SOUTHWESTERN RESOURCES CORP.

AN EXPLORATION STAGE COMPANY

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2007

(Unaudited)

CONSOLIDATED BALANCE SHEETS 
(Unaudited)

				As at
($ in thousands)		June 30				December 31
		2007				2006
ASSETS		(See note 6)
CURRENT
CASH AND CASH EQUIVALENTS	$	28,606			$	57,688
SHORT-TERM INVESTMENT		3,190				5,784
EXPLORATION ADVANCES AND OTHER RECEIVABLES		771				452
		32,567				63,924
OTHER ASSETS		-				75
PROPERTY, PLANT AND EQUIPMENT (NOTE 4)		880				968
MINERAL PROPERTIES (NOTE 5)		53,013				50,555
INVESTMENTS (NOTE 6)		15,443				4,404
	$	101,903			$	119,926
LIABILITIES
CURRENT
ACCOUNTS PAYABLE AND ACCRUED CHARGES	$	1,834			$	2,173
NON-CONTROLLING INTEREST (NOTE 11)		-				10,627
SHAREHOLDERS' EQUITY
SHARE CAPITAL (NOTE 7B)		175,098				179,239
ACCUMULATED OTHER COMPREHENSIVE INCOME (NOTE 7F)		1,499				-
CONTRIBUTED SURPLUS (NOTE 7E)		27,301				23,590
DEFICIT		(103,829	)			(95,703	)
		100,069				107,126
	$	101,903			$	119,926
NATURE AND CONTINUANCE OF OPERATIONS (NOTE 1)

See accompanying notes to consolidated financial statements

2     Southwestern Resources Corp.

CONSOLIDATED STATEMENTS 
of Loss and Deficit 
(Unaudited)

		Three months ended						Six months ended
($ in thousands)		June 30			June 30			June 30			June 30
		2007			2006			2007			2006
EXPENSES
GENERAL AND ADMINISTRATIVE (NOTE 10, 7D)	$	2,244		$	2,181		$	5,099		$	5,428
AMORTIZATION		11			13			23			27
FOREIGN EXCHANGE LOSS		1,088			941			1,192			964
GENERAL EXPLORATION (NOTE 7D)		1,346			829			3,795			1,721
MINERAL PROPERTY COSTS WRITTEN OFF (NOTE 5)		153			494			153			494
LOSS BEFORE UNDERNOTED ITEMS		(4,842	)		(4,458	)		(10,262	)		(8,634	)
INTEREST AND OTHER INCOME		429			607			1,065			1,119
GAIN ON SHARES ISSUED BY AFFILIATED COMPANIES		637			387			637			409
(NOTE 6B)
GAIN ON SALE OF INVESTMENTS (NOTE 6A)		212			435			3,558			435
EQUITY IN OPERATIONS OF AFFILIATED COMPANIES		(426	)		199			(485	)		166
(NOTE 6B)
NET LOSS BEFORE NON-CONTROLLING INTEREST		(3,990	)		(2,830	)		(5,487	)		(6,505	)
NON-CONTROLLING INTEREST (NOTE 11)		-			-			434			-
NET LOSS FOR THE PERIOD		(3,990	)		(2,830	)		(5,053	)		(6,505	)
DEFICIT AT BEGINNING OF PERIOD		(98,569	)		(97,015	)		(95,703	)		(93,340	)
LOSS ON REPURCHASE AND CANCELLATION OF OWN SHARES
(NOTE 7B)		(1,270	)		-			(3,073	)		-
DEFICIT AT END OF PERIOD	$	(103,829	)	$	(99,845	)	$	(103,829	)	$	(99,845	)
LOSS PER SHARE - BASIC AND DILUTED	$	(0.09	)	$	(0.06	)	$	(0.11	)	$	(0.14	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		45,080,458			46,171,101			45,365,553			46,114,926

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 
(Unaudited)

		Three months ended						Six months ended
($ in thousands)		June 30			June 30			June 30			June 30
		2007			2006			2007			2006
NET LOSS FOR THE PERIOD	$	(3,990	)	$	(2,830	)	$	(5,053	)	$	(6,505	)
OTHER COMPREHENSIVE INCOME:
UNREALIZED LOSS ON AVAILABLE-FOR-SALE INVESTMENT		(1,475	)		-			(324	)		-
COMPREHENSIVE LOSS FOR THE PERIOD	$	(5,465	)	$	(2,830	)	$	(5,377	)	$	(6,505	)

See accompanying notes to consolidated financial statements

Southwestern Resources Corp.    3

CONSOLIDATED STATEMENTS Of Cash Flows (Unaudited)

($ in thousands)	Three months ended						Six months ended
		June 30			June 30			June 30			June 30
		2007			2006			2007			2006
OPERATING ACTIVITIES
NET LOSS FOR THE PERIOD	$	(3,990	)	$	(2,830	)	$	(5,053	)	$	(6,505	)
ITEMS NOT INVOLVING CASH
AMORTIZATION		11			13			23			27
STOCK-BASED COMPENSATION		1,125			1,236			3,878			3,737
GAIN ON SHARES ISSUED BY AFFILIATED COMPANIES		(637	)		(387	)		(637	)		(409	)
NON-CONTROLLING INTEREST		-			-			(434	)		-
GAIN ON SALE OF INVESTMENTS		(212	)		(435	)		(3,558	)		(435	)
MINERAL PROPERTY COSTS WRITTEN OFF		153			494			153			494
EQUITY IN OPERATIONS OF AFFILIATED COMPANIES		426			(199	)		485			(166	)
		(3,124	)		(2,108	)		(5,143	)		(3,257	)
CHANGE IN NON-CASH OPERATING WORKING CAPITAL ITEMS:
INCREASE IN EXPLORATION ADVANCES AND OTHER RECEIVABLES		(130	)		(217	)		(28	)		(197	)
INCREASE IN ACCOUNTS PAYABLE AND ACCRUED CHARGES		338			187			319			101
CASH USED IN OPERATING ACTIVITIES		(2,916	)		(2,138	)		(4,852	)		(3,353	)
INVESTING ACTIVITIES
CASH REDUCTION ON COMMENCEMENT OF EQUITY ACCOUNTING		(15,378	)		-			(15,378	)		-
MINERAL PROPERTY EXPENDITURES		(4,137	)		(5,328	)		(8,739	)		(8,592	)
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT		(71	)		(179	)		(184	)		(370	)
DECREASE IN SHORT-TERM INVESTMENTS		268			-			2,593			-
INCREASE IN INVESTMENTS		-			(5,351	)		(517	)		(5,351	)
SALE OF INVESTMENTS		348			541			5,209			541
CASH USED IN INVESTING ACTIVITIES		(18,970	)		(10,317	)		(17,016	)		(13,772	)
FINANCING ACTIVITY
SHARES (PURCHASED) ISSUED		(2,246	)		582			(7,214	)		1,146
CASH (USED IN) PROVIDED BY FINANCING ACITVITY		(2,246	)		582			(7,214	)		1,146
DECREASE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD		(24,132	)		(11,873	)		(29,082	)		(15,979	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		52,738			59,703			57,688			63,809
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	28,606		$	47,830		$	28,606		$	47,830
CASH AND CASH EQUIVALENTS CONSIST OF:
CASH	$	26,103		$	44,088		$	26,103		$	44,088
SHORT – TERM INVESTEMENTS		2,503			3,742			2,503			3,742
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	28,606		$	47,830		$	28,606		$	47,830

SUPPLEMENTAL CASH FLOW INFORMATION (NOTE 12)

See accompanying notes to consolidated financial statements

4     Southwestern Resources Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2007 All tabular amounts are in thousands of dollars Unaudited

1.NATURE AND CONTINUANCE OF OPERATIONS

The Company is an exploration stage mineral exploration company engaged in the identification, acquisition, evaluation and exploration of mineral properties, especially those with the potential to host gold, silver and base metals, and is currently active in China and Peru. The Company is not in commercial production on any of its mineral properties and, accordingly, it does not generate cash from operations. The Company finances its activities by raising capital through the equity markets.

On July 19, 2007, the Company announced it had determined that there were deficiencies in its control procedures for its Boka Project which resulted in errors in previously reported assay results. Furthermore, the review indicated that the integrity of certain stored drill core samples had been compromised. As a consequence, the Company withdrew all of its previously announced results for the Boka Project and has initiated a detailed review. Such review includes checking and confirming the Company’s database for the Boka Project against the underlying official assay certificates to achieve a validated database. The review is ongoing as at the date of this report and the Company is expected to provide an update in due course.

The consolidated financial statements as at June 30, 2007 do not include any adjustment relating to the recoverability and classification of costs associated with the Boka Project that may be necessary should the Company subsequently determine that its recorded value, $40.9 million at June 30, 2007, has been impaired. The Company can provide no assurance that the ongoing review of the Boka Project will not result in an impairment charge.

The Company and John Paterson have been named in three class-action lawsuits in British Columbia, Ontario and Quebec, where the plaintiffs allege that the Company and Paterson negligently or recklessly misrepresented drilling results, and other data and information relating to the Boka Project. The Company intends to vigorously defend itself against such claims. The consolidated financial statements as at June 30, 2007 do not include any provision for liability that may be necessary should the Company be unsuccessful in defending such claims.

The Company’s continuing operations are dependent upon its ability to either secure additional equity capital or generate cash flow from operations in the future, which is not assured. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary, should the Company be unable to secure additional equity capital or generate cash from operations in the future.

2.BASIS OF PRESENTATION

These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial statements and follow the same accounting policies and methods of application as the most recent annual consolidated financial statements dated December 31, 2006, except for the items discussed in note 3 and note 6 below. These financial statements should be read in conjunction with those annual financial statements and notes thereto. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in Canada for complete financial statements. In the opinion of management, all adjustments (consisting primarily of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three and six month periods ended June 30, 2007 and 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

3.CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2007, the Company adopted two new accounting standards related to financial instruments that were issued by the Canadian Institute of Chartered Accountants. These accounting policy changes were adopted on a prospective basis with no restatement of prior period financial statements. The new standards and accounting policy changes are as follows:

FINANCIAL INSTRUMENTS RECOGNITION AND MEASUREMENT (SECTION 3855)

In accordance with this new standard, the Company now classifies all financial instruments as either held-to-maturity, available-for-sale, held-for-trading, loans and receivables, or other financial liabilities. Financial assets held-to-maturity, loans and receivables and financial liabilities other than those held-for-trading, are measured at amortized cost. Available-

Southwestern Resources Corp.    5

for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Instruments classified as held-for-trading are measured at fair value with unrealized gains and losses recognized on the statement of loss.

Upon adoption of this new standard, the Company has designated its cash and cash equivalents as held-for-trading, which are measured at fair value. Exploration advances and other receivables are classified as loans and receivables, which are measured at amortized cost. Accounts payable and accrued charges are classified as other liabilities, which are measured at amortized cost. Investments in significantly influenced affiliates are classified as held-to-maturity, which are measured at amortized cost. The Company has classified its investments in public companies (other than those that the Company has significant influence in) as available-for-sale and therefore carries them at fair market value, with the unrealized gain or loss recorded in shareholders’ equity as a component of other comprehensive income. These amounts will be reclassified from shareholders’ equity to net income when the investment is sold. Previously, investments in these public companies were carried at cost, less provisions for other than temporary declines in value. This change in accounting policy results in a $3,428,000 increase in the carrying value of investments in public companies as at January 1, 2007, representing the cumulative unrealized gain at that time (see Note 7(f)).

COMPREHENSIVE INCOME (SECTION 1530)

Comprehensive income is the change in shareholders’ equity during a period from transactions and other events and circumstances from non-owner sources. In accordance with this new standard, the Company now reports a consolidated statement of comprehensive income and a new category, accumulated other comprehensive income, in the shareholders’ equity section of the consolidated balance sheet. The components of this new category will include unrealized gains and losses on financial assets classified as available-for-sale. The components of accumulated other comprehensive income for the six month period ended June 30, 2007 are disclosed in Note 7(f).

4.PROPERTY, PLANT AND EQUIPMENT

						As at June 30, 2007
				Accumulated
		Cost		Amortization		Net Book Value
OFFICE AND OTHER EQUIPMENT	$	940	$	641	$	299
COMPUTER EQUIPMENT		1,008		748	$	260
VEHICLES		899		578	$	321
	$	2,847	$	1,967	$	880
				As at December 31, 2006
				Accumulated
		Cost		Amortization		Net Book Value
OFFICE AND OTHER EQUIPMENT	$	931	$	616	$	315
COMPUTER EQUIPMENT		945		714		231
VEHICLES		962		540		422
	$	2,838	$	1,870	$	968

Amortization relating to exploration related assets has been allocated to mineral properties in the amount of $103,603 (June 30, 2006 - $95,437) during the period.

5.MINERAL PROPERTIES

A)

		June 30, 2007		December 31, 2006
CHINA
BOKA	$	40,936	$	35,967
YUNNAN GOLD		860		857
OTHER		596		586
TOTAL CHINA		42,392		37,410

6     Southwestern Resources Corp.

		June 30, 2007		December 31, 2006
PERU
LIAM		5,706		5,138
ACCHA-YANQUE		--		3,108
BAMBAS WEST		--		738
BAMBAS COPPER		1,193		974
ANTAY		647		960
PACAPAUSA		264		262
OTHER		2,811		1,965
TOTAL PERU		10,621		13,145
TOTAL	$	53,013	$	50,555

B)For the period ended June 30, 2007 the significant expenditures were as follows:

		Boka		Liam		Accha-Yanque			Other			Total
BALANCE, BEGINNING OF PERIOD	$	35,967	$	5,138	$	3,108		$	6,342		$	50,555
PROPERTY ACQUISITION, AND MAINTENANCE		6		204		1			133			344
ANALYTICAL		181		13		55			24			273
GEOLOGY		2,342		329		666			426			3,763
DRILLING		2,198		--		981			305			3,484
RESEARCH		15		13		15			13			56
PROJECT ADMINISTRATION		227		9		132			97			465
PROPERTY COSTS WRITTEN OFF		--		--		--			(153	)		(153	)
DECONSOLIDATION OF ZINCORE METALS INC.		--		--		(4,958	)		(816	)		(5,774	)
BALANCE, END OF PERIOD	$	40,936	$	5,706		$ --		$	6,371		$	53,013

For the year ended December 31, 2006, the significant expenditures were as follows:

		Boka		Liam		Accha-Yanque		Other			Total
BALANCE, BEGINNING OF YEAR	$	25,596	$	3,194	$	1,256	$	4,833		$	34,879
PROPERTY ACQUISITION AND MAINTENANCE		17		361		200		534			1,112
ANALYTICAL		346		56		94		135			631
GEOPHYSICS		21		33		--		46			100
GEOLOGY		3,718		1,341		1,152		1,524			7,735
DRILLING		5,820		111		279		28			6,238
RESEARCH		26		15		46		22			109
PROJECT ADMINISTRATION		423		27		81		4			535
PROPERTY COSTS WRITTEN OFF		--		--		--		(593	)		(593	)
COST RECOVERY		--		--		--		(191	)		(191	)
BALANCE, END OF YEAR	$	35,967	$	5,138	$	3,108	$	6,342		$	50,555

See note 1 for description of Boka Project.

During the six month period ended June 30, 2007, expenditures totaling $153,000 were written off relating to various non-core projects in Peru. During the same period in 2006, expenditures totaling $494,000 relating to the Minispata Property in Peru were written off.

6.INVESTMENTS

A)

					June 30, 2007
	Ownership %		Carrying Value		Quoted Market Value
ZINCORE METALS INC. – SIGNIFICANTLY INFLUENCED AFFILIATE	49.4	$	10,049	$	30,480
SUPERIOR DIAMONDS INC.	13.0		2,925		3,981
OTHER INVESTMENTS	--		2,469		2,469
		$	15,443	$	36,930

Southwestern Resources Corp.    7

					December 31, 2006
	Ownership %		Carrying Value		Quoted Market Value
SUPERIOR DIAMONDS INC. – SIGNIFICANTLY INFLUENCED AFFILIATE	14.8	$	1,919	$	3,082
OTHER INVESTMENTS	--		2,485		5,913
		$	4,404	$	8,995

In April 2007, the Company sold 500,000 common shares of Zincore Metals Inc. (“Zincore”) for gross proceeds of $350,000 and recorded a gain of $212,000. This sale caused the Company’s interest in Zincore to be reduced from 50.4% to 49.7% . As a result of the reduction of the Company’s interest and resulting loss of control, the assets and liabilities of Zincore were no longer consolidated in the Company’s balance sheet effective April 1, 2007. The assets and liabilities of Zincore excluded from consolidation and the investment carrying value as at June 30, 2007 are detailed as follows:

CASH	$	15,378
EXPLORATION ADVANCES AND OTHER RECEIVABLES		171
OTHER ASSETS		75
PROPERTY, PLANT AND EQUIPMENT		146
RESOURCE PROPERTIES		5,774
		21,544
ACCOUNTS PAYABLE AND ACCRUED CHARGES		(662	)
NON-CONTROLLING INTEREST		(10,360	)
INVESTMENT AS AT APRIL 1, 2007	$	10,522
SALE OF SHARES		(136	)
EQUITY IN LOSS (APRIL 1, 2007 TO JUNE 30, 2007)		(398	)
GAIN ON DILUTION		61
INVESTMENT AS AT JUNE 30, 2007	$	10,049

During the six month period ended June 30, 2007, the Company sold all of its common shares of Lake Shore Gold Corp. (“Lake Shore”) and recorded a gain of $3,346,000. As well, during the same period the Company purchased 1,361,000 common shares of Superior Diamonds Inc. (“Superior”) at a cost of $517,000. Due to the Company and Superior no longer having a director and president in common, the Company will account for its investment using the cost method instead of the equity method as the Company no longer has significant influence.

B)

				For the three months ended					For the three months Ended
				June 30, 2007					June 30, 2006
		Gain on shares issued by		Equity in operations of			Gain on shares issued by		Equity in operations of
		affiliated companies (i)		affiliated companies (ii)			affiliated companies (i)		affiliated companies (ii)
SUPERIOR DIAMONDS INC.	$	576	$	(28	)	$	387	$	199
ZINCORE METALS INC.		61		(398	)		--		--
	$	637	$	(426	)	$	387	$	199
				For the six months ended					For the six months ended
				June 30, 2007					June 30, 2006
		Gain on shares issued by		Equity in operations of			Gain on shares issued by		Equity in operations of
		affiliated companies(i)		affiliated companies (ii)			affiliated companies (i)		affiliated companies (ii)
SUPERIOR DIAMONDS INC.	$	576	$	(87	)	$	409	$	166
ZINCORE METALS INC.		61		(398	)		--		--
	$	637	$	(485	)	$	409	$	166

I.	Gains on shares issued by affiliated companies arise when the ownership interest of the Company in a significantly influenced or controlled company is diluted as a result of share issuances of the investee company. The Company does not receive any cash proceeds (nor is required to make any payments) from these transactions.
II.	Equity in operations of affiliated companies represents the Company’s share of the net gains or losses for the reporting period in a significantly influenced company.

8     Southwestern Resources Corp.

7.SHARE CAPITAL

A)Authorized unlimited common shares without par value.

B)Issued and outstanding during the period:

											For the six months ended
														June 30, 2007
	Number of					Treasury					Number of Shares
	Shares Issued			Amount		Shares			Amount		Outstanding			Amount
	(000	’s)				(000	’s)				(000	’s)
BEGINNING OF PERIOD	45,895		$	179,571		41		$	332		45,854		$	179,239
SHARES PURCHASED	--			--		931			7,214		(931	)		(7,214	)
CANCELLED SHARES	(759	)		(2,968	)	(759	)		(6,041	)	--			3,073
END OF PERIOD	45,136		$	176,603		213		$	1,505		44,923		$	175,098

														For the year ended
														December 31, 2006
	Number of					Treasury					Number of Shares
	Shares Issued			Amount		Shares			Amount		Outstanding			Amount
	(000	’s)				(000	’s)				(000	’s)
BEGINNING OF YEAR	46,014		$	179,701		80		$	778		45,934		$	178,923
OPTIONS EXERCISED	228			899		--			--		228			899
PRIVATE PLACEMENT	58			556		--			--		58			556
SHARES PURCHASED	--			--		366			3,342		(366	)		(3,342	)
CANCELLED SHARES	(405	)		(1,585	)	(405	)		(3,788	)	-			2,203
END OF YEAR	45,895		$	179,571		41		$	332		45,854		$	179,239

During the six month period ended June 30, 2007, the Company purchased 930,600 of its own common shares for costs totalling $7,213,705 pursuant to its normal course issuer bid. During the same period, 717,600 of these common shares, as well as 41,200 common shares purchased in 2006, were cancelled and resulted in a loss of $3,072,876 being recorded as a charge to deficit.

C)Stock Options

Under the Company’s stock option plan there were 4,227,000 options outstanding at June 30, 2007 with a weighted average price of $10.32. Of the options outstanding, 3,613,750 options were exercisable with a weighted average price of $10.73

	For the six months ended June 30, 2007
	Number of shares			Weighted Average
	(in thousands)			Exercise Price
OUTSTANDING AT BEGINNING OF PERIOD	4,088		$	13.19
GRANTED	1,246		$	7.93
EXERCISED/CANCELLED	(1,107	)	$	18.19
OUTSTANDING AT END OF PERIOD	4,227		$	10.32
EXERCISABLE AT END OF PERIOD	3,614		$	10.73

D)Stock-Based Compensation

As a result of stock options vesting and the amortization of previous grants during the six month period ended June 30, 2007, the Company recognized stock-based compensation expense and included this amount in contributed surplus as follows:

Southwestern Resources Corp.    9

		Three months ended		Three months ended		Six months ended		Six months ended
		June 30, 2007		June 30, 2006		June 30, 2007		June 30, 2006
OFFICE SALARIES	$	297	$	409	$	767	$	1,309
CONSULTING FEES		477		639		1,183		1,803
GENERAL EXPLORATION		351		188		1,592		625
ZINCORE		--		--		336		--
TOTAL	$	1,125	$	1,236	$	3,878	$	3,737

For the six months ended June 30, 2007, the stock-based compensation value was determined using the Black-Scholes option pricing model. A weighted-average grant-date fair value of $3.37 (June 30, 2006 - $5.97) for each option grant was estimated using the following assumptions: no dividends are to be paid; volatility of 53% (June 30, 2006 - 54%); risk free interest rate of 4.0% (June 30, 2006 – 4.0%); and expected life of 3.4 years (June 30, 2006 – 3.5 years).

The fair value computed using the Black-Scholes model is only an estimate of the potential value of the individual options and the Company is not required to make payments for such transactions.

E)Contributed Surplus

		Six months ended June 30, 2007			Year Ended December 31, 2006
BALANCE, BEGINNING OF PERIOD	$	23,590		$	20,115
STOCK-BASED COMPENSATION		3,878			4,855
CANCELLED SHARES		--			(1,290	)
STOCK OPTIONS EXERCISED		--			(309	)
STOCK OPTIONS GRANTED BY SUBSIDIARY		169			219
STOCK-BASED COMPENSATION REMOVED ON		(336	)		--
COMMENCEMENT OF EQUITY ACCOUNTING
BALANCE, END OF PERIOD	$	27,301		$	23,590

F)Accumulated other comprehensive income

		Six Months Ended June 30, 2007
BALANCE AT DECEMBER 31, 2006		$ --
ADJUSTMENT FOR CUMULATIVE UNREALIZED GAINS ON AVAILABLE-		3,428
FOR-SALE INVESTMENTS AT TRANSITION DATE ON JANUARY 1, 2007
REALIZED GAIN ON SALE OF AVAILABLE-FOR-SALE INVESTMENT		(1,605	)
UNREALIZED LOSS ON AVAILABLE-FOR-SALE INVESTMENTS		(324	)
BALANCE AT JUNE 30, 2007	$	1,499

8.RELATED PARTY TRANSACTIONS

During the three and six month periods ended June 30, 2007 and June 30, 2006, the Company paid remuneration to directors and to companies controlled by officers who are also directors. The Company received management fees, which are recorded as other income from Superior, Lake Shore and Zincore. These are companies which are related by way of directors in common and/or by way of a management services agreement as follows:

		Three months ended		Three months ended		Six months ended		Six months ended
		June 30, 2007		June 30, 2006		June 30, 2007		June 30, 2006
REMUNERATION PAID TO OFFICERS / DIRECTORS	$	398	$	113	$	530	$	239
MANAGEMENT FEES RECEIVED	$	90	$	18	$	110	$	36

There was also an amount of $88,743 (December 31, 2006 - $5,669) due to Southwestern from the above mentioned companies at June 30, 2007.

All related party transactions are measured at the exchange amount which is the consideration agreed to between the parties.

10     Southwestern Resources Corp.

9. SEGMENTED INFORMATION

INDUSTRY INFORMATION
The Company operates in one reportable operating segment, being the acquisition and exploration of mineral properties.

GEOGRAPHIC INFORMATION
The Company’s only sources of revenue for the six month period ended June 30, 2007 arose from interest earned on corporate cash reserves and management fees. The Company has non-current assets in the following geographic locations:

		June 30, 2007		December 31, 2006
CHINA	$	42,674	$	37,652
PERU		11,059		13,694
CANADA		15,603		4,656
	$	69,336	$	56,002

10. GENERAL AND ADMINISTRATIVE

		Three months ended		Three months ended		Six months ended		Six months ended
		June 30, 2007		June 30, 2006		June 30, 2007		June 30, 2006
CONSULTING	$	1,029	$	958	$	2,256	$	2,442
SHAREHOLDER INFORMATION		172		129		422		306
OFFICE		218		181		625		441
LEGAL AND ACCOUNTING		145		193		265		319
TRAVEL		118		33		162		120
SALARIES AND BENEFITS		562		687		1,369		1,800
TOTAL	$	2,244	$	2,181	$	5,099	$	5,428

11.NON-CONTROLLING INTEREST

At June 30, 2007, the Company’s non-controlling interest in Zincore was comprised of the following:

		June 30, 2007			December 31, 2006
BALANCE, BEGINNING OF PERIOD	$	10,627			$--
CREATION OF NON-CONTROLLING INTEREST DUE		--			10,844
TO SALE OF SHARES BY SUBSIDIARY
SHARE OF STOCK OPTIONS GRANTED		167			215
SHARE OF NET LOSS OF SUBSIDIARY FOR PERIOD		(434	)		(432	)
LOSS OF CONTROLLING INTEREST		(10,360	)		--
BALANCE, END OF THE PERIOD		$ --		$	10,627

12.SUPPLEMENTAL CASH FLOW INFORMATION

In March 2006, the Company received 444,444 common shares of Superior in settlement for a note receivable valued at $200,000.

13.COMPARATIVE FIGURES

Certain of the comparative figures have been reclassified to conform to the current period’s presentation.

14. SUBSEQUENT EVENT (Except for those subsequent events noted elsewhere in these financial statements.)

On July 23, 2007, the Company adopted a Shareholder Rights Plan (the "Rights Plan"). The Rights Plan is designed to ensure fair treatment for all shareholders in the event of a take-over bid or any other attempt to acquire a controlling interest in the Company. Provisions of the Rights Plan include the limitation on shareholder ownership at 20% of the outstanding common shares in the absence of a take-over bid for all outstanding common shares and a requirement for a take-over bid to be open for a minimum of 60 days. The Rights Plan is effective immediately and must be ratified by shareholders within six months of its adoption date.

Southwestern Resources Corp.    11