200,000,000 shares without par value
Issued: 71,192,397 (2011 –54,003,827) (note 10)		34,232,125			30,750,401
Additional paid-in capital		15,986,080			15,262,405
Stock subscriptions		557,238			781,000
Accumulated deficit from prior operations		(2,003,427	)		(2,003,427	)
Accumulated deficit during the exploration stage		(49,701,810	)		(46,293,923	)
Accumulated other comprehensive income		240,272			238,058
Total stockholders’deficiency		(689,522	)		(1,265,486	)
Total liabilities and stockholders’ deficiency		681,667			1,321,620

Going-concern (note 3)

Commitments (notes 6 and 12)

Subsequent events (note 16)

The accompanying notes are an integral part of these consolidated financial statements.

58

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Deficiency

(Expressed in U.S. Dollars)

Period from March 1, 2004 (Inception of Exploration Stage) to February 29, 2012

	Number of shares		Amount		Additional paid-in capital		Stock subscriptions			Deficit accumulated from prior operations			Deficit accumulated during the exploration stage			Accumulated other comprehensive income (loss)			Total stockholders deficiency
			$		$		$			$			$			$			$
Balance from prior operations, March 1, 2004		709,168		1,701,843		194,391		67,025			(2,003,427	)		-			8,929			(31,239	)
Common stock issued in share exchange		860,000		10,965,000		-		-			-			-			-			10,965,000
Options issued as finders’ fees		-		-		1,523,000		-			-			-			-			1,523,000
Common stock issued for cash		113,222		269,134		-		(67,025	)		-			-			-			202,109
Options exercised		50,000		35,000		-		-			-			-			-			35,000
Options issued		-		-		86,955		-			-			-			-			86,955
Warrants exercised		5,512		-		-		-			-			-			-			-
Beneficial conversion feature		-		-		500,000		-			-			-			-			500,000
Foreign exchange translation adjustment		-		-		-		-			-			-			(3,050	)		(3,050	)
Net loss for the year		-		-		-		-			-			(13,912,488	)		-			(13,912,488	)
Balance, February 28, 2005		1,737,902		12,970,977		2,304,346		-			(2,003,427	)		13,912,488	)		5,879			(634,713	)
Common stock issued for consulting services		30,000		90,000		-		-			-			-			-			90,000
Options exercised		32,000		43,000		-		-			-			-			-			43,000
Common stock issued on conversion of debenture		2,000,000		300,000		-		-			-			-			-			300,000
Common stock issued in property acquisition		2,000,000		2,100,000		-		-			-			-			-			2,100,000
Common stock issued for cash		7,000,000		70,000		-		-			-			-			-			70,000
Options issued		-		-		248,000		-			-			-			-			248,000
Warrants issued		-		-		487,250		-			-			-			-			487,250
Beneficial conversion feature		-		-		952,000		-			-			-			-			952,000
Stock subscriptions		-		-		-		170,000			-			-			-			170,000
Foreign exchange translation adjustment		-		-		-		-			-			-			(4,828	)		(4,828	)
Net loss for the year		-		-		-		-			-			(4,425,885	)		-			(4,425,885	)
Balance, February 28, 2006		12,799,902		15,573,977		3,991,596		170,000			(2,003,427	)		(18,338,373	)		1,051			(605,176	)

The accompanying notes are an integral part of these consolidated financial statements.

59

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Deficiency

(Expressed in U.S. Dollars)

Period from March 1, 2004 (Inception of Exploration Stage) to February 29, 2012

	Number of shares			Amount			Additional paid-in capital		Stock subscriptions			Deficit accumulated from prior operations			Deficit accumulated during the exploration stage			Accumulated other comprehensive income (loss)			Total stockholders’ deficiency
				$			$		$			$			$			$			$
Balance, February 28, 2006		12,799,902			15,573,977			3,991,596		170,000			(2,003,427	)		(18,338,373	)		1,051			(605,176	)
Common stock issued on conversion of debenture		5,835,000			2,917,500			-		-			-			-			-			2,917,500
Common stock issued on settlement of promissory notes		1,651,200			412,800			-		-			-			-			-			412,800
Common stock issued for cash		750,000			375,000			-		(170,000	)		-			-			-			205,000
Warrants exercised		50,000			50,000			-		-			-			-			-			50,000
Shares returned to treasury		(50,000	)		(25,000	)		-		-			-			-			-			(25,000	)
Options issued		-			-			496,000		-			-			-			-			496,000
Warrants issued		-			-			1,949,000		-			-			-			-			1,949,000
Beneficial conversion feature		-			-			2,265,500		-			-			-			-			2,265,500
Foreign exchange translation adjustment		-			-			-		-			-			-			(3,098	)		(3,098	)
Net loss for year		-			-			-		-			-			(7,393,034	)		-			(7,393,034	)
Balance, February 28, 2007		21,036,102			19,304,277			8,702,096		-			(2,003,427	)		(25,731,407	)		(2,047	)		269,492
Warrants exercised		4,344,400			3,674,377			-		-			-			-			-			3,674,377
Options issued		-			-			974,841		-			-			-			-			974,841
Fair value of warrants expensed		-			-			1,478,750		-			-			-			-			1,478,750
Stock subscriptions		-			-			-		330,000			-			-			-			330,000
Foreign exchange translation adjustment		-			-			-		-			-			-			(8,301	)		(8,301	)
Net loss for the year		-			-			-		-			-			(8,096,604	)		-			(8,096,604	)
Balance, February 29, 2008		25,380,502			22,978,654			11,155,687		330,000			(2,003,427	)		(33,828,011	)		(10,348	)		(1,377,445	)

The accompanying notes are an integral part of these consolidated financial statements.

60

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Deficiency

(Expressed in U.S. Dollars)

Period from March 1, 2004 (Inception of Exploration Stage) to February 29, 2012

	Number of shares		Amount		Additional paid-in capital		Stock subscriptions			Deficit accumulated from prior operations			Deficit accumulated during the exploration stage			Accumulated other comprehensive income (loss)			Total stockholders’ deficiency
			$		$		$			$			$			$			$
Balance, February 29, 2008		25,380,502		22,978,654		11,155,687		330,000			(2,003,427	)		(33,828,011	)		(10,348	)		(1,377,445	)
Notes converted into shares		2,936,028		1,470,522		-		-			-			-			-			1,470,522
Options issued		-		-		603,801		-			-			-			-			603,801
Warrants issued		-		-		122,260		-			-			-			-			122,260
Fair value of warrants embedded in convertible debentures		-		-		480,800		-			-			-			-			480,800
Value of beneficial conversion feature of convertible debentures		-		-		312,399		-			-			-			-			312,399
Stock subscriptions		-		-		-		121,258			-			-			-			121,258
Shares issued for subscriptions		330,000		330,000		-		(330,000	)		-			-			-			-
Accounts payable settled with shares		206,000		103,000		-		-			-			-			-			103,000
Shares issued for services		672,000		262,090		-		-			-			-			-			262,090
Shares issued to management as bonuses		1,050,000		232,750		-		-			-			-			-			232,750
Cash received for options issued		-		-		1,961		-			-			-			-			1,961
Shares issued on private placement		444,772		179,885		-		-			-			-			-			179,885
Foreign exchange translation adjustment		-		-		-		-			-			-			460,072			460,072
Net loss for the year		-		-		-		-			-			(8,036,208	)		-			(8,036,208	)
Balance, February 28, 2009		31,019,302		25,556,901		12,676,908		121,258			(2,003,427	)		(41,864,219	)	$	449,724			(5,062,855	)

The accompanying notes are an integral part of these consolidated financial statements.

61

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Deficiency

(Expressed in U.S. Dollars)

Period from March 1, 2004 (Inception of Exploration Stage) to February 29, 2012

	Number of shares		Amount		Additional paid-in capital			Stock subscriptions			Deficit accumulated from prior operations			Deficit accumulated during the exploration stage			Accumulated other comprehensive income (loss)			Total stockholders’ deficiency
			$		$			$			$			$			$			$
Balance, February 28, 2009		31,019,302		25,556,901		12,676,908			121,258			(2,003,427	)		(41,864,219	)		449,724			(5,062,855	)
Notes converted into shares		3,333,333		1,000,000		-			-			-			-			-			1,000,000
Options issued		-		-		720,202			-			-			-			-			720,202
Warrants issued		-		-		1,172,500			-			-			-			-			1,172,500
Fair value of warrants embedded in convertible debentures		-		-		165,042			-			-			-			-			165,042
Value of beneficial conversion feature of convertible debentures		-		-		98,700			-			-			-			-			98,700
Shares issued for subscriptions		404,193		121,258		-			(121,258	)		-			-			-			-
Shares issued for management bonus		1,000,000		280,000		-			-			-			-			-			280,000
Accounts payable settled with shares		2,504,142		751,242		-			-			-			-			-			751,242
Notes settled with shares		2,250,000		250,000		-			-			-			-			-			250,000
Shares issued for services		492,857		158,500		-			-			-			-			-			158,500
Shares issued for interest costs		250,000		82,500		-			-			-			-			-			82,500
Financing costs		-		-		(245,000	)		-			-			-			-			(245,000	)
Finders’ fees on private placement		-		-		(150,000	)		-			-			-			-			(150,000	)
Shares issued on private placement		12,500,000		2,500,000		-			-			-			-			-			2,500,000
Subscription proceeds on private placement		-		-		-			50,000			-			-			-			50,000
Accounts payable converted to subscriptions		-		-		-			116,000			-			-			-			116,000
Foreign exchange translation adjustment		-		-		-			-			-			-			(220,216	)		(220,216	)
Net loss for the year		-		-		-			-			-			(1,191,288	)		-			(1,191,288	)
Balance, February 28, 2010		53,753,827		30,700,401		14,438,352			166,000			(2,003,427	)		(43,055,507	)		229,508			475,327

The accompanying notes are an integral part of these consolidated financial statements.

62

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Consolidated Statements of Stockholders’ Deficiency

(Expressed in U.S. Dollars)

Period from March 1, 2004 (Inception of Exploration Stage) to February 29, 2012

	Number of shares			Amount			Additional paid-in capital			Stock subscriptions			Deficit accumulated from prior operations			Deficit accumulated during the Exploration stage			Accumulated other comprehensive income (loss)		Total stockholders’ deficiency
				$			$			$			$			$			$		$
Balance, February 28, 2010		53,753,827			30,700,401			14,438,352			166,000			(2,003,427	)		(43,055,507	)		229,508		475,327
Options issued		-			-			824,053			-			-			-			-		824,053
Shares issued for subscriptions		250,000			50,000			-			(50,000	)		-			-			-		-
Subscription proceeds		-			-			-			640,000			-			-			-		640,000
Debt converted into subscription proceeds		-			-			-			25,000			-			-			-		25,000
Foreign exchange translation adjustment		-			-			-			-			-			-			8,550		8,550
Net loss for the year		-			-			-			-			-			(3,238,416	)		-		(3,238,416	)
Balance, February 28, 2011		54,003,827			30,750,401			15,262,405			781,000			(2,003,427	)	$	(46,293,923	)		238,058		(1,265,486	)
Notes converted into shares		3,663,151			775,490			-			-			-			-			-		775,490
Options and warrants issued		-			-			907,575			-			-			-			-		907,575
Shares issued for subscriptions		6,510,000			1,302,000			-			(1,302,000	)		-			-			-		-
Accounts payable settled with shares		473,752			128,651			-			-			-			-			-		128,651
Shares issued for services		1,625,000			366,250			-			-			-			-			-		366,250
Shares issued for property acquisition		1,166,667			219,333			-			407,335			-			-			-		626,668
Subscription proceeds		4,500,000			900,000			-			670,903			-			-			-		1,570,903
Financing costs		-			-			(183,900	)		-			-			-			-		(183,900	)
Shares returned, previously issued as management bonus		(750,000	)		(210,000	)		-			-			-			-			-		(210,000	)
Foreign exchange translation adjustment		-			-			-			-			-			-			2,214		2,214
Net loss for the year		-			-			-			-			-			(3,407,887	)		-		(3,407,887	)
Balance, February 29, 2012		71,192,397			34,232,125			15,986,080			557,238			(2,003,427	)	$	(49,701,810	)		240,272		(689,522	)

The accompanying notes are an integral part of these consolidated financial statements.

63

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Expressed in U.S. Dollars)

							Period from
							March 1, 2004
							(Inception of
							Exploration
	Year Ended						Stage)
	February 29,			February 28,			to February 29,
	2012			2011			2012
Net sales	$	2,102,012		$	1,158,923		$	3,785,445
Cost of goods sold		827,022			583,760			1,685,375
Gross margin		1,274,990			575,163			2,100,070
Expenses
General and administrative		3,630,221			2,578,022			23,216,159
Mineral exploration		891,371			400,415			10,131,855
Impairment of mineral property costs		949,785			719,031			18,260,059
Operating loss		(4,196,387	)		(3,122,305	)		(49,508,003	)
Other income (expenses)
Deposit on equipment written off		-			(25,300	)		(25,300	)
Foreign exchange (loss)		(240,071	)		(114,270	)		(589,849	)
Interest		(41,124	)		(90,360	)		(5,355,306	)
Other income		160,294			65,691			419,316
Gain on disposal of assets		-			15,130			15,130
Loss on sale of assets		-			-			4,388,374
Gain (loss) on settlement of debt (note 6)		909,401			32,998			953,828
Net loss		(3,407,887	)		(3,238,416	)		(49,701,810	)
Other comprehensive income (loss)
Foreign exchange translation adjustment		2,214			8,550			240,272
Total comprehensive loss	$	(3,405,673	)	$	(3,229,866	)	$	(49,461,538	)
Total loss per share – basic and diluted	$	(0.05	)	$	(0.06	)
Weighted average number of shares of
common stock – basic and diluted		63,108,764			53,957,252

The accompanying notes are an integral part of these consolidated financial statements.

64

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(Expressed in U.S. Dollars)

	Year Ended						Period From  March 1, 2004 (Inception of Exploration Stage)
	February 29			February 28			ToFebruary 29,
	2012			2011			2012
Operating activities
Net loss	$	(3,407,887	)	$	(3,238,416	)	$	(49,701,810	)
Adjustments to reconcile net (loss) to net cash flows
Write-off of note receivable		-			-			57,500
Impairment of mineral property costs		776,668			-			14,421,668
Issuance of shares for consulting services		-			-			510,590
Issuance of shares for interest costs		-			-			82,500
Discount on convertible debenture		-			-			569,549
Deposit on equipment written off		-			25,300			25,300
Gain on disposal of assets		-			(15,130	)		(15,130	)
Gain on sale of assets		-			-			(4,389,954	)
Non-cash component of gain on settlement of debt		(909,401	)		(32,998	)		(995,643	)
Beneficial conversion feature		-			-			4,081,091
Stock-based compensation		1,273,825			824,053			12,240,436
Amortization		40,920			50,365			346,303
Net change in operating assets and liabilities:
Prepaid expense		80,460			262,193			(51,628	)
Accounts receivable		(78,302	)		(142,392	)		(113,847	)
Inventory		64,202			-			64,202
Customer deposits		-			(150,000	)		(194,809	)
Notes payable		-			-			109,337
Accounts payable and accrued liabilities		510,125			(1,169,025	)		7,247,076
Cash used in operating activities		(1,649,390	)		(3,586,050	)		(15,707,269	)
Investing activities
Sale of equipment		-			-			33,316
Purchase of property and equipment		(1,144	)		(14,226	)		(603,617	)
Cash used in investing activities		(1,144	)		(14,226	)		(570,301	)
Financing activities
Proceeds from loans payable		28,550			28,500			316,617
Proceeds from notes payable		-			-			3,162,196
Proceeds from convertible debentures		-			-			7,462,500
Proceeds from exercise of options		-			-			78,000
Proceeds from exercise of warrants		-			-			3,144,377
Repayment of loans payable		(28,539	)		(61,108	)		(296,849	)
Repayment of notes payable		-			(44,674	)		(586,620	)
Repayment of convertible debentures		-			-			(2,051,047	)
Stock subscriptions (net)		1,387,004			640,000			2,318,262
Issuance of common stock (net)		-			-			2,756,994
Cash providedby financing activities		1,387,015			562,718			16,304,430
Net change in cash		(263,519	)		(3,037,558	)		26,860
Effect of foreign currency translation on cash		(26,501	)		68,066			68,955
Cash and cash equivalents, beginning		407,912			3,377,404			22,077
Cash and cash equivalents, ending	$	117,892		$	407,912		$	117,892

Supplemental cash flow information (note 15)

The accompanying notes are an integral part of these consolidated financial statements.

65

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

1.   BASIS OF PRESENTATION

Pan American Goldfields Ltd. (formerly Mexoro Minerals, Ltd and Sunburst Acquisitions IV, Inc.) ("Panam" or the “Company”) was incorporated in the state of Delaware on March 23, 2010 and on July 2, 2010 changed its name to Pan American Goldfields Ltd. pursuant to an agreement and plan of merger between the Company and Mexoro Minerals Ltd. The Company was formed to seek out and acquire business opportunities. Between 1997 and 2003, the Company was engaged in two business acquisitions and one business opportunity, none of which generated a significant profit or created sustainable business. All were sold or discontinued. The Company had previously been pursuing various business opportunities and, effective March 1, 2004, the Company changed its operations to mineral exploration. Currently, the main focus of the Company’s operations is in Mexico and Argentina.

In February 2011, the Company entered into an agreement with Compañia Minera Alto Rio Salado S.A. (“Compañia Minera”), a private Argentine entity, for the acquisition of the 15,000 hectares Cerro Delta Project in northwest La Rioja Province, Argentina. The agreement became effective in March 2011. Under the terms of the agreement, the Company is required to pay $150,000 upon signing (paid) the agreement, $200,000 on the first anniversary (the Company has paid $65,000 of the $200,000 amount due and is negotiating the terms for the balance of the payments), $500,000 on the second anniversary, $750,000 on the third anniversary, $1.2 million on the fourth anniversary, and $2.2 million on the fifth anniversary of the signing, with a final option payment of $5 million to purchase a 100% interest in the Cerro Delta project payable on the sixth anniversary of the signing. The vendor will retain a 1% net smelter return (“NSR”) (note 6).

On February 12, 2009, the Company entered into a joint venture through a definitive agreement for development of its Cieneguita project with Minera Rio Tinto, S.A. de C.V. (“MRT”), a private company duly incorporated pursuant to the laws of Mexico. The purpose of the joint venture is to put the Cieneguita property into production. Pursuant to the agreement, MRT is to provide the necessary working capital to begin and maintain mining operations at Cieneguita, which are estimated to be $3,000,000. MRT plans to spend 100% of the money to earn 74% of the net cash flow from production (notes 5 and 6). The Company will receive 20% of the net cash flows from production.

In September 2011, the Company executed an amended and restated development agreement for the restructure of its Cieneguita joint venture related to the Cieneguita project. Under the restructured joint venture agreement the Company receives 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, the Company's interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions (note 6).

On May 25, 2004, the Company completed a “Share Exchange Agreement” with Sierra Minerals and Mining, Inc. (“Sierra Minerals”), a Nevada corporation, which caused Sierra Minerals to become a wholly-owned subsidiary of the Company. Sierra Minerals held certain rights to properties in Mexico that the Company now owns or has an option to acquire. Through Sierra Minerals, the Company entered into a joint venture agreement with MRT. In August 2005, the Company cancelled the joint venture agreement in order to directly pursue mineral exploration opportunities through a wholly-owned Mexican subsidiary, Sunburst Mining de Mexico S.A. de C.V. (“Sunburst de Mexico”). On August 25, 2005, the Company, Sunburst de Mexico and MRT entered into agreements providing Sunburst de Mexico the right to explore and exploit certain properties in Mexico. In December 2005, the Company and Sunburst de Mexico entered into a new agreement with MRT (the “New Agreement”) (note 6). On January 20, 2006, Sierra Minerals was dissolved.

66

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

2.   SIGNIFICANT ACCOUNTING POLICIES

        (a)   Principles of consolidation

The accompanying financial statements include the accounts and activities of the Company and its wholly-owned subsidiary, Sunburst de Mexico. All intercompany balances and transactions have been eliminated in consolidation.

        (b)   Financial instruments

                        (i)   Fair value

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and promissory notes approximate their fair values because of the short-term maturity of these financial instruments. The carrying value of convertible debentures approximates their fair value because these instruments earn interest at the market rate.

                         (ii)   Interest rate risk

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities. The convertible debentures are not exposed to interest rate risk because the interest rate is fixed to maturity.

                          (iii)   Credit risk

The Company's financial assets that are exposed to credit risk consist primarily of cash that is placed with major financial institutions. The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits of $250,000. The Company has not experienced any losses related to this concentration of risk. On February 29, 2012, the Company had $24,780 at BMO Bank of Montreal in Canada and $93,112 at HSBC bank in Mexico.

                           (iv)   Translation risk

The Company translates the results of non-U.S. operations into U.S. currency using rates approximating the average exchange rate for the year. The exchange rate may vary from time to time. This risk is considered moderate, as the Company’s mining project expenses are recorded in Mexican pesos and converted to U.S. currency.

         (c)   Equipment

Equipment is recorded at cost less accumulated depreciation. Depreciation is provided on the following basis:

Software	2 years straight-line
Machinery	10% declining-balance
Vehicles	25% declining-balance
Computer equipment	30% declining-balance
Office equipment	30% declining-balance

All equipment is held by Sunburst de Mexico in Mexico.

         (d)   Cash and cash equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

67

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

2.       SIGNIFICANT ACCOUNTING POLICIES (continued)

         (e)   Mineral property costs

The Company has been in the development stage since March 1, 2004, and has not yet realized any significant revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

        (f)   Basic and diluted income (loss) per share

The Company computes income (loss) per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. All previously stated share and per share balances have been restated to give retroactive effect to the 1:50 reverse stock split that occurred on February 15, 2006. Dilutive loss per share has not been presented because the effects of all common share equivalents were anti-dilutive.

         (g)   Impairment or disposal of long-lived assets

The Company accounts for the impairment or disposal of long-lived assets according to ASC 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimate fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.

         (h)   Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas of estimate include the impairment of assets and rates for amortization, accrued liabilities, future income tax balances and the inputs used in calculating stock-based compensation. Actual results could differ from those estimates and would impact future results of operations and cash flows.

68

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

2.        SIGNIFICANT ACCOUNTING POLICIES (continued)

        (i)   Consideration of other comprehensive income items

ASC 220 “Comprehensive Income” requires companies to present comprehensive income (consisting primarily of net loss plus other direct equity changes and credits) and its components as part of the basic financial statements.

        (j)   Stock-based compensation

The Company utilizes the fair value recognition provisions of ASC 718 “Compensation – Stock Compensation” (formerly, SFAS No. 123R “Share Based Payments”), which requires the Company to use the Black-Scholes pricing model to estimate the fair value of the options at the grant date.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued (see note 11 & 12).

         (k)   Income taxes

Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized. The Financial Accounting Standards Board (“FASB”) has issued ASC 740 “Income Taxes” (formerly, Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” – An Interpretation of FASB Statement No. 109 (FIN 48)). ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740. As a conclusion, the tax position of the Company has not met the more-likely-than-not threshold as of February 29, 2012.

       (l)   Foreign currency translation

Sunburst de Mexico maintains accounting records in its functional currency, Mexican pesos. Sunburst de Mexico translates foreign currency transactions into functional currency in the following manner: at the transaction date, each asset, liability, revenue and expense is translated into the functional currency by the use of the exchange rate in effect at that date; at the period end, foreign currency monetary assets and liabilities are re-evaluated into the functional currency by using the exchange rate in effect at the balance sheet date. The resulting foreign exchange gains and losses are included in operations.

In preparing consolidated financial statements, the Company translates the assets and liabilities of its subsidiary into U.S. dollars at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated into U.S. dollars at the average exchange rate for the applicable period. Any gain or loss from such translations is included in stockholders’ equity as a component of other comprehensive income.

69

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

2.       SIGNIFICANT ACCOUNTING POLICIES (continued)

         (m)   Asset retirement obligations

The Company accounts for asset retirement obligations (ARO) in accordance with ASC 410 “Asset Retirement and Environmental Obligations” (formerly, FASB Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143)). This accounting standard applies to the fair value of a liability for an ARO that is recorded when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. Obligations associated with the retirement of these assets require recognition in certain circumstances: (1) the present value of a liability and offsetting asset for an ARO, (2) the subsequent accretion of that liability and depreciation of the asset, and (3) the periodic review of the ARO liability estimates and discount rates. In 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations — An Interpretation of FASB Statement No. 143 (FIN 47), which was effective for the Company on December 31, 2005. FIN 47 clarifies that the phrase "conditional asset retirement obligation," as used in FAS 143, refers to a legal obligation to perform asset retirement activity for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the company. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional ARO should be factored into the measurement of the liability when sufficient information exists. ASC 410 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an ARO. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an ARO.

The Company is in an early stage of mineral exploration and has no known reserves as of February 29, 2012. Accordingly, the Company cannot reasonably estimate the fair value of those obligations because of their indeterminate settlement dates.

          (n)   Revenue recognition

The Company recognized revenue when persuasive evidence of an arrangement exists, shipment has occurred, the price is determinable and collection is reasonably assured. All revenues resulted from the proportionate consolidation of the joint venture with MRT, as discussed in note 5.

          (o)    Inventory

The Company accounts for inventory at the lower of cost or market determined by the average cost method. The inventory consists of the Company,s proportionate shares of the in process inventory of the integrate  project joint venture.

70

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

2.        SIGNIFICANT ACCOUNTING POLICIES (continued)

        (p)   Recent accounting pronouncements

                       (i)   On June 16, 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-05, which revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company does not expect the provisions of ASU 2011-05 to have a material effect on the financial position, results of operations or cash flows of the Company, as the Company currently presents a continuous statement of operations and comprehensive income (loss).

                        (ii)   On May 12, 2011, the FASB issued ASU 2011-04. The ASU is the result of joint efforts by the FASB and IASB to develop a single, converged fair value framework.  Thus, there are few differences between the ASU and its international counterpart, IFRS 13. This ASU is largely consistent with existing fair value measurement principles in U.S. GAAP; however it expands ASC 820’s existing disclosure requirements for fair value measurements and makes other amendments.  The ASU is effective for interim and annual periods beginning after December 15, 2011. The Company does not expect the provisions of ASU 2011-05 to have a material effect on the financial position, results of operations or cash flows of the Company.

                         (iii)   In May 2010, the FASB issued ASU 2010-19, Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this update are effective as of the announcement date of March 18, 2010. Implementation of ASU 2010-19 did not have a material effect on the financial position, results of operations or cash flows of the Company.

                          (iv)   In April 2010, the FASB issued ASU 2010-17, Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. Implementation of ASU 2010-17 did not have a material effect on the financial position, results of operations or cash flows of the Company.

                         (v)   In January 2010, the FASB issued ASU 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. Implementation of ASU 2010-02 did not have a material effect on the financial position, results of operations or cash flows of the Company.

71

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

2.        SIGNIFICANT ACCOUNTING POLICIES (continued)

 (p)           Recent accounting pronouncements (continued)

                           (vi)   In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. Implementation of ASU 2010-01 did not have a material effect on the financial position, results of operations or cash flows of the Company.

                           (vii)   In September 2009, the FASB issued Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (ASU 2009-13). It updates the existing multiple-element revenue arrangements guidance currently included under ASC 605-25, which originated primarily from the guidance in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF 00-21). The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. Implementation ofUpdate No. 2009-13 did not have a material effect on the financial position, results of operations or cash flows of the Company.

                            (viii)   In September 2009, the FASB issued ASC 105, formerly FASB Statement No. 168, the FASB Accounting Standards Codification (“Codification”) and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”), a replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 establishes the Codification as the single source of authoritative GAAP in the United States, other than rules and interpretive releases issued by the SEC. The Codification is a reorganization of current GAAP into a topical format that eliminates the current GAAP hierarchy and establishes instead two levels of guidance — authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature that is not included in the Codification will become non-authoritative. The FASB’s primary goal in developing the Codification is to simplify user access to all authoritative GAAP by providing all the authoritative literature related to a particular accounting topic in one place. The Codification was effective for interim and annual periods ending after September 15, 2009. As the Codification was not intended to change or alter existing GAAP, it did not have a material impact on the Company’s financial statements.

                          (ix)   Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.

72

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

2.SIGNIFICANT ACCOUNTING POLICIES (continued)

 (p)           Recent accounting pronouncements (continued)

                         (x)   Effective June 30, 2009, the Company adopted three accounting standard updates which were intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. They also provide additional guidelines for estimating fair value in accordance with fair value accounting. The first update, as codified in ASC 820-10-65, provides additional guidelines for estimating fair value in accordance with fair value accounting. The second accounting update, as codified in ASC 320-10-65, changes accounting requirements for other-than-temporary-impairment (OTTI) for debt securities by replacing the current requirement that a holder have the positive intent and ability to hold an impaired security to recovery in order to conclude an impairment was temporary with a requirement that an entity conclude it does not intend to sell an impaired security and it will not be required to sell the security before the recovery of its amortized cost basis. The third accounting update, as codified in ASC 825-10-65, increases the frequency of fair value disclosures. These updates were effective for fiscal years and interim periods ended after June 15, 2009. The adoption of these accounting updates did not have a material impact on the Company’s financial statements.

                          (xi)   Effective June 30, 2009, the Company adopted a new accounting standard for subsequent events, as codified in ASC 855-10. The update modifies the names of the two types of subsequent events either as recognized subsequent events (previously referred to in practice as Type I subsequent events) or non-recognized subsequent events (previously referred to in practice as Type II subsequent events). In addition, the standard modifies the definition of subsequent events to refer to events or transactions that occur after the balance sheet date, but before the financial statements are issued (for public entities) or available to be issued (for nonpublic entities). The update did not result in significant changes in the practice of subsequent event disclosures, and therefore the adoption did not have a material impact on the Company’s financial statements.

73

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

3.   GOING CONCERN

The accompanying financial statements have been prepared on a goingconcern basis. The Company has a history of operating losses and will need to raise additional capital to fund its planned operations. As at February 29, 2012, the Company had a cumulative loss, during its exploration period,of $49,701,810 (February 28, 2011 - $46,293,923). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company intends to reduce its cumulative loss through the attainment of profitable operations from its investment in Mexican and Argentine mining ventures (note 6). In addition, the Company has conducted private placements of common stock andconvertible debt (note 10), which have generated a portion of the initial cash requirements for its planned mining ventures (note 6).

InFebruary2012, the Company completed a private placement of 4,500,000 units at $0.20 per unit for total gross proceeds of $900,000. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock, each exercisable at $0.30, expiring in two years from the closing date.

In June 2011, the Company completed a private placement of 1,500,000 units at $0.20 per unit, for total proceeds of $300,000. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock, each exercisable at $0.30, expiring in two years from the closing date.

In March 2011, the Company completed a private placement of 6,560,000 units at $0.20 per unit, for total proceeds of $1,312,000. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock. Each warrant is exercisable for one share of common stock at an exercise price of $0.30 per share for a period of two years from the closing date.

In September 2009, the Company entered into private placement subscription agreements, as thereafter amended, with certain U.S. accredited investors and certain non-U.S. investors for 12,500,000 unregistered shares of common stock with 100% warrant coverage at a purchase price of $0.20 per unit. The warrants have an exercise price of $0.30 per share with a two-year term and will not be exercisable until 12 months after their date of issuance. The Company received aggregate gross proceeds, prior to any expenses, from the private placement of $2,500,000.

In July 2009, the Company signed a definitive agreement to sell its Guazapares project located in southwest Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount Gold and Silver Corp. (“Paramount”) for a total consideration of up to $5,300,000. The purchase price is to be paid in two stages. The first payment of $3,700,000 was released from escrow in February 2010, as the transfer of the 12 claims to Paramount was completed. An additional payment of $1,600,000 is due if, within 36 months following execution of the letter of agreement (July 10, 2009), either (i) Paramount Gold de Mexico SA de C.V. is sold by Paramount, either through a stock sale or a sale of substantially all of its assets, or (ii) Paramount’s San Miguel project is put into commercial production.

74

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

4.   EQUIPMENT

	February 29, 2012			February 28, 2011
	Cost	Accumulated  Depreciation	Net Book	Net Book
			Value	Value
	$	$	$	$
Software	24,124	18,180	5,944	6,734
Machinery	281,551	138,594	142,957	180,423
Vehicles	90,643	81,225	9,418	19,773
Computers	28,156	28,058	98	930
Office equipment	16,435	8,648	7,787	10,015
	440,909	274,705	166,204	217,875

5.   JOINT VENTURE WITH MRT

On February 12, 2009, the Company entered into a joint venture through a definitive agreementfor development of its Cieneguita project with MRT. The purpose of the joint venture is to put Cieneguita property into production. As per the agreement, MRT is to provide the necessary working capital to begin and maintain mining operations estimated to be $3,000,000. MRT will spend 100% of the funds in exchange for a 75% interest in the net cash flow from production. The agreement was amended in December 2009 for MRT to earn a 74% interest in the net cash flow from production (note 6).

In September 2011, the Company executed an amended and restated development agreement for the restructure of its Cieneguita joint venturerelated to the Cieneguita project. Under the restructured joint venture agreement the Company receives 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, the Company's interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions (note 6).

The agreement limits the mining of the mineralized material that is available from the surface to a depth of 15 meters or approximately 10% of the mineralized material found as of the date of the definitive agreement. The Company incurs no obligations to the joint venture’s creditors as the operations and working capital requirements are controlled by MRT and as such, the Company has concluded that it is not the primary beneficiary of the joint venture. Accordingly, the Company’s share of income and expenses are reflected in these financial statements under the proportionate consolidation method.

The Company’s proportionate share of revenues was $2,102,012 and proportionate share of the net profit was $793,865 for the year ended February 29, 2012. The Company’s proportionate share of accounts receivable of the joint venture was $248,251 at February 29, 2012. The joint venture did not have any other assets or liabilities at February 29, 2012.

75

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

6.   MINERAL PROPERTIES

The Company incurred exploration expenses as follows in the year ended February 29,2012:

	Cieneguita	Cerro Delta	Encino Gordo	New Projects	Total
	$	$	$	$	$
Drilling and sampling	-	-	-	2,425	2,425
Geological, geochemical, geophysics	22,161	30,751	-	-	52,912
Field work preparations	-	386,072	-	46,116	432,188
Salaries	-	-	-	-	-
Land use permits	15,855	-	5,779	-	21,634
Travel	14,810	-	2,200	-	17,010
Consulting	138,518	30,971	825	-	170,314
Equipment	141,383	1,312	333	-	143,028
General	12,599	39,187	74	-	51,860
	345,326	488,293	9,211	48,541	891,371

The Company incurred exploration expenses as follows in the year ended February 28, 2011:

	Sahuayacan	Cieneguita	Encino Gordo	New Projects	Total
	$	$	$	$	$
Drilling and sampling	67,063	-	-	-	67,063
Geological, geochemical, geophysics	148,191	-	5,413	1,277	154,881
Land use permits	10,360	14,775	3,712	-	28,847
Automotive	-	54	-	-	54
Travel	2,429	9,880	6,131	-	18,440
Consulting	7,501	62,107	13,159	-	82,767
Equipment	1,006	4,327	2,152	-	7,485
General	8,162	22,898	9,818	-	40,878
	244,712	114,041	40,385	1,277	400,415

76

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

6.        MINERAL PROPERTIES (continued)

Since May 2004, the Company has held interests in gold exploration properties in Mexico.

In August 2005, the Company formed its wholly owned subsidiary, Sunburst de Mexico, which allowed the Company to take title to the properties in the name of Sunburst de Mexico. On August 25, 2005, the Company entered into property agreements with MRT, which provided Sunburst de Mexico options to purchase the mineral concessions of the Cieneguita and Guazapares properties and the right of refusal on three Encino Gordo properties. The Company also entered into an exploration and sale agreement, in October 2006, with Minera Emilio S.A. de C.V. for the mineral concessions of the Sahuayacanproperty.

In August 2005, the parties also entered into an operator’s agreement, that gave MRT the sole and exclusive right and authority to manage the Cieneguita property, and a share option agreement which granted MRT the exclusive option to acquire up to 100% of all outstanding shares of Sunburst de Mexico if the Company did not comply with the terms of the property agreements. The operator’s agreement and share option agreement weresubsequently cancelled when the Company and Sunburst de Mexico entered into a new contract with MRT as described below under “Encino Gordo”.

In February 2009, the Company entered into a development agreement with MRT, which was amended in December 2009. Pursuant to the terms of the amended development agreement, MRT agreed to invest up to $8,000,000 to put the first phase of the Cieneguita project into production and complete a feasibility study. The first phase of production is limited to the mining of the mineralized material that is available from the surface to a depth of 15 meters (“First Phase Production”). In exchange, the Company assigned MRT an interest to 74% of the net cash flows from First Phase Production and MRT would earn a 54% ownership interest by spending up to $4,000,000 to take the Cieneguita project through the feasibility stage.

In September 2011, the Company executed an amended and restated development agreement for the restructure of its Cieneguita joint venturerelated to the Cieneguita project. Under the restructured joint venture agreement the Company receives 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, the Company's interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions (note 6).

77

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

6.        MINERAL PROPERTIES (continued)

The material provisions of the property agreements are as follows:

Cieneguita

MRT assigned to Sunburst de Mexico, with the permission of the Cieneguita property’s owner, Corporativo Minero, S.A. de C.V. (“Corporativo Minero”), all of MRT’s rights and obligations acquired under a previous agreement (the Cieneguita option agreement), including the exclusive option to acquire the Cieneguita property for a price of $2,000,000. Prior to assigning the Cieneguita property to the Company, MRT had paid $350,000 to Corporativo Minero. As the Cieneguita property was not in production by May 6, 2006, Sunburst de Mexico was required to pay $120,000 to Corporativo Minero to extend the contract. Corporativo Minero agreed to reduce the obligation to $60,000, of which $10,000 was paid in April 2006 and the balance paid on May 6, 2006. The Company made this payment to Corporativo Minero and the contract was extended.

The Company had the obligation to pay a further $120,000 per year for the next 13 years and the balance of the payments in the 14th year, until the total amount of $2,000,000 was paid. The Company renegotiated the payment due May 6, 2007, to $60,000 payable on November 6, 2007, which was paid, and the balance of $60,000 was paid on December 20, 2007. The Company paid $60,000 on May 12, 2008, of the $120,000 due on May 6, 2008, and the balance was paid in June 2008. The Company paid $30,000 each for a total of $120,000 on May 22, 2009, June 26, 2009, September 4, 2009 and November 20, 2009. In 2010, the Cieneguita project was put into production under the development agreement as described above and the payment terms were changed based on the following formula:

The Company must pay the Cieneguita owners $20 per ounce of gold produced from the Cieneguita property to the total of $2,000,000 due. In the event that the price of gold is above $400 per ounce, the property payments payable to the Cieneguita owners from production will be increased by $0.10 for each dollar increment over $400 per ounce. The total payment of $2,000,000 does not change with fluctuations in the price of gold. Non-payment of any portion of the $2,000,000 total payment will constitute a default. In such case, the Cieneguita owners will retain ownership of the concessions, but the Company will not incur any additional default penalty.

In September 2011, the Company, MRT and Corporativo Minero entered into a new agreement, where Corporativo Minero is entitled to a monthly payment of $30,000, to be paid from the net cash flows from production at Cieneguita until the completion of the first 15 meters of production or December 31, 2012, whichever occurs first.

Based on production at Cieneguita, the joint venture paid $227,241 during the fiscal year ended February 29, 2012 (February 28, 2011 - $120,000) to the Cieneguita owners. As of February 29, 2012, Corporativo Minero has been paid a total of $1,177,241 for the Cieneguita property. The Company is not in default on its payments for the Cieneguita property.

78

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

6.        MINERAL PROPERTIES (continued)

On February 12, 2009,the Company entered into a definitive agreement for development of the Cieneguita project with MRT. The definitive agreement covered project financing of up to $9,000,000. The major points of the agreement were as follows:

(i)   MRT and/or its investors will subscribe for $1,000,000 of a secured convertible debenture at 8% interest (payable in stock or cash). The debenture was convertible into units at $0.60 per unit. Each unit comprised two common shares and one warrant. Each warrant is exercisable at $0.50 per share for a period of three years. The placement will be used for continued exploration of the Company’s properties and general working capital.

(ii)   MRT is to provide the necessary working capital to begin and maintain mining operations estimated to be $3,000,000 used for the purpose of putting the Cieneguita property into production. MRT will spend 100% of the money to earn 75% of the net cash flow from production. The agreement will limit the mining to the mineralized material that is available from surface to a depth of 15 meters or approximately 10% of the mineralized material found to date.

(iii)   MRT will spend up to $5,000,000 to take the Cieneguita property through the feasibility stage. In doing so, MRT will earn a 60% interest in the Company’s rights to the property. After the expenditure of the $5,000,000 all costs will be shared on a ratio of 60% to MRT and 40% to the Company. If the Company elects not to pay its portion of costs after the $5,000,000 has been spent, the Company’s position shall revert to a 25% carried interest on the property.

To generate funding for the Company’s continued operations, the Company issued $1,500,000 of convertible debentures in March 2009, of which an aggregate of $880,000 was issued to Mario Ayub, a former director of the Company, and his affiliated entity, MRT. Pursuant to the terms of the convertible debentures, the holders irrevocably converted the debentures into a 10% ownership interest in the Cieneguita project and a 10% interest in the net cash flow from First Phase Production.

In December 2009, Mario Ayub and MRT agreed to resell an aggregate 4% ownership interest in the Cieneguita project back to the Company, along with 4% of the net cash flow from First Phase Production, in return for $550,000. In a private transaction not involving the Company, the other holders contributed their remaining 6% ownership interest in the Cieneguita project to a newly formed entity, Marje Minerals SA (“Marje Minerals”).

In December 2009, the Company amended the development agreement and its agreements with the debenture holders. According to the amended development agreement, the ownership interest in the Cieneguita project and the net cash flows from the First Phase Production were held by the Company, MRT and Marje Minerals as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase Production	Net Cash Flow Interest Following First Phase Production
MRT	54% (1)	74%	54% (1)
Marje Minerals	6%	6%	6%
Panam	40%	20%	40%

 (1) Was to be earned by MRT by spending $4,000,000 to take the Cieneguita project through the feasibility stage.

Any additional costs for the First Phase Production and the feasibility study for the Cieneguita project, after MRT invested $8,000,000, would have been shared by the Company, MRT and Marje Minerals on a pro-rata basis based on their respective ownership percentages in the Cieneguita project.

79

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

6.        MINERAL PROPERTIES (continued)

The major terms of the amended development agreement with MRT and Marje Minerals are as follows:

(i)   MRT purchased $1,000,000 of secured convertible debentures at 8% interest (payable in stock or cash). The proceeds from this investment were used for continued exploration and development of the Cieneguita project and general working capital. On November 5, 2009, MRT exercised its conversion rights on the debenture and MRT was issued 3,333,333 common shares and a warrant to purchase 1,666,667 shares of common stock at an exercise price of $0.50 per share.

(ii)   MRT agreed to provide the necessary working capital to begin and maintain mining operations, estimated to be $3,000,000, to put the first phase of the Cieneguita project into production. In exchange for these funds, the Company assigned MRT an interest to 74% of the net cash flow from First Phase Production. The agreement limits the mining during First Phase Production to the mineralized material that is available from the surface to a depth of 15 meters.

(iii)   MRT committed to spend up to $4,000,000 to take the Cieneguita project through the feasibility stage. In doing so, the Company assigned MRT a 54% interest in its rights to the Cieneguita project. After the expenditure of the $4,000,000, all costs will be shared on a pro rata ownership basis (i.e. 54% to MRT, 40% to the Company and 6% to Marje Minerals). If any party cannot pay its portion of the costs after the $4,000,000 has been spent, then their ownership position in the Cieneguita project will be reduced by 1% for every $100,000 invested by the other owners. The Company’s ownership interest in the Cieneguita project, however, cannot be reduced below 25%. In addition, the Company has the right to cover Marje Minerals’ pro rata portion of costs if they cannot pay their portion of the costs. In return, the Company will receive 1% of Marje Minerals’ ownership position in the Cieneguita project for every $100,000 the Company invests on their behalf.

(iv)   The MRT agreement was contingent on the Company repaying its debenture to Paramount. In March 2009, the Company repaid $1,000,000, or approximately two-thirds of the debt, and Paramount released a security interest it had on the Cieneguita project. In October 2009, the Company repaid the remaining amount of the debt and Paramount released its security interests on the Sahuayacan, Guazapares and Encino Gordo properties.

In September 2011, the Company executed a new amended and restated development agreement with MRT and Marje Minerals, for the restructure of its Cieneguita joint venture. Under the restructured joint venture agreement the Company receives 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, the Company's interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions. The Company also bought back 6% interest in Cieneguita from Marje Minerals in exchange for 3,333,333 common shares of the Company.

80

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

6.       MINERAL PROPERTIES (continued)

Under the agreement, the parties agreed to restructure their respective ownership interests in the Cieneguita project as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase Production	Net Cash Flow Interest Following First Phase Production
MRT	20%	74%	20%
Marje Minerals	0%	6%	0%
Panam	80%	20%	80%

The Company and MRT shall be responsible for the cost of a feasibility study on a pro rata basis based on their respective amended ownership percentages of the Cieneguita project.

Marje Minerals will also assume approximately $490,000 in debt of the Company in consideration for receiving half of all monthly net cash flows that the Company is entitled from operations on the first 15 meters, if any, until the sooner of December 31, 2012 or until Marje Minerals receives $490,000 from these cash flows (note 7).

Encino Gordo

On December 8, 2005, the Company and Sunburst de Mexico entered into a “New Agreement” with MRT to exercise their option under the sale and purchase of the mining concessions agreement, dated August 18, 2005, to obtain two mining concessions in the Encino Gordo region. The New Agreement also provided the Company the option to obtain three additional concessions in the Encino Gordo region.

The following are additional material terms of the New Agreement:

        (a)   The share option agreement with MRT was cancelled;

        (b)   The Company granted MRT the option to buy all of the outstanding shares of Sunburst de Mexico for $100 if the Company failed to transfer $1,500,000 to Sunburst de Mexico by April 30, 2006. On April 6, 2006, MRT agreed to waive its option to purchase the shares of Sunburst de Mexico and also waived the Company’s obligation to transfer $1,500,000 to Sunburst de Mexico. The property agreements were modified to change the NSR to a maximum of 2.5% for all properties covered by the agreements. The property agreements contained NSRs ranging from 0.5% to 7%;

         (c)   The Company agreed to issue 2,000,000 shares of the Company’s common stock to MRT within four months of the date of signing of the New Agreement. These shares were issued to MRT and its assignee at the market value of $1.05 per share on February 23, 2006, and $2,100,000 was charged to operations for the year ended February 28, 2006. This issuance fulfilled the Company’s payment obligations under the previous property agreements;

         (d)   The Company agreed to issue 1,000,000 additional shares of the Company’s common stock to MRT if and when the Cieneguita property is put into production and reaches 85% of production capacity over a 90-day period, as defined in the New Agreement; and

        (e)   The operator’s agreement with MRT was cancelled.

81

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

6.        MINERAL PROPERTIES (continued)

Sunburst de Mexico purchased two of the Encino Gordo concessions from MRT for a price of 1,000 pesos (approximately US$100), and MRT assigned to Sunburst de Mexico a first right of refusal to acquire three additional Encino Gordo concessions. The total payments to acquire 100% of these three additional concessions were as follows: $10,000 on June 30, 2006 (paid); $25,000 on December 31, 2006 (paid), $50,000 on December 31, 2007 ($20,000 of this payment was made on January 3, 2008 and the balance was paid on February 29, 2008) and $75,000 on December 31, 2008 (the payment was not made and the Company was in default). In August 2009, the Company decided to surrender the Encino Gordo 2 mining concession eliminating any future concession payments on these properties.

Sahuayacan

In May 2010, the Company management decided to drop the Sahuayacan properties due to lack of economic thicknesses and grades of gold mineralization encountered in the drilling program eliminating any future concession payments on these properties.

Cerro Delta

In February 2011, the Company management entered into an agreement with Compania Minera Alto Rio Salado S.A., a private Argentine entity, for the acquisition of the 15,000 hectare Cerro Delta project in northwest La Rioja Province, Argentina. Under the terms of the agreement, the Company must pay $150,000 upon signing (paid), and $200,000 on the first anniversary (the Company has paid $65,000 of the $200,000 amount due and is negotiating the terms for the balance of the payments), $500,000 on the second anniversary, $750,000 on the third anniversary, $1.2 million on the fourth anniversary, and $2.2 million on the fifth anniversary of the signing, with a final option payment of $5 million to purchase a 100% interest in the project payable on the sixth anniversary of the signing. The vendor will retain a 1% NSR (note 17).

82

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

7.   PROMISSORY NOTES

As at February 29, 2012, the Company had $nil (February 28, 2011 - $884,022) of promissory notes outstanding, comprising the following:

        (a)   During the year ended February 29, 2008, the Company converted accounts payable of $465,994 (Swiss Franc (“CHF”) 565,000) into promissory notes. The Company had an implied obligation to pay the accounts payable in CHF as the funds to pay the expense came from Swiss investors in CHF. Accordingly, the promissory notes were issued in CHF. The notes consisted of one warrant for each CHF 5.00 of notes issued, exercisable at $1.00 each. The principal and interest on the notes became due and payable on April 30, 2008. The interest rate payable during the default period was 12%. In September 2011, the Company executed debt conversion and release agreements to convert promissory notes and related interest charges in the amount of $1,091,645 into Company’s common shares for a total of 3,340,880 shares (note 10).

         (b)   During the year ended February 29, 2012, the Company entered into an agreement to convert $17,778 of the promissory notes including accrued interest by issuing 55,000 shares of the Company’s common stock (note 10).

        (c)   $10,358 of promissory notes were to be repaid over a 12 month period as part of a debt settlement agreement. These notes bore no interest. In September 2011, the Company assigned these notes to Marje Minerals as part of the amended and restated development agreement (note 6).

         (d)   $28,113 of promissory notes bore no interest and had no repayment terms. In September 2011, the Company assigned these notes to Marje Minerals as part of the amended and restated development agreement (note 6).

8.   LOANS PAYABLE

As at February 29, 2012, there were loans payable in the amount of $12,887(February 28, 2011 - $12,876), which are all current. The loans are repayable in monthly instalments of $3,272 (February 28, 2011 – $3,272), including interest of 7.50% per annum.

9.   PREFERRED STOCK

The Company is authorized to issue 20,000,000 shares of preferred stock. The Company’s board of directors is authorized to divide the preferred stock into series, and with respect to each series, to determine the preferences and rights and qualifications, limitations or restrictions thereof, including the dividend rights, conversion rights, voting rights, redemption rights and terms, liquidation preferences, sinking fund provisions, and the number of shares constituting the series and the designations of such series. The board of directors could, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting rights of the holders of common stock, which issuance could have certain anti-takeover effects.

83

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

10.   COMMON STOCK

In February 2012, the Company issued 500,000 shares of common stock and warrants to purchase 500,000 shares of common stock at $0.30, expiring on February 29, 2014, to a consultant.

Between September 2011 and February 2012, the Company converted subscription proceeds of $900,000 and issued 4,500,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In December 2011, the Company acquired 6% ownership interest in the Cieneguita project in exchange for 3,333,333 common shares, of which, the Company had issued 1,166,667 common shares as of February 29, 2012.

In October 2011, the Company and note holders agreed to cancel $979,476 of outstanding debt in exchange for 3,340,880 shares of the Company’s common shares. The Company recognized a gain on settlement of debt in the amount of $277,891. In November 2011, the Company also issued 267,271 shares to a consultant as consulting fee relating to the settlement of debt.

In August 2011, the Company negotiated return of 750,000 shares to the treasury from a former president. The shares were valued at the time of issuanceat $0.28 per share.

In July 2011, the Company issued 500,000 shares of common stock and warrants to purchase 500,000 shares of common stock at $0.30, expiring on July 21, 2013, to a consultant.

In June 2011, the Company converted subscription proceeds of $300,000 and issued 1,500,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In June 2011, the Company issued 125,000 shares to a consultant pursuant to a consulting agreement.

In June 2011, the Company issued the 423,752 shares pursuant to the April 2011 debt settlement agreement. The shares were valued at the time of the debt settlement agreement of $0.28 per share.

In April 2011, the Company converted subscription proceeds of $347,000 and issued 1,735,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In March 2011, the Company converted subscription proceeds of $665,000 and issued 3,325,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In March 2011, the Company and a note holder agreed to cancel $17,778 in outstanding debt in exchange for 55,000 shares of the Company’s common stock.

In March 2011, the Company issued 500,000 shares of common stock and warrants to purchase 500,000 shares of common stock at $0.30, expiring on December 31, 2002, to a consultant.

In May 2010, the Company converted subscription proceeds of $50,000 and issued 250,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expire in two years.

In December 2009, the Company converted subscription proceeds of $2,275,000 and issued 11,375,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In November 2009, the Company received subscription proceeds of $65,000 and issued 325,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

84

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

10.           COMMON STOCK (Continued)

In November 2009, MRT converted the $1,000,000 debentures into units of $0.60 each. Each unit comprises 2 common shares and 1 warrant. Each warrant is exercisable at $0.50 per share for a period of 3 years. The Company issued 3,333,333 shares and 1,666,667 warrants to MRT.

In October 2009, the Company received subscription proceeds of $20,000 and issued 100,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In September 2009, the Company received subscription proceeds of $40,000 and issued 200,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In July 2009, the Company received subscription proceeds of $100,000 and issued 500,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In June 2009, the Company converted $622,500 of debt into subscription proceeds and issued 2,075,000 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.60 of debt. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.

In June 2009, the Company issued 1,000,000 shares of common stock to an officer of the Company as bonus. The Company assigned a value of $0.28 per share for a total of $280,000 to these shares.

In May 2009, the Company converted $128,742 of debt into subscription proceeds and issued 429,141 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.60 of debt. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.

In May 2009, the Company converted $121,258 of stock subscriptions and issued 404,193 common shares. The subscribers have agreed to purchase one unit for each $0.60 of stock subscriptions. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.

In May 2009, the Company issued 42,837 shares for $13,500 of investors’ relations services as per the agreement.

In April 2009, the Company issued 2,250,000 shares under an escrow agreement as security against convertible debentures issued in the amount of $250,000. In October 2009, the Company defaulted on the terms of the agreement of the convertible debentures and released the shares from escrow in settlement of the convertible debentures.

In March and April 2009, the Company issued 700,000 shares pursuant to amended convertible debenture agreement and financing arrangements.

85

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

11.   STOCK COMPENSATION PROGRAM

On March 18, 2009, the board of directors approved the granting of stock options according to the 2009 Nonqualified Stock Option Plan (“2009 Option Plan”) whereby the board is authorized to grant to employees and other related persons stock options to purchase an aggregate of up to 6,000,000 shares of the Company's common stock. Subject to the adoption of the 2009 Option Plan, the options were granted and vest, pursuant to the terms of the 2009 Option Plan, in six equal instalments, with the first instalment vesting at the date of grant, and the balance vesting over 2.5 years, every six months.

In the year ended February 29, 2012, the Company awarded 1,600,000 options to purchase common shares (February 28, 2011 – 1,000,000) and recorded stock-based compensation expense for the vesting options of $323,175 (February 28, 2011 - $546,054). The following weighted average assumptions were used for the Black-Scholes option-pricing model to value stock options granted in 2012 and 2011:

	2012	2011
Expected volatility	110.11%	110.36%
Weighted-average volatility	110.11%	110.36%
Expected dividend rate	-	-
Expected life of options in years	10	3 -10
Risk-free rate	3.38%	2.95%

There were no capitalized stock-based compensation costs at February 29, 2012 or February 28, 2011.

The summary of option activity under the 2009 Option Plan as of February 29, 2012, and changes during the period then ended, is presented below:

	Weighted	Number of	Weighted-	Aggregate
	Average	Shares	Average	Intrinsic
	Exercise		Remaining	Value
	Price		Contractual
Options	$		Term
Balance at March 1, 2011	0.46	6,735,000
Options granted	0.29	1,600,000
Options exercised
Options cancelled/forfeited	0.61	(2,120,000)
Balance at February 29, 2012	0.34	6,215,000	7.64	$17,280
Exercisable at February 29, 2012	0.37	4,648,335	7.16	$17,280

The weighted-average grant-date fair value of options granted during the year endedFebruary 29, 2012 and February 28, 2011was $0.33 and $0.19, respectively.

86

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

11.     STOCK COMPENSATION PROGRAM (continued)

A summary of the status of the Company’s nonvested options as of February 29, 2012, and changes during the year ended February 29, 2012, is presented below:

				Weighted-average
				Grant-Date
Non-vested options	Shares			Fair Value
				$
Non-vested at February 28, 2011		1,376,666			0.26
Granted		1,600,000			0.27
Vested		(1,315,000	)		0.26
Cancelled/forfeited		(95,001	)		0.16
Non-vested at February 29, 2012		1,566,665			0.26

As of February 29, 2012, there was an estimated $342,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2009 nonqualified stock option plan. That cost is expected to be recognized over a weighted-average period of approximately 1.57 years.

On April 29, 2011, the Company repriced the exercise price of 1,125,000 vested stock options by reducing the exercise prices of $0.36 and $0.44 to $0.28. As a result, the Company recorded incremental stock-based compensation of $6,000 during the year ended February 29, 2012.

87

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

12.   WARRANTS

As at February 29, 2012, the Company had a total of 31,011,733 warrants (February 28, 2011 – 25,826,733) outstanding to purchase common stock. Each warrant entitles the holder to purchase one share of the Company’s common stock. The Company has reserved 31,011,733 shares of common stock in the event that these warrants are exercised.

During the year ended February 29, 2012, the Company received $nil from warrants exercised.

The following table summarizes the continuity of the Company’s share purchase warrants:

	Number of Warrants			Weighted Average Exercise Price
Balance, February 28, 2010		25,380,900		$	0.43
Issued		3,000,000			0.25
Cancelled/expired		(2,554,167	)		0.44
Balance, February 28, 2011		25,826,733		$	0.41
Issued		19,060,000			0.30
Cancelled/expired		(12,875,000	)		0.30
February 29, 2012		32,011,733		$	0.35

As at February 29, 2012, the following share purchase warrants were outstanding:

Number of Warrants	Exercise Price	Expiry Date
	$
3,000,000	0.25	July 26, 2012
300,000	0.25	August 22, 2013
200,000	0.25	September 6, 2013
166,666	0.30	May 8, 2012
500,000	0.30	December 31, 2012
3,325,000	0.30	March 17, 2013
1,735,000	0.30	April 13, 2013
500,000	0.30	July 21, 2013
1,500,000	0.30	June 2, 2013
500,000	0.30	July 21, 2013
4,400,000	0.30	December 30, 2013
5,000,000	0.30	December 29, 2016
500,000	0.30	February 20, 2014
100,000	0.30	February 28, 2014
500,000	0.30	February 15, 2022
200,000	0.40	March 24, 2012
525,000	0.50	August 15, 2012
1,666,667	0.50	November 5, 2012
5,000,000	0.50	December 24, 2012
200,000	0.65	June 30, 2012
1,793,400	0.75	April 2012 to August, 2013
200,000	1.30	June 30, 2012
200,000	2.00	June 30, 2012
32,011,733

88

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

13.   RELATED PARTY TRANSACTIONS

For the year ended February 29, 2012, the Company paid or accrued management fees of $405,500 (February 28, 2011 - $441,639) to certain officers and directors. The Company also paid or accrued $1,115,624 (February 28, 2011 - $118,399) to certain officers and directors for travel, office and other related expenses.

The Company also paid consulting fees of $58,535 (February 28, 2011 - $93,333) to a director of the Company.

As at February 29, 2012, accounts payable of $216,631 (February 28, 2011 - $207,399) was owing to directors and officers of the Company and $nil (February 28, 2011 - $43,226) was owing to companies controlled by the directors. In addition, promissory notes of $nil (February 28, 2011 - $10,668) were owed to a company controlled by a director (note 7).

All related party transactions are in the normal course of business at the exchange amount agreed to by each party.

14.   INCOME TAXES

Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred income tax assets are approximately as follows:

	February 29	February 28
	2012	2011
	$	$
Deferred income tax assets
Equipment	34,000	34,000
Net operating loss and credit carry forwards	8,866,000	8,329,000
Gross deferred tax assets	8,900,000	8,363,000
Valuation allowance	(8,900,000)	(8,363,000)
		-

As at February 29, 2012, the Company's net operating loss carry-forwards for income tax purposes were approximately $22,529,000 (February 28, 2011 - $21,172,000). If not utilized, they will start to expire in 2017.

89

PAN AMERICAN GOLDFIELDS LTD.

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. Dollars)

Years Ended February 29, 2012 and February 28, 2011

15.   SUPPLEMENTAL CASH FLOW INFORMATION

	Year ended  February 29,  2012	Year ended February 28, 2011	Period From Inception of Exploration Stage (March 1, 2004) to February 29, 2012
	$	$	$
Interest paid	-	30,000	310,053
Common stock issued on conversion of debt	128,651	-	4,321,651
Common stock issued on settlement of notes payable	775,490	-	3,908,812
Common stock issued for interest costs	-	-	82,500
Common stock issued for financing costs	-	-	145,000
Common stock issued for mineral property costs	219,333	-	799,333
Common stock issued for bonuses	-	-	512,750
Shares issued for services	366,250	-	876,840

16.   SUBSEQUENT EVENTS

In April 2012, the Company issued 235,294 common shares pursuant to a debt settlement agreement to settle $40,000 of debt.

In April 2012, the Company issued 250,000 common shares to a consultant pursuant to a consulting agreement.

In May 2012, the Company converted subscription proceeds of $45,000 and issued 300,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In May 2012, the Company transferred its interest in concessions at the Encino Gordo project located in the Barrancaregion of Chihuahua State in Mexico, which included two concessions owned by the Company and two additional concessions the Company had the option to acquire, to MRT. In connection with the transfer, MRT paid $100,000 cash, waived $200,000 in payments the Company owed to MRT in connection with the Encino Gordo Project and agreed to assume all of the Company’s obligations related to the transferred concessions.

In May 2012, the Company appointed Andrey Koniuhov to its board of directors. Mr. Koniuhov has over 25 years of exploration and mining experience. He currently serves as Director of Geology and Advanced Projects for Polyus Gold. The Company issued Mr. Koniuhov 1,000,000 warrants, each warrant exercisable at $0.25 with a 10 year term. The Warrants are subject to a vesting schedule with 166,667 of the Warrants issued vesting immediately and the balance vesting every six months over three years.

90

EX-31.1

EX-31.2

EXHIBIT 31.2

Certification

I, Salil Dhaumya, certify that:

1. I have reviewed this annual report on Form 10-K of Pan American Goldfields Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:  May 31, 2012

/s/ Salil Dhaumya 

Name:   Salil Dhaumya, Principal Financial Officer

EX-32.1

CERTIFICATION OF PEO PURSUANT TO 18 U.S.C. 1350

Exhibit 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350, as adopted), Miguel Di Nanno, Principal Executive Officer of Pan American Goldfields Ltd. (the “Company”), hereby certifies that, to the best of his knowledge:

1. This Annual Report on Form 10-K for the fiscal year ended February 29, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    Miguel Di Nanno

Miguel Di Nanno

President and Principal Executive Officer

Date: May 31, 2012

EX-32.2

CERTIFICATION OF PFO PURSUANT TO 18 U.S.C. 1350

Exhibit 32.2

CERTIFICATION

    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350, as adopted), Salil Dhaumya, Principal Financial Officer of Pan American Goldfields Ltd. (the “Company”), hereby certifies that, to the best of his knowledge:

1. This Annual Report on Form 10-K for the fiscal year ended February 29, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    Salil Dhaumya

Salil Dhaumya

Principal Financial Officer

Date: May 31, 2012

XML

GOINGCONCERN

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

GOINGCONCERN

3.       GOINGCONCERN

The accompanying financial statements have been prepared on a goingconcern basis. The Company has a history of operating losses and will need to raise additional capital to fund its planned operations. As at February 29, 2012, the Company had a cumulative loss, during its exploration period,of $49,701,810 (February 28, 2011 - $46,293,923). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company intends to reduce its cumulative loss through the attainment of profitable operations from its investment in Mexican and Argentine mining ventures (note 6). In addition, the Company has conducted private placements of common stock andconvertible debt (note 10), which have generated a portion of the initial cash requirements for its planned mining ventures (note 6).

InFebruary2012, the Company completed a private placement of 4,500,000 units at $0.20 per unit for total gross proceeds of $900,000. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock, each exercisable at $0.30, expiring in two years from the closing date.

In June 2011, the Company completed a private placement of 1,500,000 units at $0.20 per unit, for total proceeds of $300,000. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock, each exercisable at $0.30, expiring in two years from the closing date.

In March 2011, the Company completed a private placement of 6,560,000 units at $0.20 per unit, for total proceeds of $1,312,000. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock. Each warrant is exercisable for one share of common stock at an exercise price of $0.30 per share for a period of two years from the closing date.

In September 2009, the Company entered into private placement subscription agreements, as thereafter amended, with certain U.S. accredited investors and certain non-U.S. investors for 12,500,000 unregistered shares of common stock with 100% warrant coverage at a purchase price of $0.20 per unit. The warrants have an exercise price of $0.30 per share with a two-year term and will not be exercisable until 12 months after their date of issuance. The Company received aggregate gross proceeds, prior to any expenses, from the private placement of $2,500,000.

In July 2009, the Company signed a definitive agreement to sell its Guazapares project located in southwest Chihuahua, Mexico to Paramount Gold de Mexico, SA de C.V., the Mexican subsidiary of Paramount Gold and Silver Corp. (“Paramount”) for a total consideration of up to $5,300,000. The purchase price is to be paid in two stages. The first payment of $3,700,000 was released from escrow in February 2010, as the transfer of the 12 claims to Paramount was completed. An additional payment of $1,600,000 is due if, within 36 months following execution of the letter of agreement (July 10, 2009), either (i) Paramount Gold de Mexico SA de C.V. is sold by Paramount, either through a stock sale or a sale of substantially all of its assets, or (ii) Paramount’s San Miguel project is put into commercial production.

XML

SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

SIGNIFICANT ACCOUNTING POLICIES

2.       SIGNIFICANT ACCOUNTING POLICIES

(a)             Principles of consolidation

The accompanying financial statements include the accounts and activities of the Company and its wholly-owned subsidiary, Sunburst de Mexico. All intercompany balances and transactions have been eliminated in consolidation.

(b)            Financial instruments

(i)             Fair value

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and promissory notes approximate their fair values because of the short-term maturity of these financial instruments. The carrying value of convertible debentures approximates their fair value because these instruments earn interest at the market rate.

(ii)            Interest rate risk

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities. The convertible debentures are not exposed to interest rate risk because the interest rate is fixed to maturity.

(iii)           Credit risk

The Company's financial assets that are exposed to credit risk consist primarily of cash that is placed with major financial institutions. The Company maintains its cash in bank deposit accounts which at times may exceed federally insured limits of $250,000. The Company has not experienced any losses related to this concentration of risk. On February 29, 2012, the Company had $24,780 at BMO Bank of Montreal in Canada and $93,112 at HSBC bank in Mexico.

(iv)          Translation risk

The Company translates the results of non-U.S. operations into U.S. currency using rates approximating the average exchange rate for the year. The exchange rate may vary from time to time. This risk is considered moderate, as the Company’s mining project expenses are recorded in Mexican pesos and converted to U.S. currency.

(c)            Equipment

Equipment is recorded at cost less accumulated depreciation. Depreciation is provided on the following basis:

Software	2 years straight-line
Machinery	10% declining-balance
Vehicles	25% declining-balance
Computer equipment	30% declining-balance
Office equipment	30% declining-balance

All equipment is held by Sunburst de Mexico in Mexico.

(d)           Cash and cash equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

(e)            Mineral property costs

The Company has been in the development stage since March 1, 2004, and has not yet realized any significant revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

(f)            Basic and diluted income (loss) per share

The Company computes income (loss) per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. All previously stated share and per share balances have been restated to give retroactive effect to the 1:50 reverse stock split that occurred on February 15, 2006. Dilutive loss per share has not been presented because the effects of all common share equivalents were anti-dilutive.

(g)           Impairment or disposal of long-lived assets

The Company accounts for the impairment or disposal of long-lived assets according to ASC 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimate fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.

(h)           Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas of estimate include the impairment of assets and rates for amortization, accrued liabilities, future income tax balances and the inputs used in calculating stock-based compensation. Actual results could differ from those estimates and would impact future results of operations and cash flows.

(i)             Consideration of other comprehensive income items

ASC 220 “Comprehensive Income” requires companies to present comprehensive income (consisting primarily of net loss plus other direct equity changes and credits) and its components as part of the basic financial statements.

(j)             Stock-based compensation

The Company utilizes the fair value recognition provisions of ASC 718 “Compensation – Stock Compensation” (formerly, SFAS No. 123R “Share Based Payments”), which requires the Company to use the Black-Scholes pricing model to estimate the fair value of the options at the grant date.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued (see note 11 & 12).

(k)           Income taxes

Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized. The Financial Accounting Standards Board (“FASB”) has issued ASC 740 “Income Taxes” (formerly, Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” – An Interpretation of FASB Statement No. 109 (FIN 48)). ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740. As a conclusion, the tax position of the Company has not met the more-likely-than-not threshold as of February 29, 2012.

(l)            Foreign currency translation

Sunburst de Mexico maintains accounting records in its functional currency, Mexican pesos. Sunburst de Mexico translates foreign currency transactions into functional currency in the following manner: at the transaction date, each asset, liability, revenue and expense is translated into the functional currency by the use of the exchange rate in effect at that date; at the period end, foreign currency monetary assets and liabilities are re-evaluated into the functional currency by using the exchange rate in effect at the balance sheet date. The resulting foreign exchange gains and losses are included in operations.

In preparing consolidated financial statements, the Company translates the assets and liabilities of its subsidiary into U.S. dollars at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated into U.S. dollars at the average exchange rate for the applicable period. Any gain or loss from such translations is included in stockholders’ equity as a component of other comprehensive income.

(m)           Asset retirement obligations

The Company accounts for asset retirement obligations (ARO) in accordance with ASC 410 “Asset Retirement and Environmental Obligations” (formerly, FASB Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143)). This accounting standard applies to the fair value of a liability for an ARO that is recorded when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. Obligations associated with the retirement of these assets require recognition in certain circumstances: (1) the present value of a liability and offsetting asset for an ARO, (2) the subsequent accretion of that liability and depreciation of the asset, and (3) the periodic review of the ARO liability estimates and discount rates. In 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations — An Interpretation of FASB Statement No. 143 (FIN 47), which was effective for the Company on December 31, 2005. FIN 47 clarifies that the phrase "conditional asset retirement obligation," as used in FAS 143, refers to a legal obligation to perform asset retirement activity for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the company. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional ARO should be factored into the measurement of the liability when sufficient information exists. ASC 410 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an ARO. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an ARO.

The Company is in an early stage of mineral exploration and has no known reserves as of February 29, 2012. Accordingly, the Company cannot reasonably estimate the fair value of those obligations because of their indeterminate settlement dates.

(n)            Revenue recognition

The Company recognized revenue when persuasive evidence of an arrangement exists, shipment has occurred, the price is determinable and collection is reasonably assured. All revenues resulted from the proportionate consolidation of the joint venture with MRT, as discussed in note 5.

(o)           Recent accounting pronouncements

(i)             On June 16, 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-05, which revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company does not expect the provisions of ASU 2011-05 to have a material effect on the financial position, results of operations or cash flows of the Company, as the Company currently presents a continuous statement of operations and comprehensive income (loss).

(ii)            On May 12, 2011, the FASB issued ASU 2011-04. The ASU is the result of joint efforts by the FASB and IASB to develop a single, converged fair value framework. Thus, there are few differences between the ASU and its international counterpart, IFRS 13. This ASU is largely consistent with existing fair value measurement principles in U.S. GAAP; however it expands ASC 820’s existing disclosure requirements for fair value measurements and makes other amendments. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Company does not expect the provisions of ASU 2011-05 to have a material effect on the financial position, results of operations or cash flows of the Company.

(iii)           In May 2010, the FASB issued ASU 2010-19, Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this update are effective as of the announcement date of March 18, 2010. Implementation of ASU 2010-19 did not have a material effect on the financial position, results of operations or cash flows of the Company.

(iv)          In April 2010, the FASB issued ASU 2010-17, Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. Implementation of ASU 2010-17 did not have a material effect on the financial position, results of operations or cash flows of the Company.

(v)           In January 2010, the FASB issued ASU 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. Implementation of ASU 2010-02 did not have a material effect on the financial position, results of operations or cash flows of the Company.

(o) Recent accounting pronouncements (continued)

(vi)          In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. Implementation of ASU 2010-01 did not have a material effect on the financial position, results of operations or cash flows of the Company.

(vii)          In September 2009, the FASB issued Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (ASU 2009-13). It updates the existing multiple-element revenue arrangements guidance currently included under ASC 605-25, which originated primarily from the guidance in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF 00-21). The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. Implementation ofUpdate No. 2009-13 did not have a material effect on the financial position, results of operations or cash flows of the Company.

(viii)         In September 2009, the FASB issued ASC 105, formerly FASB Statement No. 168, the FASB Accounting Standards Codification (“Codification”) and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”), a replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 establishes the Codification as the single source of authoritative GAAP in the United States, other than rules and interpretive releases issued by the SEC. The Codification is a reorganization of current GAAP into a topical format that eliminates the current GAAP hierarchy and establishes instead two levels of guidance — authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature that is not included in the Codification will become non-authoritative. The FASB’s primary goal in developing the Codification is to simplify user access to all authoritative GAAP by providing all the authoritative literature related to a particular accounting topic in one place. The Codification was effective for interim and annual periods ending after September 15, 2009. As the Codification was not intended to change or alter existing GAAP, it did not have a material impact on the Company’s financial statements.

(ix)           Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.

(o) Recent accounting pronouncements (continued)

(x)            Effective June 30, 2009, the Company adopted three accounting standard updates which were intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. They also provide additional guidelines for estimating fair value in accordance with fair value accounting. The first update, as codified in ASC 820-10-65, provides additional guidelines for estimating fair value in accordance with fair value accounting. The second accounting update, as codified in ASC 320-10-65, changes accounting requirements for other-than-temporary-impairment (OTTI) for debt securities by replacing the current requirement that a holder have the positive intent and ability to hold an impaired security to recovery in order to conclude an impairment was temporary with a requirement that an entity conclude it does not intend to sell an impaired security and it will not be required to sell the security before the recovery of its amortized cost basis. The third accounting update, as codified in ASC 825-10-65, increases the frequency of fair value disclosures. These updates were effective for fiscal years and interim periods ended after June 15, 2009. The adoption of these accounting updates did not have a material impact on the Company’s financial statements.

(xi)           Effective June 30, 2009, the Company adopted a new accounting standard for subsequent events, as codified in ASC 855-10. The update modifies the names of the two types of subsequent events either as recognized subsequent events (previously referred to in practice as Type I subsequent events) or non-recognized subsequent events (previously referred to in practice as Type II subsequent events). In addition, the standard modifies the definition of subsequent events to refer to events or transactions that occur after the balance sheet date, but before the financial statements are issued (for public entities) or available to be issued (for nonpublic entities). The update did not result in significant changes in the practice of subsequent event disclosures, and therefore the adoption did not have a material impact on the Company’s financial statements.

XML

Balance Sheets (USD $)	Feb. 29, 2012	Feb. 28, 2011
Current
Cash and cash equivalents	$ 117,892	$ 407,912
Accounts receivable	346,885	409,692
Prepaid expenses	50,686	136,141
Deposits		150,000
Net assets	515,463	1,103,745
Equipment (note 4)	166,204	217,875
Total assets	681,667	1,321,620
Current
Accounts payable and accrued liabilities	1,358,302	1,690,208
Loans payable (note 8)	12,887	12,876
Promissory notes (note 7)		884,022
Total liabilities	1,371,189	2,587,106
Capital stock
Common stock Authorized: 200,000,000 shares without par value Issued: 71,192,397 (2011 –54,003,827) (note 10)	34,232,125	30,750,401
Additional paid-in capital	15,986,080	15,262,405
Stock subscriptions	557,238	781,000
Accumulated deficit from prior operations	(2,003,427)	(2,003,427)
Accumulated deficit during the exploration stage	(49,701,810)	(46,293,923)
Accumulated other comprehensive income	240,272	238,058
Total stockholders’ deficiency	(689,522)	(1,265,486)
Total liabilities and stockholders’ deficiency	$ 681,667	$ 1,321,620

XML

Statements of Cash Flows (USD $)	12 Months Ended		96 Months Ended
	Feb. 29, 2012	Feb. 28, 2011	Feb. 29, 2012
Statement of Cash Flows [Abstract]
Net loss	$ (3,407,887)	$ (3,238,416)	$ (49,701,810)
Adjustments to reconcile net (loss) to net cash flows
Write-off of note receivable			57,500
Impairment of mineral property costs	776,668		14,421,668
Issuance of shares for consulting services			510,590
Issuance of shares for interest costs			82,500
Discount on convertible debenture			569,549
Deposit on equipment written off		25,300	25,300
Gain on disposal of assets		(15,130)	(15,130)
Gain on sale of assets			(4,389,954)
Non-cash component of gain on settlement of debt	(909,401)	(32,998)	(995,643)
Beneficial conversion feature			4,081,091
Stock-based compensation	1,273,825	824,053	12,240,436
Amortization	40,920	50,365	346,303
Net change in operating assets and liabilities:
Prepaid expense	80,460	262,193	(51,628)
Accounts receivable	(14,100)	(142,392)	(49,645)
Customer deposits		(150,000)	(194,809)
Notes payable			109,337
Accounts payable and accrued liabilities	510,125	(1,169,025)	7,247,076
Cash used in operating activities	(1,649,390)	(3,586,050)	(15,707,269)
Sale of equipment			33,316
Purchase of property and equipment	(1,144)	(14,226)	(603,617)
Cash used in investing activities	(1,144)	(14,226)	(570,301)
Financing activities
Proceeds from loans payable	28,550	28,500	316,617
Proceeds from notes payable			3,162,196
Proceeds from convertible debentures			7,462,500
Proceeds from exercise of options			78,000
Proceeds from exercise of warrants			3,144,377
Repayment of loans payable	(28,539)	(61,108)	(296,849)
Repayment of notes payable		(44,674)	(586,620)
Repayment of convertible debentures			(2,051,047)
Stock subscriptions (net)	1,387,004	640,000	2,318,262
Issuance of common stock (net)			2,756,994
Cash provided by financing activities	1,387,015	562,718	16,304,430
Net change in cash	(263,519)	(3,037,558)	26,860
Effect of foreign currency translation on cash	(26,501)	68,066	68,955
Cash and cash equivalents, beginning	407,912	3,377,404	22,077
Cash and cash equivalents, ending	$ 117,892	$ 407,912	$ 117,892

XML

SUBSEQUENT EVENTS

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

SUBSEQUENT EVENTS

16. SUBSEQUENT EVENTS

In April 2012, the Company issued 235,294 common shares pursuant to a debt settlement agreement to settle $40,000 of debt.

In April 2012, the Company issued 250,000 common shares to a consultant pursuant to a consulting agreement.

In May 2012, the Company converted subscription proceeds of $45,000 and issued 300,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In May 2012, the Company transferred its interest in concessions at the Encino Gordo project located in the Barrancaregion of Chihuahua State in Mexico, which included two concessions owned by the Company and two additional concessions the Company had the option to acquire, to MRT. In connection with the transfer, MRT paid $100,000 cash, waived $200,000 in payments the Company owed to MRT in connection with the Encino Gordo Project and agreed to assume all of the Company’s obligations related to the transferred concessions.

In May 2012, the Company appointed Andrey Koniuhov to its board of directors. Mr. Koniuhov has over 25 years of exploration and mining experience. He currently serves as Director of Geology and Advanced Projects for Polyus Gold. The Company issued Mr. Koniuhov 1,000,000 warrants, each warrant exercisable at $0.25 with a 10 year term. The Warrants are subject to a vesting schedule with 166,667 of the Warrants issued vesting immediately and the balance vesting every six months over three years.

XML

BASIS OF PRESENTATION

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

BASIS OF PRESENTATION

1.       BASIS OF PRESENTATION

Pan American Goldfields Ltd. (formerly Mexoro Minerals, Ltd and Sunburst Acquisitions IV, Inc.) ("Panam" or the “Company”) was incorporated in the state of Delaware on March 23, 2010 and on July 2, 2010 changed its name to Pan American Goldfields Ltd. pursuant to an agreement and plan of merger between the Company and Mexoro Minerals Ltd. The Company was formed to seek out and acquire business opportunities. Between 1997 and 2003, the Company was engaged in two business acquisitions and one business opportunity, none of which generated a significant profit or created sustainable business. All were sold or discontinued. The Company had previously been pursuing various business opportunities and, effective March 1, 2004, the Company changed its operations to mineral exploration. Currently, the main focus of the Company’s operations is in Mexico and Argentina.

In February 2011, the Company entered into an agreement with Compañia Minera Alto Rio Salado S.A. (“Compañia Minera”), a private Argentine entity, for the acquisition of the 15,000 hectares Cerro Delta Project in northwest La Rioja Province, Argentina. The agreement became effective in March 2011. Under the terms of the agreement, the Company is required to pay $150,000 upon signing (paid) the agreement, $200,000 on the first anniversary (the Company has paid $65,000 of the $200,000 amount due and is negotiating the terms for the balance of the payments), $500,000 on the second anniversary, $750,000 on the third anniversary, $1.2 million on the fourth anniversary, and $2.2 million on the fifth anniversary of the signing, with a final option payment of $5 million to purchase a 100% interest in the Cerro Delta project payable on the sixth anniversary of the signing. The vendor will retain a 1% net smelter return (“NSR”) (note 6).

On February 12, 2009, the Company entered into a joint venture through a definitive agreement for development of its Cieneguita project with Minera Rio Tinto, S.A. de C.V. (“MRT”), a private company duly incorporated pursuant to the laws of Mexico. The purpose of the joint venture is to put the Cieneguita property into production. Pursuant to the agreement, MRT is to provide the necessary working capital to begin and maintain mining operations at Cieneguita, which are estimated to be $3,000,000. MRT plans to spend 100% of the money to earn 74% of the net cash flow from production (notes 5 and 6). The Company will receive 20% of the net cash flows from production.

In September 2011, the Company executed an amended and restated development agreement for the restructure of its Cieneguita joint venture related to the Cieneguita project. Under the restructured joint venture agreement the Company receives 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, the Company's interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions (note 6).

On May 25, 2004, the Company completed a “Share Exchange Agreement” with Sierra Minerals and Mining, Inc. (“Sierra Minerals”), a Nevada corporation, which caused Sierra Minerals to become a wholly-owned subsidiary of the Company. Sierra Minerals held certain rights to properties in Mexico that the Company now owns or has an option to acquire. Through Sierra Minerals, the Company entered into a joint venture agreement with MRT. In August 2005, the Company cancelled the joint venture agreement in order to directly pursue mineral exploration opportunities through a wholly-owned Mexican subsidiary, Sunburst Mining de Mexico S.A. de C.V. (“Sunburst de Mexico”). On August 25, 2005, the Company, Sunburst de Mexico and MRT entered into agreements providing Sunburst de Mexico the right to explore and exploit certain properties in Mexico. In December 2005, the Company and Sunburst de Mexico entered into a new agreement with MRT (the “New Agreement”) (note 6). On January 20, 2006, Sierra Minerals was dissolved.

XML

Balance Sheets (Parenthetical)	Feb. 29, 2012	Feb. 28, 2011
Statement of Financial Position [Abstract]
Preferred stock Authorized shares	20,000,000	20,000,000
Common stock Authorized shares	200,000,000	200,000,000
Common stock shares Issued	71,192,397	54,003,827

XML

STOCK COMPENSATION PROGRAM

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

STOCK COMPENSATION PROGRAM

11. STOCK COMPENSATION PROGRAM

On March 18, 2009, the board of directors approved the granting of stock options according to the 2009 Nonqualified Stock Option Plan (“2009 Option Plan”) whereby the board is authorized to grant to employees and other related persons stock options to purchase an aggregate of up to 6,000,000 shares of the Company's common stock. Subject to the adoption of the 2009 Option Plan, the options were granted and vest, pursuant to the terms of the 2009 Option Plan, in six equal instalments, with the first instalment vesting at the date of grant, and the balance vesting over 2.5 years, every six months.

In the year ended February 29, 2012, the Company awarded 1,600,000 options to purchase common shares (February 28, 2011 – 1,000,000) and recorded stock-based compensation expense for the vesting options of $323,175 (February 28, 2011 - $546,054). The following weighted average assumptions were used for the Black-Scholes option-pricing model to value stock options granted in 2012 and 2011:

	2012	2011
Expected volatility	110.11%	110.36%
Weighted-average volatility	110.11%	110.36%
Expected dividend rate	-	-
Expected life of options in years	10	3 -10
Risk-free rate	3.38%	2.95%

There were no capitalized stock-based compensation costs at February 29, 2012 or February 28, 2011.

The summary of option activity under the 2009 Option Plan as of February 29, 2012, and changes during the period then ended, is presented below:

	Weighted	Number of	Weighted-	Aggregate
	Average	Shares	Average	Intrinsic
	Exercise		Remaining	Value
	Price		Contractual
Options	$		Term
Balance at March 1, 2011	0.46	6,735,000
Options granted	0.29	1,600,000
Options exercised
Options cancelled/forfeited	0.61	(2,120,000)
Balance at February 29, 2012	0.34	6,215,000	7.64	$17,280
Exercisable at February 29, 2012	0.37	4,648,335	7.16	$17,280

The weighted-average grant-date fair value of options granted during the year endedFebruary 29, 2012 and February 28, 2011was $0.33 and $0.19, respectively.

A summary of the status of the Company’s nonvested options as of February 29, 2012, and changes during the year ended February 29, 2012, is presented below:

		Weighted-average
		Grant-Date
Non-vested options	Shares	Fair Value
		$
Non-vested at February 28, 2011	1,376,666	0.26
Granted	1,600,000	0.27
Vested	(1,315,000)	0.26
Cancelled/forfeited	(95,001)	0.16
Non-vested at February 29, 2012	1,566,665	0.26

As of February 29, 2012, there was an estimated $342,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2009 nonqualified stock option plan. That cost is expected to be recognized over a weighted-average period of approximately 1.57 years.

On April 29, 2011, the Company repriced the exercise price of 1,125,000 vested stock options by reducing the exercise prices of $0.36 and $0.44 to $0.28. As a result, the Company recorded incremental stock-based compensation of $6,000 during the year ended February 29, 2012.

XML

Document and Entity Information (USD $)	12 Months Ended
	Feb. 29, 2012	May 30, 2012
Document And Entity Information
Entity Registrant Name	PAN AMERICAN GOLDFIELDS LTD
Entity Central Index Key	0001046672
Document Type	10-K
Document Period End Date	Feb. 29, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float		$ 0
Entity Common Stock, Shares Outstanding		71,977,691
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2011

XML

WARRANTS

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

WARRANTS

12. WARRANTS

As at February 29, 2012, the Company had a total of 31,011,733 warrants (February 28, 2011 – 25,826,733) outstanding to purchase common stock. Each warrant entitles the holder to purchase one share of the Company’s common stock. The Company has reserved 31,011,733 shares of common stock in the event that these warrants are exercised.

During the year ended February 29, 2012, the Company received $nil from warrants exercised.

The following table summarizes the continuity of the Company’s share purchase warrants:

	Number of Warrants	Weighted Average Exercise Price
Balance, February 28, 2010	25,380,900	$	0.43
Issued	3,000,000		0.25
Cancelled/expired	(2,554,167)		0.44
Balance, February 28, 2011	25,826,733	$	0.41
Issued	19,060,000		0.30
Cancelled/expired	(12,875,000)		0.30
February 29, 2012	32,011,733	$	0.35

As at February 29, 2012, the following share purchase warrants were outstanding:

Number of Warrants	Exercise Price	Expiry Date
	$
3,000,000	0.25	July 26, 2012
300,000	0.25	August 22, 2013
200,000	0.25	September 6, 2013
166,666	0.30	May 8, 2012
500,000	0.30	December 31, 2012
3,325,000	0.30	March 17, 2013
1,735,000	0.30	April 13, 2013
500,000	0.30	July 21, 2013
1,500,000	0.30	June 2, 2013
500,000	0.30	July 21, 2013
4,400,000	0.30	December 30, 2013
5,000,000	0.30	December 29, 2016
500,000	0.30	February 20, 2014
100,000	0.30	February 28, 2014
500,000	0.30	February 15, 2022
200,000	0.40	March 24, 2012
525,000	0.50	August 15, 2012
1,666,667	0.50	November 5, 2012
5,000,000	0.50	December 24, 2012
200,000	0.65	June 30, 2012
1,793,400	0.75	April 2012 to August, 2013
200,000	1.30	June 30, 2012
200,000	2.00	June 30, 2012
32,011,733

XML

Shareholders Equity (USD $)	Number of shares	Amount $	Additional paid-in capital $	Stock subscriptions $	Deficit accumulated from prior operations $	Deficit accumulated during the exploration stage $	Accumulated other comprehensive income (loss) $	Total
Balance from prior operations, March 1, 2004 at Feb. 29, 2004	709,168	1,701,843	194,391	67,025	(2,003,427)		8,929	(31,239)
Common stock issued in share exchange	$ 860,000	$ 10,965,000						$ 10,965,000
Options issued as finders’ fees			1,523,000					1,523,000
Common stock issued for cash	113,222	269,134		(67,025)				202,109
Options exercised	50,000	35,000						35,000
Options issued			86,955					86,955
Warrants exercised	5,512
Beneficial conversion feature			500,000					4,081,091
Foreign exchange translation adjustment							(3,050)	(3,050)
Net loss for the year						(13,912,488)		(13,912,488)
Balance, February 28, 2005	1,737,902	12,970,977	2,304,346		(2,003,427)	13,912,488	5,879	(634,713)
Common stock issued for consulting services	30,000	90,000						90,000
Options exercised	32,000	43,000						43,000
Common stock issued on conversion of debenture	2,000,000	300,000						300,000
Common stock issued in property acquisition	2,000,000	2,100,000						2,100,000
Common stock issued for cash	7,000,000	70,000						70,000
Options issued			248,000					248,000
Warrants issued			487,250					487,250
Beneficial conversion feature			952,000					952,000
Stock subscriptions				170,000				2,318,262
Foreign exchange translation adjustment							(4,828)	(4,828)
Net loss for the year						(4,425,885)		(4,425,885)
Balance, February 28, 2006	12,799,902	15,573,977	3,991,596	170,000	(2,003,427)	(18,338,373)	1,051	(605,176)
Common stock issued on conversion of debenture	5,835,000	2,917,500						2,917,500
Common stock issued on settlement of promissory notes	1,651,200	412,800						412,800
Common stock issued for cash	750,000	375,000		(170,000)				205,000
Warrants exercised	50,000	50,000						50,000
Shares returned to treasury	(50,000)	(25,000)						(25,000)
Options issued			496,000					496,000
Warrants issued			1,949,000					1,949,000
Beneficial conversion feature			2,265,500					2,265,500
Foreign exchange translation adjustment							(3,098)	(3,098)
Net loss for year						(7,393,034)		(7,393,034)
Balance, February 28, 2007	21,036,102	19,304,277	8,702,096		(2,003,427)	(25,731,407)	(2,047)	269,492
Warrants exercised	4,344,400	3,674,377						3,674,377
Options issued			974,841					974,841
Fair value of warrants expensed			1,478,750					1,478,750
Stock subscriptions				330,000				330,000
Foreign exchange translation adjustment							(8,301)	(8,301)
Net loss for the year						(8,096,604)		(8,096,604)
Balance, February 29, 2008	25,380,502	22,978,654	11,155,687	330,000	(2,003,427)	(33,828,011)	(10,348)	(1,377,445)
Notes converted into shares	2,936,028	1,470,522						1,470,522
Options issued			603,801					603,801
Warrants issued			122,260					122,260
Fair value of warrants embedded in convertible debentures			480,800					480,800
Value of beneficial conversion feature of convertible debentures			312,399					312,399
Stock subscriptions				121,258				121,258
Shares issued for subscriptions	330,000	330,000		(330,000)
Accounts payable settled with shares	206,000	103,000						103,000
Shares issued for services	672,000	262,090						262,090
Shares issued to management as bonuses	1,050,000	232,750						232,750
Cash received for options issued			1,961					1,961
Shares issued on private placement	444,772	179,885						179,885
Foreign exchange translation adjustment							460,072	460,072
Net loss for the year						(8,036,208)		(8,036,208)
Balance, February 28, 2009	31,019,302	25,556,901	12,676,908	121,258	(2,003,427)	(41,864,219)	449,724	(5,062,855)
Notes converted into shares	3,333,333	1,000,000						1,000,000
Options issued			720,202					720,202
Warrants issued			1,172,500					1,172,500
Fair value of warrants embedded in convertible debentures			165,042					165,042
Value of beneficial conversion feature of convertible debentures			98,700					98,700
Shares issued for subscriptions	404,193	121,258		(121,258)
Shares issued for management bonus	1,000,000	280,000						280,000
Accounts payable settled with shares	2,504,142	751,242						751,242
Notes settled with shares	2,250,000	250,000						250,000
Shares issued for services	492,857	158,500						158,500
Shares issued for interest costs	250,000	82,500						82,500
Financing costs			(245,000)					(245,000)
Finders’ fees on private placement			(150,000)					(150,000)
Shares issued on private placement	12,500,000	2,500,000						2,500,000
Subscription proceeds on private placement				50,000				50,000
Accounts payable converted to subscriptions				116,000				116,000
Foreign exchange translation adjustment							(220,216)	(220,216)
Net loss for the year						(1,191,288)		(1,191,288)
Balance, February 28, 2010	53,753,827	30,700,401	14,438,352	166,000	(2,003,427)	(43,055,507)	229,508	475,327
Options issued			824,053					824,053
Shares issued for subscriptions	250,000	50,000		(50,000)
Subscription proceeds				640,000				640,000
Debt converted into subscription proceeds				25,000				25,000
Foreign exchange translation adjustment							8,550	8,550
Net loss for the year						(3,238,416)		(3,238,416)
Balance, February 28, 2011	54,003,827	30,750,401	15,262,405	781,000	(2,003,427)	(46,293,923)	238,058	(1,265,486)
Notes converted into shares	3,663,151	775,490						775,490
Options and warrants issued			907,575					907,575
Shares issued for subscriptions	6,510,000	1,302,000		(1,302,000)
Accounts payable settled with shares	473,752	128,651						128,651
Shares issued for services	1,625,000	366,250						366,250
Shares issued for property acquisition	1,166,667	219,333		407,335				626,668
Subscription proceeds	4,500,000	900,000		670,904				1,570,904
Financing costs			(183,900)					(183,900)
Shares returned, previously issued as management bonus	(750,000)	(210,000)						(210,000)
Foreign exchange translation adjustment							2,214	2,214
Net loss for the year						$ (3,407,887)		$ (3,407,887)
Balance, February 29, 2012 at Feb. 29, 2012	71,192,397	34,232,125	15,986,080	557,238	(2,003,427)	(49,701,810)	245,337	(689,522)

XML

MINERAL PROPERTIES

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

MINERAL PROPERTIES

6.       MINERAL PROPERTIES

The Company incurred exploration expenses as follows in the year ended February 29,2012:

	Cieneguita	Cerro Delta	Encino Gordo	New Projects	Total
	$	$	$	$	$
Drilling and sampling	-	-	-	2,425	2,425
Geological, geochemical, geophysics	22,161	30,751	-	-	52,912
Field work preparations	-	386,072	-	46,116	432,188
Salaries	-	-	-	-	-
Land use permits	15,855	-	5,779	-	21,634
Travel	14,810	-	2,200	-	17,010
Consulting	138,518	30,971	825	-	170,314
Equipment	141,383	1,312	333	-	143,028
General	12,599	39,187	74	-	51,860
	345,326	488,293	9,211	48,541	891,371

The Company incurred exploration expenses as follows in the year ended February 28, 2011:

	Sahuayacan	Cieneguita	Encino Gordo	New Projects	Total
	$	$	$	$	$
Drilling and sampling	67,063	-	-	-	67,063
Geological, geochemical, geophysics	148,191	-	5,413	1,277	154,881
Land use permits	10,360	14,775	3,712	-	28,847
Automotive	-	54	-	-	54
Travel	2,429	9,880	6,131	-	18,440
Consulting	7,501	62,107	13,159	-	82,767
Equipment	1,006	4,327	2,152	-	7,485
General	8,162	22,898	9,818	-	40,878
	244,712	114,041	40,385	1,277	400,415

Since May 2004, the Company has held interests in gold exploration properties in Mexico.

In August 2005, the Company formed its wholly owned subsidiary, Sunburst de Mexico, which allowed the Company to take title to the properties in the name of Sunburst de Mexico. On August 25, 2005, the Company entered into property agreements with MRT, which provided Sunburst de Mexico options to purchase the mineral concessions of the Cieneguita and Guazapares properties and the right of refusal on three Encino Gordo properties. The Company also entered into an exploration and sale agreement, in October 2006, with Minera Emilio S.A. de C.V. for the mineral concessions of the Sahuayacanproperty.

In August 2005, the parties also entered into an operator’s agreement, that gave MRT the sole and exclusive right and authority to manage the Cieneguita property, and a share option agreement which granted MRT the exclusive option to acquire up to 100% of all outstanding shares of Sunburst de Mexico if the Company did not comply with the terms of the property agreements. The operator’s agreement and share option agreement weresubsequently cancelled when the Company and Sunburst de Mexico entered into a new contract with MRT as described below under “Encino Gordo”.

In February 2009, the Company entered into a development agreement with MRT, which was amended in December 2009. Pursuant to the terms of the amended development agreement, MRT agreed to invest up to $8,000,000 to put the first phase of the Cieneguita project into production and complete a feasibility study. The first phase of production is limited to the mining of the mineralized material that is available from the surface to a depth of 15 meters (“First Phase Production”). In exchange, the Company assigned MRT an interest to 74% of the net cash flows from First Phase Production and MRT would earn a 54% ownership interest by spending up to $4,000,000 to take the Cieneguita project through the feasibility stage.

In September 2011, the Company executed an amended and restated development agreement for the restructure of its Cieneguita joint venturerelated to the Cieneguita project. Under the restructured joint venture agreement the Company receives 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, the Company's interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions (note 6).

The material provisions of the property agreements are as follows:

Cieneguita

MRT assigned to Sunburst de Mexico, with the permission of the Cieneguita property’s owner, Corporativo Minero, S.A. de C.V. (“Corporativo Minero”), all of MRT’s rights and obligations acquired under a previous agreement (the Cieneguita option agreement), including the exclusive option to acquire the Cieneguita property for a price of $2,000,000. Prior to assigning the Cieneguita property to the Company, MRT had paid $350,000 to Corporativo Minero. As the Cieneguita property was not in production by May 6, 2006, Sunburst de Mexico was required to pay $120,000 to Corporativo Minero to extend the contract. Corporativo Minero agreed to reduce the obligation to $60,000, of which $10,000 was paid in April 2006 and the balance paid on May 6, 2006. The Company made this payment to Corporativo Minero and the contract was extended.

The Company had the obligation to pay a further $120,000 per year for the next 13 years and the balance of the payments in the 14th year, until the total amount of $2,000,000 was paid. The Company renegotiated the payment due May 6, 2007, to $60,000 payable on November 6, 2007, which was paid, and the balance of $60,000 was paid on December 20, 2007. The Company paid $60,000 on May 12, 2008, of the $120,000 due on May 6, 2008, and the balance was paid in June 2008. The Company paid $30,000 each for a total of $120,000 on May 22, 2009, June 26, 2009, September 4, 2009 and November 20, 2009. In 2010, the Cieneguita project was put into production under the development agreement as described above and the payment terms were changed based on the following formula:

The Company must pay the Cieneguita owners $20 per ounce of gold produced from the Cieneguita property to the total of $2,000,000 due. In the event that the price of gold is above $400 per ounce, the property payments payable to the Cieneguita owners from production will be increased by $0.10 for each dollar increment over $400 per ounce. The total payment of $2,000,000 does not change with fluctuations in the price of gold. Non-payment of any portion of the $2,000,000 total payment will constitute a default. In such case, the Cieneguita owners will retain ownership of the concessions, but the Company will not incur any additional default penalty.

In September 2011, the Company, MRT and Corporativo Minero entered into a new agreement, where Corporativo Minero is entitled to a monthly payment of $30,000, to be paid from the net cash flows from production at Cieneguita until the completion of the first 15 meters of production or December 31, 2012, whichever occurs first.

Based on production at Cieneguita, the joint venture paid $227,241 during the fiscal year ended February 29, 2012 (February 28, 2011 - $120,000) to the Cieneguita owners. As of February 29, 2012, Corporativo Minero has been paid a total of $1,177,241 for the Cieneguita property. The Company is not in default on its payments for the Cieneguita property.

On February 12, 2009,the Company entered into a definitive agreement for development of the Cieneguita project with MRT. The definitive agreement covered project financing of up to $9,000,000. The major points of the agreement were as follows:

(i)             MRT and/or its investors will subscribe for $1,000,000 of a secured convertible debenture at 8% interest (payable in stock or cash). The debenture was convertible into units at $0.60 per unit. Each unit comprised two common shares and one warrant. Each warrant is exercisable at $0.50 per share for a period of three years. The placement will be used for continued exploration of the Company’s properties and general working capital.

(ii)            MRT is to provide the necessary working capital to begin and maintain mining operations estimated to be $3,000,000 used for the purpose of putting the Cieneguita property into production. MRT will spend 100% of the money to earn 75% of the net cash flow from production. The agreement will limit the mining to the mineralized material that is available from surface to a depth of 15 meters or approximately 10% of the mineralized material found to date.

(iii)           MRT will spend up to $5,000,000 to take the Cieneguita property through the feasibility stage. In doing so, MRT will earn a 60% interest in the Company’s rights to the property. After the expenditure of the $5,000,000 all costs will be shared on a ratio of 60% to MRT and 40% to the Company. If the Company elects not to pay its portion of costs after the $5,000,000 has been spent, the Company’s position shall revert to a 25% carried interest on the property.

To generate funding for the Company’s continued operations, the Company issued $1,500,000 of convertible debentures in March 2009, of which an aggregate of $880,000 was issued to Mario Ayub, a former director of the Company, and his affiliated entity, MRT. Pursuant to the terms of the convertible debentures, the holders irrevocably converted the debentures into a 10% ownership interest in the Cieneguita project and a 10% interest in the net cash flow from First Phase Production.

In December 2009, Mario Ayub and MRT agreed to resell an aggregate 4% ownership interest in the Cieneguita project back to the Company, along with 4% of the net cash flow from First Phase Production, in return for $550,000. In a private transaction not involving the Company, the other holders contributed their remaining 6% ownership interest in the Cieneguita project to a newly formed entity, Marje Minerals SA (“Marje Minerals”).

In December 2009, the Company amended the development agreement and its agreements with the debenture holders. According to the amended development agreement, the ownership interest in the Cieneguita project and the net cash flows from the First Phase Production were held by the Company, MRT and Marje Minerals as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase Production	Net Cash Flow Interest Following First Phase Production
MRT	54% (1)	74%	54% (1)
Marje Minerals	6%	6%	6%
Panam	40%	20%	40%

(1) Was to be earned by MRT by spending $4,000,000 to take the Cieneguita project through the feasibility stage.

Any additional costs for the First Phase Production and the feasibility study for the Cieneguita project, after MRT invested $8,000,000, would have been shared by the Company, MRT and Marje Minerals on a pro-rata basis based on their respective ownership percentages in the Cieneguita project.

The major terms of the amended development agreement with MRT and Marje Minerals are as follows:

(i)            MRT purchased $1,000,000 of secured convertible debentures at 8% interest (payable in stock or cash). The proceeds from this investment were used for continued exploration and development of the Cieneguita project and general working capital. On November 5, 2009, MRT exercised its conversion rights on the debenture and MRT was issued 3,333,333 common shares and a warrant to purchase 1,666,667 shares of common stock at an exercise price of $0.50 per share.

(ii)            MRT agreed to provide the necessary working capital to begin and maintain mining operations, estimated to be $3,000,000, to put the first phase of the Cieneguita project into production. In exchange for these funds, the Company assigned MRT an interest to 74% of the net cash flow from First Phase Production. The agreement limits the mining during First Phase Production to the mineralized material that is available from the surface to a depth of 15 meters.

(iii)           MRT committed to spend up to $4,000,000 to take the Cieneguita project through the feasibility stage. In doing so, the Company assigned MRT a 54% interest in its rights to the Cieneguita project. After the expenditure of the $4,000,000, all costs will be shared on a pro rata ownership basis (i.e. 54% to MRT, 40% to the Company and 6% to Marje Minerals). If any party cannot pay its portion of the costs after the $4,000,000 has been spent, then their ownership position in the Cieneguita project will be reduced by 1% for every $100,000 invested by the other owners. The Company’s ownership interest in the Cieneguita project, however, cannot be reduced below 25%. In addition, the Company has the right to cover Marje Minerals’ pro rata portion of costs if they cannot pay their portion of the costs. In return, the Company will receive 1% of Marje Minerals’ ownership position in the Cieneguita project for every $100,000 the Company invests on their behalf.

(iv)           The MRT agreement was contingent on the Company repaying its debenture to Paramount. In March 2009, the Company repaid $1,000,000, or approximately two-thirds of the debt, and Paramount released a security interest it had on the Cieneguita project. In October 2009, the Company repaid the remaining amount of the debt and Paramount released its security interests on the Sahuayacan, Guazapares and Encino Gordo properties.

In September 2011, the Company executed a new amended and restated development agreement with MRT and Marje Minerals, for the restructure of its Cieneguita joint venture. Under the restructured joint venture agreement the Company receives 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, the Company's interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions. The Company also bought back 6% interest in Cieneguita from Marje Minerals in exchange for 3,333,333 common shares of the Company.

Under the agreement, the parties agreed to restructure their respective ownership interests in the Cieneguita project as follows:

Holder	Ownership Percentage	Net Cash Flow Interest From First Phase Production	Net Cash Flow Interest Following First Phase Production
MRT	20%	74%	20%
Marje Minerals	0%	6%	0%
Panam	80%	20%	80%

The Company and MRT shall be responsible for the cost of a feasibility study on a pro rata basis based on their respective amended ownership percentages of the Cieneguita project.

Marje Minerals will also assume approximately $490,000 in debt of the Company in consideration for receiving half of all monthly net cash flows that the Company is entitled from operations on the first 15 meters, if any, until the sooner of December 31, 2012 or until Marje Minerals receives $490,000 from these cash flows (note 7).

Encino Gordo

On December 8, 2005, the Company and Sunburst de Mexico entered into a “New Agreement” with MRT to exercise their option under the sale and purchase of the mining concessions agreement, dated August 18, 2005, to obtain two mining concessions in the Encino Gordo region. The New Agreement also provided the Company the option to obtain three additional concessions in the Encino Gordo region.

The following are additional material terms of the New Agreement:

(a)            The share option agreement with MRT was cancelled;

(b)           The Company granted MRT the option to buy all of the outstanding shares of Sunburst de Mexico for $100 if the Company failed to transfer $1,500,000 to Sunburst de Mexico by April 30, 2006. On April 6, 2006, MRT agreed to waive its option to purchase the shares of Sunburst de Mexico and also waived the Company’s obligation to transfer $1,500,000 to Sunburst de Mexico. The property agreements were modified to change the NSR to a maximum of 2.5% for all properties covered by the agreements. The property agreements contained NSRs ranging from 0.5% to 7%;

(c)             The Company agreed to issue 2,000,000 shares of the Company’s common stock to MRT within four months of the date of signing of the New Agreement. These shares were issued to MRT and its assignee at the market value of $1.05 per share on February 23, 2006, and $2,100,000 was charged to operations for the year ended February 28, 2006. This issuance fulfilled the Company’s payment obligations under the previous property agreements;

(d)            The Company agreed to issue 1,000,000 additional shares of the Company’s common stock to MRT if and when the Cieneguita property is put into production and reaches 85% of production capacity over a 90-day period, as defined in the New Agreement; and

(e)           The operator’s agreement with MRT was cancelled.

Sunburst de Mexico purchased two of the Encino Gordo concessions from MRT for a price of 1,000 pesos (approximately US$100), and MRT assigned to Sunburst de Mexico a first right of refusal to acquire three additional Encino Gordo concessions. The total payments to acquire 100% of these three additional concessions were as follows: $10,000 on June 30, 2006 (paid); $25,000 on December 31, 2006 (paid), $50,000 on December 31, 2007 ($20,000 of this payment was made on January 3, 2008 and the balance was paid on February 29, 2008) and $75,000 on December 31, 2008 (the payment was not made and the Company was in default). In August 2009, the Company decided to surrender the Encino Gordo 2 mining concession eliminating any future concession payments on these properties.

Sahuayacan

In May 2010, the Company management decided to drop the Sahuayacan properties due to lack of economic thicknesses and grades of gold mineralization encountered in the drilling program eliminating any future concession payments on these properties.

Cerro Delta

In February 2011, the Company management entered into an agreement with Compania Minera Alto Rio Salado S.A., a private Argentine entity, for the acquisition of the 15,000 hectare Cerro Delta project in northwest La Rioja Province, Argentina. Under the terms of the agreement, the Company must pay $150,000 upon signing (paid), and $200,000 on the first anniversary (the Company has paid $65,000 of the $200,000 amount due and is negotiating the terms for the balance of the payments), $500,000 on the second anniversary, $750,000 on the third anniversary, $1.2 million on the fourth anniversary, and $2.2 million on the fifth anniversary of the signing, with a final option payment of $5 million to purchase a 100% interest in the project payable on the sixth anniversary of the signing. The vendor will retain a 1% NSR (note 17).

XML

JOINT VENTURE WITH MRT

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

JOINT VENTURE WITH MRT

5.       JOINT VENTURE WITH MRT

On February 12, 2009, the Company entered into a joint venture through a definitive agreementfor development of its Cieneguita project with MRT. The purpose of the joint venture is to put Cieneguita property into production. As per the agreement, MRT is to provide the necessary working capital to begin and maintain mining operations estimated to be $3,000,000. MRT will spend 100% of the funds in exchange for a 75% interest in the net cash flow from production. The agreement was amended in December 2009 for MRT to earn a 74% interest in the net cash flow from production (note 6).

In September 2011, the Company executed an amended and restated development agreement for the restructure of its Cieneguita joint venturerelated to the Cieneguita project. Under the restructured joint venture agreement the Company receives 20% of the net operating profits after royalties for material processed through a small-scale pilot operation and mined from the first 15 meters depth of the Cieneguita deposit until December 31, 2012. For all other material processed from the property, the Company's interest is 80% and MRT is reduced to a 20% working interest, subject to certain dilution provisions (note 6).

The agreement limits the mining of the mineralized material that is available from the surface to a depth of 15 meters or approximately 10% of the mineralized material found as of the date of the definitive agreement. The Company incurs no obligations to the joint venture’s creditors as the operations and working capital requirements are controlled by MRT and as such, the Company has concluded that it is not the primary beneficiary of the joint venture. Accordingly, the Company’s share of income and expenses are reflected in these financial statements under the proportionate consolidation method.

The Company’s proportionate share of revenues was $2,102,012 and proportionate share of the net profit was $793,865 for the year ended February 29, 2012. The Company’s proportionate share of accounts receivable of the joint venture was $248,251 at February 29, 2012. The joint venture did not have any other assets or liabilities at February 29, 2012.

XML

RELATED PARTY TRANSACTIONS

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

RELATED PARTY TRANSACTIONS

13. RELATED PARTY TRANSACTIONS

For the year ended February 29, 2012, the Company paid or accrued management fees of $405,500 (February 28, 2011 - $441,639) to certain officers and directors. The Company also paid or accrued $1,115,624 (February 28, 2011 - $118,399) to certain officers and directors for travel, office and other related expenses.

The Company also paid consulting fees of $58,535 (February 28, 2011 - $93,333) to a director of the Company.

As at February 29, 2012, accounts payable of $216,631 (February 28, 2011 - $207,399) was owing to directors and officers of the Company and $nil (February 28, 2011 - $43,226) was owing to companies controlled by the directors. In addition, promissory notes of $nil (February 28, 2011 - $10,668) were owed to a company controlled by a director (note 7).

All related party transactions are in the normal course of business at the exchange amount agreed to by each party.

XML

PREFERRED STOCK

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

PREFERRED STOCK

9.       PREFERRED STOCK

The Company is authorized to issue 20,000,000 shares of preferred stock. The Company’s board of directors is authorized to divide the preferred stock into series, and with respect to each series, to determine the preferences and rights and qualifications, limitations or restrictions thereof, including the dividend rights, conversion rights, voting rights, redemption rights and terms, liquidation preferences, sinking fund provisions, and the number of shares constituting the series and the designations of such series. The board of directors could, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting rights of the holders of common stock, which issuance could have certain anti-takeover effects.

XML

PROMISSORY NOTES

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

PROMISSORY NOTES

7.       PROMISSORY NOTES

As at February 29, 2012, the Company had $nil (February 28, 2011 - $884,022) of promissory notes outstanding, comprising the following:

(a)            During the year ended February 29, 2008, the Company converted accounts payable of $465,994 (Swiss Franc (“CHF”) 565,000) into promissory notes. The Company had an implied obligation to pay the accounts payable in CHF as the funds to pay the expense came from Swiss investors in CHF. Accordingly, the promissory notes were issued in CHF. The notes consisted of one warrant for each CHF 5.00 of notes issued, exercisable at $1.00 each. The principal and interest on the notes became due and payable on April 30, 2008. The interest rate payable during the default period was 12%. In September 2011, the Company executed debt conversion and release agreements to convert promissory notes and related interest charges in the amount of $1,091,645 into Company’s common shares for a total of 3,340,880 shares (note 10).

(b)            During the year ended February 29, 2012, the Company entered into an agreement to convert $17,778 of the promissory notes including accrued interest by issuing 55,000 shares of the Company’s common stock (note 10).

(c)             $10,358 of promissory notes were to be repaid over a 12 month period as part of a debt settlement agreement. These notes bore no interest. In September 2011, the Company assigned these notes to Marje Minerals as part of the amended and restated development agreement (note 6).

(d)            $28,113 of promissory notes bore no interest and had no repayment terms. In September 2011, the Company assigned these notes to Marje Minerals as part of the amended and restated development agreement (note 6).

XML

LOANS PAYABLE

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

LOANS PAYABLE

8.       LOANS PAYABLE

As at February 29, 2012, there were loans payable in the amount of $12,887(February 28, 2011 - $12,876), which are all current. The loans are repayable in monthly instalments of $3,272 (February 28, 2011 – $3,272), including interest of 7.50% per annum.

XML

COMMON STOCK

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

COMMON STOCK

10.       COMMON STOCK

In February 2012, the Company issued 500,000 shares of common stock and warrants to purchase 500,000 shares of common stock at $0.30, expiring on February 29, 2014, to a consultant.

Between September 2011 and February 2012, the Company converted subscription proceeds of $900,000 and issued 4,500,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In December 2011, the Company acquired 6% ownership interest in the Cieneguita project in exchange for 3,333,333 common shares, of which, the Company had issued 1,166,667 common shares as of February 29, 2012.

In October 2011, the Company and note holders agreed to cancel $979,476 of outstanding debt in exchange for 3,340,880 shares of the Company’s common shares. The Company recognized a gain on settlement of debt in the amount of $277,891. In November 2011, the Company also issued 267,271 shares to a consultant as consulting fee relating to the settlement of debt.

In August 2011, the Company negotiated return of 750,000 shares to the treasury from a former president. The shares were valued at the time of issuanceat $0.28 per share.

In July 2011, the Company issued 500,000 shares of common stock and warrants to purchase 500,000 shares of common stock at $0.30, expiring on July 21, 2013, to a consultant.

In June 2011, the Company converted subscription proceeds of $300,000 and issued 1,500,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In June 2011, the Company issued 125,000 shares to a consultant pursuant to a consulting agreement.

In June 2011, the Company issued the 423,752 shares pursuant to the April 2011 debt settlement agreement. The shares were valued at the time of the debt settlement agreement of $0.28 per share.

In April 2011, the Company converted subscription proceeds of $347,000 and issued 1,735,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In March 2011, the Company converted subscription proceeds of $665,000 and issued 3,325,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expires in two years.

In March 2011, the Company and a note holder agreed to cancel $17,778 in outstanding debt in exchange for 55,000 shares of the Company’s common stock.

In March 2011, the Company issued 500,000 shares of common stock and warrants to purchase 500,000 shares of common stock at $0.30, expiring on December 31, 2002, to a consultant.

In May 2010, the Company converted subscription proceeds of $50,000 and issued 250,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of the Company’s common stock and one warrant each exercisable at $0.30, which expire in two years.

In December 2009, the Company converted subscription proceeds of $2,275,000 and issued 11,375,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In November 2009, the Company received subscription proceeds of $65,000 and issued 325,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In November 2009, MRT converted the $1,000,000 debentures into units of $0.60 each. Each unit comprises 2 common shares and 1 warrant. Each warrant is exercisable at $0.50 per share for a period of 3 years. The Company issued 3,333,333 shares and 1,666,667 warrants to MRT.

In October 2009, the Company received subscription proceeds of $20,000 and issued 100,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In September 2009, the Company received subscription proceeds of $40,000 and issued 200,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In July 2009, the Company received subscription proceeds of $100,000 and issued 500,000 shares of common stock in a private placement. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.20 of subscription proceeds. Each unit consists of one share of Company’s common stock and one warrant each exercisable at $0.30, which expire in four years.

In June 2009, the Company converted $622,500 of debt into subscription proceeds and issued 2,075,000 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.60 of debt. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.

In June 2009, the Company issued 1,000,000 shares of common stock to an officer of the Company as bonus. The Company assigned a value of $0.28 per share for a total of $280,000 to these shares.

In May 2009, the Company converted $128,742 of debt into subscription proceeds and issued 429,141 common shares. The subscribers to the subscription proceeds have agreed to purchase one unit for each $0.60 of debt. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.

In May 2009, the Company converted $121,258 of stock subscriptions and issued 404,193 common shares. The subscribers have agreed to purchase one unit for each $0.60 of stock subscriptions. Each unit consists of two shares of Company’s common stock and one warrant each exercisable at $0.50, which expires on December 31, 2010.

In May 2009, the Company issued 42,837 shares for $13,500 of investors’ relations services as per the agreement.

In April 2009, the Company issued 2,250,000 shares under an escrow agreement as security against convertible debentures issued in the amount of $250,000. In October 2009, the Company defaulted on the terms of the agreement of the convertible debentures and released the shares from escrow in settlement of the convertible debentures.

In March and April 2009, the Company issued 700,000 shares pursuant to amended convertible debenture agreement and financing arrangements.

XML

SUPPLEMENTAL CASH FLOW INFORMATION

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

SUPPLEMENTAL CASH FLOW INFORMATION

15. SUPPLEMENTAL CASH FLOW INFORMATION

	Year ended  February 29, 2012	Year ended February 28, 2011	Period From Inception of Exploration Stage (March 1, 2004) to February 29, 2012
	$	$	$
Interest paid	-	30,000	310,053
Common stock issued on conversion of debt	128,651	-	4,321,651
Common stock issued on settlement of notes payable	775,490	-	3,908,812
Common stock issued for interest costs	-	-	82,500
Common stock issued for financing costs	-	-	145,000
Common stock issued for mineral property costs	219,333	-	799,333
Common stock issued for bonuses	-	-	512,750
Shares issued for services	366,250	-	876,840

XML

Statements of Operations (USD $)	12 Months Ended		96 Months Ended
	Feb. 29, 2012	Feb. 28, 2011	Feb. 29, 2012
Income Statement [Abstract]
Net sales	$ 2,102,012	$ 1,158,923	$ 3,785,445
Cost of goods sold	827,022	583,760	1,685,375
Gross margin	1,274,990	575,163	2,100,070
Expenses
General and administrative	3,630,221	2,578,022	23,216,159
Mineral exploration	891,371	400,415	10,131,855
Impairment of mineral property costs	776,668		14,421,668
Operating loss	(4,196,387)	(3,122,305)	(49,508,003)
Other income (expenses)
Deposit on equipment written off		25,300	25,300
Foreign exchange (loss)	(240,071)	(114,270)	(589,849)
Interest	(41,124)	(90,360)	(5,355,306)
Other income	160,294	65,691	419,316
Gain on disposal of assets		15,130	15,130
Loss on sale of assets			4,388,374
Gain (loss) on settlement of debt (note 6)	909,401	32,998	953,828
Net loss	(3,407,887)	(3,238,416)	(49,701,810)
Other comprehensive income (loss)
Foreign exchange translation adjustment	2,214	8,550	240,272
Total comprehensive loss	(3,405,673)	(3,229,866)	(49,461,538)
Total loss per share – basic and diluted	$ (0.05)	$ (0.06)
Weighted average number of shares of common stock – basic and diluted	$ 63,108,764	$ 53,957,252

XML

EQUIPMENT

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

EQUIPMENT

4.       EQUIPMENT

	February 29, 2012			February 28, 2011
	Cost	Accumulated Depreciation	Net Book	Net Book
			Value	Value
	$	$	$	$
Software	24,124	18,180	5,944	6,734
Machinery	281,551	138,594	142,957	180,423
Vehicles	90,643	81,225	9,418	19,773
Computers	28,156	28,058	98	930
Office equipment	16,435	8,648	7,787	10,015
	440,909	274,705	166,204	217,875

XML

INCOME TAXES

12 Months Ended

Feb. 29, 2012

Notes to Financial Statements

INCOME TAXES

14. INCOME TAXES

Deferred income taxes reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The components of the net deferred income tax assets are approximately as follows:

	February 29	February 28
	2012	2011
	$	$
Deferred income tax assets
Equipment	34,000	34,000
Net operating loss and credit carry forwards	8,866,000	8,329,000
Gross deferred tax assets	8,900,000	8,363,000
Valuation allowance	(8,900,000)	(8,363,000)
		-

As at February 29, 2012, the Company's net operating loss carry-forwards for income tax purposes were approximately $22,529,000 (February 28, 2011 - $21,172,000). If not utilized, they will start to expire in 2017.