CARDERO RESOURCE CORP.
(An Exploration Stage Company)

Audited Consolidated Financial Statements

October 31, 2011 and 2010

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The consolidated financial statements and all information in the annual report are the responsibility of the Board of Directors and management. The consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. Management maintains the necessary systems of internal controls, policies and procedures to provide assurance that assets are safeguarded and that the financial records are reliable and form a proper basis for the preparation of financial statements.

The Board of Directors ensures that management fulfills its responsibilities for financial reporting and internal control through an Audit Committee. This committee, which reports to the Board of Directors, meets with the independent auditors and reviews the financial statements.

The consolidated financial statements have been audited by Smythe Ratcliffe LLP, Chartered Accountants, who were appointed by the shareholders. The auditors’ report outlines the scope of their examination and their opinion on the consolidated financial statements.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of the Company’s financial reporting for external purposes in accordance with accounting principles generally accepted in Canada and the United States of America. Internal control over financial reporting includes maintaining records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; providing reasonable assurance that transactions are recorded as necessary for preparation of the Company’s financial statements in accordance with generally accepted accounting principles; providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company’s assets that could have a material effect on its financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s financial statements would be prevented or detected.

The Company acquired 100% ownership in Cardero Coal Ltd. (formerly Coalhunter Mining Corporation) on June 1, 2011. Management excluded from its assessment of the effectiveness of Cardero Resource Corp.’s internal control over financial reporting as of October 31, 2011. Cardero Coal Ltd.’s internal control over financial reporting is associated with total assets of $66.4 million included in the consolidated financial statements of Cardero Resource Corp. and subsidiaries as of and for the year ended October 31, 2011. Management did not assess the effectiveness of internal control over financial reporting at Cardero Coal Ltd. due to the complexity associated with assessing internal controls during integration efforts.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of October 31, 2011. The effectiveness of the Company’s internal control over financial reporting as of October 31, 2011 has been audited by Smythe Ratcliffe LLP, an independent registered public accounting firm, as stated in their report.

“Michael Hunter”	“Blaine Bailey”
Michael Hunter,	Blaine Bailey,
President & Chief Executive Officer	Chief Financial Officer
January 26, 2012
Vancouver, Canada

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS OF CARDERO RESOURCE CORP.
(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of Cardero Resource Corp. as of October 31, 2011 and 2010 and the consolidated statements of operations, shareholders’ equity and cash flows for the years ended October 31, 2011, 2010 and 2009, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Cardero Resource Corp. as at October 31, 2011 and 2010, and the results of its operations and its cash flows for the years ended October 31, 2011, 2010 and 2009 in accordance with Canadian generally accepted accounting principles.

Other Matter
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of October 31, 2011 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 26, 2012 expressed an unqualified opinion thereon.

Chartered Accountants

Vancouver, Canada
January 26, 2012

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS OF CARDERO RESOURCE CORP.
(An Exploration Stage Company)

We have audited Cardero Resource Corp.’s (the “Company”) internal control over financial reporting as of October 31, 2011 based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risks. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is 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. A company’s 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 the assets of the company; (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 company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Cardero Resource Corp.’s Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Cardero Coal Ltd. (formerly Coalhunter Mining Corporation), which is included in the October 31, 2011 consolidated financial statements of Cardero Resource Corp. and constituted $66.4 million of total assets as of October 31, 2011. Our audit of internal control over financial reporting of Cardero Resource Corp. also did not include an evaluation of the internal control over financial reporting of Cardero Coal Ltd.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of October 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years ended October 31, 2011, 2010 and 2009, and our report dated January 26, 2012 expressed an unqualified opinion thereon.

Chartered Accountants

Vancouver, Canada
January 26, 2012

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Consolidated Financial Statements

October 31, 2011, 2010 and 2009

INDEX	Page
Management’s Responsibility for Financial Statements
Management’s Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Financial Statements	1-5
Consolidated Balance Sheets	1
Consolidated Statements of Operations	2
Consolidated Statements of Shareholders’ Equity	3-4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6-45

CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Consolidated Balance Sheets
October 31

		2011			2010
ASSETS
Current
Cash and cash equivalents	$	5,985,634		$	52,264,003
Accounts receivable		1,434,077			267,431
Due from related parties (note 9)		1,239,043			1,361,550
Loan receivable (note 9)		8,580,096			-
Prepaid expenses		356,191			335,493
Total Current Assets		17,595,041			54,228,477
Fixed Assets (note 4)		910,996			197,737
Resource Related Investments (note 5)		32,551,104			60,685,650
Equity Investments (note 6)		-			5,236,540
Resource Property Advances		810,100			-
Resource Properties (notes 3 and 7)		69,347,042			15,856,750
Reclamation Deposit		115,000			-
Total Assets	$	121,329,283		$	136,205,154
LIABILITIES
Current
Accounts payable and accrued liabilities (note 9)	$	4,038,261		$	832,087
Income taxes payable		-			26,847,314
Total Current Liabilities		4,038,261			27,679,401
Future Income Tax Liability (note 3)		11,713,033			-
Total Liabilities		15,751,294			27,679,401
SHAREHOLDERS’ EQUITY
Capital Stock (notes 3 and 8)		107,237,122			69,890,947
Contributed Surplus		20,318,203			14,726,585
Accumulated Other Comprehensive Income		9,075,564			30,227,593
Deficit		(31,052,900	)		(6,319,372	)
Total Shareholders’ Equity		105,577,989			108,525,753
Total Liabilities and Shareholders’ Equity	$	121,329,283		$	136,205,154

Nature of operations (note 1)
Commitments (note 12)
Subsequent events (note 17)

Approved on behalf of the Board:

“Hendrik Van Alphen”	“Lawrence W. Talbot”
Hendrik Van Alphen, Director	Lawrence W. Talbot, Director

See Notes to Consolidated Financial Statements 1

CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Consolidated Statements of Operations
Years Ended October 31

		2011			2010			2009
Administrative Expenses
Amortization	$	244,935		$	69,463		$	52,418
Bad debts		-			104,835			468,099
Consulting fees (notes 8 and 9)		1,324,798			1,828,250			1,276,789
Corporate development		606,239			301,906			91,058
Insurance		108,928			162,115			173,179
Investor relations (note 8)		650,779			553,873			254,789
Office costs		736,844			1,005,473			726,334
Professional fees (note 9)		977,197			995,418			820,382
Property evaluations (note 7(e))		3,610,508			226,202			453,525
Regulatory and transfer agent fees		221,064			104,686			134,609
Salaries and benefits (note 8)		3,840,081			3,238,965			2,215,861
Travel		225,639			328,387			255,344
Loss Before Other Items and Income Taxes		(12,547,012	)		(8,919,573	)		(6,922,387	)
Other Items
Foreign exchange gain (loss)		984,660			(3,832,001	)		(418,566	)
Interest income, net of bank charges (note 9(c))		1,420,650			36			24,575
Realized gain on sale of available-for-sale investment (note 5)		8,833,404			939,651			2,718,254
Unrealized gain (loss) on derivative investments (note 5)		(2,936,073	)		1,346,746			349,424
Unrealized gain (loss) on held-for-trading investment (note 5)		(59,500	)		52,000			11,000
Gain on sale of resource property (note 7(c)(ii))		-			87,727,157			8,597,655
Write-off of resource properties (note 7)		(12,206,614	)		(8,498,083	)		(3,070,287	)
Impairment losses on available-for-sale investments (note 5)		(2,837,978	)		-			-
Loss on equity investments (note 6)		(793,194	)		(483,461	)		(795,000	)
Loss on debt settlement		-			-			(17,176	)
		(7,594,645	)		77,252,045			7,399,879
Income (Loss) Before Income Taxes		(20,141,657	)		68,332,472			477,492
Income Taxes
Current expense		(859,159	)		(26,421,049	)		(2,564,900	)
Future recovery (expense) (note 11)		(3,732,712	)		3,039,547			1,832,780
		(4,591,871	)		(23,381,502	)		(732,120	)
Net Income (Loss) for the Year	$	(24,733,528	)	$	44,950,970		$	(254,628	)
Basic and Diluted Income (Loss) Per Share	$	(0.36	)	$	0.77		$	(0.01	)
Weighted Average Number of Common Shares Outstanding		68,988,456			58,571,515			58,421,309

CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Consolidated Statements of Shareholders’ Equity

	Capital Stock													Accumulated
														Other			Total
					Obligation to						Contributed			Comprehensive			Shareholders’
	Shares		Amount		Issue Shares			Deficit			Surplus			Income			Equity
Balance, October 31, 2008	57,782,847	$	68,824,822	$	795,000		$	(51,015,714	)	$	11,912,309		$	2,617,740		$	33,134,157
Net loss for the year	-		-		-			(254,628	)		-			-			(254,628	)
Other comprehensive income
Unrealized gain on available-for-sale investments	-		-		-			-			-			12,043,882			12,043,882
Transfer to income of realized gain on sale of resource related      investments	-		-		-			-			-			(1,658,126	)		(1,658,126	)
Comprehensive income for the year																	10,131,128
Shares issued for cash
Exercise of options	25,000		36,750		-			-			-			-			36,750
Exercise of warrants	92,500		127,500		-			-			-			-			127,500
Shares issued for non-cash
Reclassification of contributed surplus on exercise of options	-		14,088		-			-			(14,088	)		-			-
Reclassification of contributed surplus on exercise of warrants	-		32,059		-			-			(32,059	)		-			-
Investment acquisition	500,000		795,000		(795,000	)		-			-			-			-
Obligation to issue shares	-		-		111,500			-			-			-			111,500
Debt settlement	143,130		204,676		-			-			-			-			204,676
Stock-based compensation	-		-		-			-			1,192,109			-			1,192,109
Balance, October 31, 2009	58,543,477		70,034,895		111,500			(51,270,342	)		13,058,271			13,003,496			44,937,820

CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Consolidated Statements of Shareholders’ Equity (Continued)

	Capital Stock															Accumulated
																Other			Total
							Obligation to						Contributed			Comprehensive			Shareholders’
	Shares			Amount			Issue Shares			Deficit			Surplus			Income			Equity
Balance, October 31, 2009 (carried forward)	58,543,477		$	70,034,895		$	111,500		$	(51,270,342	)	$	13,058,271		$	13,003,496		$	44,937,820
Net income for the year	-			-			-			44,950,970			-			-			44,950,970
Other comprehensive income
Unrealized gain on available-for-sale investments	-			-			-			-			-			17,686,472			17,686,472
Transfer to income of realized gain on sale of               resource related investments	-			-			-			-			-			(462,375	)		(462,375	)
Comprehensive income for the year																			62,175,067
Shares issued for cash
Exercise warrants	67,125			90,619			-			-			-			-			90,619
Shares purchased pending return to treasury	(312,300	)		(374,760	)		-			-			1,066			-			(373,694	)
Shares issued for non-cash
Reclassification of contributed surplus on exercise of warrants	-			28,693			-			-			(28,693	)		-			-
Property acquisition	75,000			111,500			(111,500	)		-			-			-			-
Stock-based compensation	-			-			-			-			1,695,941			-			1,695,941
Balance, October 31, 2010	58,373,302			69,890,947			-			(6,319,372	)		14,726,585			30,227,593			108,525,753
Net loss for the year	-			-			-			(24,733,528	)		-			-			(24,733,528	)
Other comprehensive income
Unrealized loss on available-for-sale investments	-			-			-			-			-			(13,039,757	)		(13,039,757	)
Transfer to income of realized gain on sale of resource       related investments	-			-			-			-			-			(8,112,272	)		(8,112,272	)
Comprehensive loss for the year																			(45,885,557	)
Shares issued for cash
Exercise options	840,000			1,026,150			-			-			-			-			1,026,150
Exercise warrants	443,800			171,718			-			-			-			-			171,718
Shares issued for non-cash
Reclassification of contributed surplus on exercise of options	-			556,406			-			-			(556,406	)		-			-
Reclassification of contributed surplus on exercise of warrants	-			496,398			-			-			(496,398	)		-			-
Acquisition of Cardero Coal (note 3)	23,397,002			35,095,503			-			-			5,342,487			-			40,437,990
Stock-based compensation	-			-			-			-			1,301,935			-			1,301,935
Balance, October 31, 2011	83,054,104		$	107,237,122		$	-		$	(31,052,900	)	$	20,318,203		$	9,075,564		$	105,577,989

CARDERO RESOURCE CORP.
(AN EXPLORATION STAGE COMPANY)
Consolidated Statements of Cash Flows
Years Ended October 31

		2011			2010			2009
Operating Activities
Net income (loss) for the year	$	(24,733,528	)	$	44,950,970		$	(254,628	)
Items not involving cash
Amortization		244,935			69,463			52,418
Bad debts		-			104,835			468,099
Stock-based compensation (note 8)		1,301,935			1,695,941			1,192,109
Write-off of resource properties (note 7)		12,206,614			8,498,083			3,070,287
Realized gain on sale of available-for-sale investments		(8,833,403	)		(939,651	)		(2,718,254	)
Unrealized loss (gain) on held-for-trading investment (note 5)		59,500			(52,000	)		(11,000	)
Loss on equity investment		793,194			483,461			795,000
Unrealized loss (gain) on derivative investments (note 5)		2,936,073			(1,346,746	)		(349,424	)
Impairment losses on available-for-sale investments (note 5)		2,837,978			-			-
Amortization of fair value of warrants to interest income		(892,513	)		-			-
Gain on sale of resource property		-			(87,727,157	)		(8,597,655	)
Loss on debt settlement		-			-			17,176
Future income taxes (recovery) expense		3,732,712			(3,039,547	)		(1,832,780	)
Realized foreign exchange gain on income tax payable		(1,245,680	)		-			-
Unrealized foreign exchange loss		1,369,755			2,877,426			32,360
Changes in non-cash working capital items
Accounts receivable		(308,776	)		(85,975	)		300,662
Due from related parties		122,507			(773,594	)		150,916
Loan receivable		(8,580,096	)		-			-
Prepaid expenses		(15,532	)		(95,465	)		(16,254	)
Accounts payable and accrued liabilities		(163,112	)		173,710			78,765
Income taxes payable		(25,601,634	)		24,282,414			2,564,900
Cash Used in Operating Activities		(44,769,071	)		(10,923,832	)		(5,057,303	)
Investing Activities
Acquisition of Cardero Coal Ltd. (note 3)		2,348,873			-			-
Investment in and expenditures on resource properties		(7,332,461	)		(7,411,092	)		(3,778,314	)
Increase in reclamation deposit		(110,000	)		-			-
Proceeds from resource property transactions, net of costs		-			88,372,433			13,587,313
Proceeds from sale of resource related investments		12,250,273			2,416,776			4,607,154
Purchase of resource related investments		(3,840,625	)		(17,094,329	)		(4,874,325	)
Purchase of equity investments		(3,882,443	)		(5,720,000	)		-
Purchase of fixed assets		(771,028	)		(38,648	)		(82,059	)
Cash Provided by (Used in) Investing Activities		(1,337,411	)		60,525,140			9,459,769
Financing Activities
Proceeds from shares issued		1,197,868			90,619			164,250
Shares purchased pending return to treasury		-			(373,694	)		-
Cash Provided by (Used in) Financing Activities		1,197,868			(283,075	)		164,250
Effect of Foreign Exchange on Cash		(1,369,755	)		(2,877,426	)		(32,360	)
Increase (Decrease) in Cash and Cash Equivalents		(46,278,369	)		46,440,807			4,534,356
Cash and Cash Equivalents, Beginning of the Year		52,264,003			5,823,196			1,288,840
Cash and Cash Equivalents, End of the Year	$	5,985,634		$	52,264,003		$	5,823,196
Supplemental cash flow information (note 16)

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

1.	NATURE OF OPERATIONS
	Cardero Resource Corp. and its subsidiaries are engaged in the exploration of mineral properties, primarily in Mexico, Peru, Argentina, Ghana, the United States and Canada. The Company considers itself to be an exploration stage company.
	These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will be able to continue in operation for the foreseeable future.
	The Company incurred a loss of $24,733,528 for the year ended October 31, 2011 (2010 – $44,950,970 net income; 2009 – $254,628 net loss). The Company has working capital as at October 31, 2011 of $13,556,780 (2010 - $26,549,076), and a deficit of $31,052,900 (2010 - $6,319,372).
	As the equity market improves, with the fair value of the Company’s investments, management believes it has sufficient funding for operations in the near future, which results in the going concern assumption being an appropriate underlying concept for the preparation of these consolidated financial statements.
	The business of mining and exploration involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The Company has no source of revenue, and has significant cash requirements to meet its administrative overhead and maintain its mineral interests. The recoverability of amounts shown for resource properties is dependent on several factors. These include the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development of these properties, and future profitable production or proceeds from disposition of mineral properties or resource related investments.
2.	SIGNIFICANT ACCOUNTING POLICIES
	(a)	Basis of presentation
		These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) and are stated in Canadian dollars. As described in note 15, accounting principles generally accepted in Canada differ in certain material respects from accounting principles generally accepted in the United States (“US GAAP”).
		These consolidated financial statements include the accounts of Cardero Resource Corp. (“Cardero”) and its wholly-owned integrated subsidiaries, Cardero Argentina, S.A. (“Cardero Argentina”), Minerales Y Metales California, S.A. de C.V. (“MMC”), Cardero Iron Ore Company Ltd., Cardero Hierro Del Peru S.A.C. (“Cardero Iron Peru”), Cerro Colorado Development Ltd., Compania Minera Cardero Chile Limitada (“Cardero Chile”), Cardero Iron Ore (USA) Inc. (“Cardero Iron US”), Cardero Iron Ore Management (USA) Inc., Cardero Iron Ore Company (BVI) Ltd., Cardero Hierro Peru (BVI) Ltd., Cardero Coal Ltd. (formerly “Coalhunter Mining Corporation”) (“Cardero Coal”), Cardero Ghana Ltd. (“Cardero Ghana”) and Cardero Iron Ore Ghana (BVI) Ltd. (collectively, the “Company”). All significant inter-company transactions and balances have been eliminated.
	(b)	Cash and cash equivalents
		Cash and cash equivalents includes cash and highly liquid investments, with maturities of three months or less from the date of purchase, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

6

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

2.	SIGNIFICANT ACCOUNTING POLICIES (Continued)
	(c)	Use of estimates
		The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Areas requiring the use of estimates include the rates of amortization for fixed assets, the recoverability of resource property interests, the recoverability of accounts receivable and amounts due from related parties, the recoverability of equity investments, the assumptions used in the determination of the fair value of financial instruments and stock-based compensation, and the determination of the valuation allowance for future income tax assets and accruals. Management believes the estimates are reasonable; however, actual results could differ from those estimates and could impact future results of operations and cash flows.
	(d)	Amortization
		Amortization of fixed assets is recorded at the following annual rates:

Computer equipment	-	30% declining balance basis
Computer software	-	100% declining balance
Office equipment	-	20% to 30% declining balance basis
Vehicle	-	20% declining balance
Metallurgy lab	-	over 5 years on a straight-line basis
Leasehold improvements	-	over the term of the lease on a straight-line basis

	Additions during the year are amortized at one-half the annual rates.
(e)	Investments
	Investments over which the Company exercises significant influence are accounted for using the equity method. Resource related investments, not including derivatives, are principally classified as available-for-sale, and are carried at quoted market value, where applicable, or at an estimate of fair value. Resulting unrealized gains or losses, net of applicable income taxes, are reflected in other comprehensive income, while realized gains or losses are reflected in operations. Share purchase warrants included in investments are derivative financial instruments and are classified as held-for-trading and, accordingly, unrealized gains or losses, net of applicable income taxes, are included in operations.
	The investments are reviewed, on an investment-by-investment basis quarterly, to consider whether there are any conditions that may indicate that the impairments are other than temporary. When the impairments are other than temporary, in the Company’s assessment, the accumulated unrealized gains or losses are reflected in operations rather than in other comprehensive income.

7

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

2.	SIGNIFICANT ACCOUNTING POLICIES (Continued)
	(f)	Resource properties
		The Company capitalizes all costs related to investments in mineral property interests on a property-by-property basis. Such costs include mineral property acquisition costs and exploration and development expenditures, net of any recoveries. Costs are deferred until such time as the extent of mineralization has been determined and mineral property interests are either developed, the property is sold or the Company’s mineral rights are allowed to lapse.
		All capitalized costs are reviewed, on a property-by-property basis, to consider whether there are any conditions that may indicate impairment. When the carrying value of a property exceeds its net recoverable amount (as estimated by quantifiable evidence of an economic geological resource or reserve or by reference to option or joint venture expenditure commitments) or when, in the Company’s assessment, it will be unable to sell the property for an amount greater than the deferred costs, the property is written down for the impairment in value.
		From time to time, the Company may acquire or dispose of a mineral property interest pursuant to the terms of an option agreement. As such options are exercisable entirely at the discretion of the optionee, the amounts payable or receivable are not recorded at the time of the agreement. Option payments are recorded as property costs or recoveries when the payments are made or received.
		The amounts shown for acquisition costs and deferred exploration expenditures represent costs incurred to date and do not necessarily reflect present or future values.
		Capitalized costs are depleted over the useful lives of the properties upon commencement of commercial production, or written-off if the properties are abandoned or the applicable mineral rights are allowed to lapse.
	(g)	Foreign currency translation
		The functional and reporting currency of the Company is the Canadian dollar. Amounts recorded in foreign currency are translated into Canadian dollars as follows:
		i.	Monetary assets and liabilities, at the rate of exchange in effect as at the balance sheet date;
		ii.	Non-monetary assets and liabilities, at the exchange rates prevailing at the time of the acquisition of the assets or assumption of the liabilities; and
		iii.	Interest income and expenses (excluding amortization, which is translated at the same rate as the related asset), at the rate of exchange on the transaction date.

	Gains and losses arising from this translation of foreign currency are included in the determination of net income (loss) for the period.
(h)	Stock-based compensation
	The Company accounts for stock-based compensation using a fair value based method with respect to all stock-based payments measured and recognized, to directors, employees and non -employees. For directors and employees, the fair value of the option is measured at the date of grant. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete or the date the performance commitment is reached, or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. For directors, employees and non-employees, the fair value of the options is accrued and charged either to operations or mineral property interests, with the offset credit to contributed surplus, over the vesting period. If and when the stock options are exercised, the applicable amounts from contributed surplus are transferred to capital stock.

8

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

2.	SIGNIFICANT ACCOUNTING POLICIES (Continued)
	(i)	Basic and diluted income (loss) per share
		Basic income (loss) per share is calculated using the weighted average number of common shares outstanding during the year. The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method the dilutive effect on income per share is calculated presuming the exercise of outstanding options, warrants and similar instruments. It assumes that the proceeds of such exercise would be used to repurchase common shares at the average market price during the year. However, the calculation of diluted income (loss) per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive. Shares held in escrow, other than where their release is subject to the passage of time, are not included in the calculation of the weighted average number of common shares outstanding.
	(j)	Revenue recognition
		Interest income is recorded as earned at the effective rate of interest over the term to maturity.
	(k)	Asset retirement obligations (“ARO”)
		The Company recognizes an estimate of the liability associated with an ARO in the consolidated financial statements at the time the liability is incurred. The estimated fair value of the ARO is recorded as a long-term liability, with a corresponding increase in the carrying amount of the related asset. The capitalized amount is depleted on a unit-of-production basis over the life of the proved reserves. The liability amount is increased each reporting period due to the passage of time and the amount of accretion is charged to earnings in the period. The ARO can also increase or decrease due to changes in the estimates of timing of cash flows or changes in the original estimated undiscounted cost. Actual costs incurred upon settlement of the ARO are charged against the ARO to the extent of the liability recorded.
	(l)	Income taxes
		The Company follows the asset and liability method of accounting for income taxes. Under this method of tax allocation, future income tax assets and liabilities are determined based on differences between the financial statement carrying values and their respective income tax basis (temporary differences). Future income tax assets and liabilities are measured using the tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in operations in the period in which the change is enacted or substantially assured. The amount of future income tax assets recognized is limited to the amount of the benefit that is more likely than not to be realized.
	(m)	Financial instruments
		All financial instruments are classified as one of the following: held-to-maturity, loans and receivables, held-for-trading, available-for-sale or other financial liabilities. Financial assets and liabilities held-for-trading are measured at fair value with gains and losses recognized in net income (loss). Financial assets held-to-maturity, loans and receivables, and other financial liabilities are measured at amortized cost using the effective interest method. Available-for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss) and reported in shareholders’ equity. Any financial instrument may be designated as held-for-trading upon initial recognition.
		Transaction costs that are directly attributable to the acquisition or issue of financial instruments that are classified as other than held-for-trading, which are expensed as incurred, are included in the initial carrying value.

9

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

2.	SIGNIFICANT ACCOUNTING POLICIES (Continued)
	(n)	Future accounting changes
		International Financial Reporting Standards (“IFRS”)
		In 2008, the Canadian Accounting Standards Board confirmed that the transition to IFRS from Canadian GAAP will be effective for fiscal years beginning on or after January 1, 2011 for publicly accountable enterprises. The Company will therefore be required to present IFRS financial statements for its January 31, 2012 interim consolidated financial statements. The effective date will require the restatement for comparative purposes of amounts reported by the Company for the interim periods and for the year ended October 31, 2011.
3.	ACQUISITION OF CARDERO COAL
	On June 1, 2011, the Company completed the acquisition of Cardero Coal through a Plan of Arrangement (the “Acquisition”) whereby one Cardero Coal common share was exchanged for 0.8 of a common share of the Company. The acquisition resulted in the Company issuing 23,397,002 common shares on the effective date, with a further 5,885,543 common shares reserved for issuance for the exercise of options held by former Cardero Coal optionees, the exercise of Cardero Coal warrants and pursuant to Cardero Coal property acquisition agreements. On completion of the transaction, Cardero Coal became a wholly-owned subsidiary of the Company. The Company accounted for the Acquisition using the asset acquisition method.
	The fair value of the common shares of the Company issued in connection with the Acquisition has been determined at $1.50 per share. The fair values of the Company’s share purchase options and warrants issued as replacement options and warrants granted were $2,416,470 and $4,354,140. The Company options vest on December 1, 2011 (25%), June 1, 2012 (25%), and December 1, 2012 (50%). The fair values were calculated using the Black-Scholes pricing model. Of the aggregate fair value, $988,347 represents the value of the Cardero Coal options at May 31, 2011 and was allocated to the total purchase price. The remaining $1,428,123 will be allocated to salaries and benefits over the vesting term. The assumptions used in the calculation are as follows:

	Options	Warrants
Expected life (years)	2.0	2.0
Interest rate	1.45%	1.45%
Volatility (average)	49.89%	52.61%
Dividend yield	0.00%	0.00%

The purchase consideration is comprised of the following:

Total purchase price:
Initial investments in Cardero Coal to acquire a 45.5% interest	$	7,205,311
Issuance of 23,397,002 Cardero common shares for 54.5% interest		35,095,503
Fair value of 2,029,143 Cardero options as replacement options		988,347
Fair value of 3,856,400 Cardero warrants as replacement warrants		4,354,140
Transaction costs		922,393
	$	48,565,694

10

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

3.	ACQUISITION OF CARDERO COAL (Continued)
	The fair value of the Cardero Coal assets acquired and liabilities assumed as at the acquisition date were as follows:

Purchase price allocation:
Cash	$	2,626,895
Accounts receivable		87,990
Due from Cardero		644,370
Prepaid expenses		5,166
Fixed assets		187,166
Resource property advances		166,788
Reclamation deposit		5,000
Resource properties (note 7)		57,021,938
Accounts payable and accrued liabilities		(466,586	)
Future income tax liability		(11,713,033	)
	$	48,565,694

4. FIXED ASSETS

		2011						2010
				Accumulated						Accumulated
		Cost		Amortization		Net		Cost		Amortization		Net
Computer equipment	$	232,518	$	145,741	$	86,777	$	171,624	$	122,128	$	49,496
Computer software		146,280		63,738		82,542		-		-		-
Office equipment		208,937		68,830		140,107		99,853		48,402		51,451
Vehicle		20,874		1,740		19,134		-		-		-
Metallurgy lab		508,651		102,359		406,292		-		-		-
Leasehold improvements		345,068		168,924		176,144		210,530		113,740		96,790
	$	1,462,328	$	551,332	$	910,996	$	482,007	$	284,270	$	197,737

5. RESOURCE RELATED INVESTMENTS

	Shares			Warrants
2011	Number		Fair Value	Number		Fair Value		Total
International Tower Hill Mines Ltd. (“ITH”)	3,053,933	$	15,330,744	-	$	-	$	15,330,744
Trevali Mining Corporation (“Trevali”)	11,159,432		10,043,489	4,533,572		506,635		10,550,124
Wealth Minerals Ltd. (“Wealth”)	5,022,806		1,029,675	-		-		1,029,675
Dorato Resources Inc. (“Dorato”)	2,536,000		304,320	-		-		304,320
Indico Resources Ltd. (“Indico”)	50,000		11,000	-		-		11,000
Balmoral Resources Ltd. (“Balmoral”)	240,000		235,200	-		-		235,200
Corvus Gold Inc. (“Corvus”)	1,655,711		1,043,098	-		-		1,043,098
Abzu Gold Inc. (“Abzu Gold”)	8,934,007		3,841,623	3,782,000		37,820		3,879,443
Ethos Capital Corp.(“Ethos”)	250,000		167,500	-		-		167,500
		$	32,006,649		$	544,455	$	32,551,104

11

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

5. RESOURCE RELATED INVESTMENTS (Continued)

	Shares			Warrants
2010	Number		Fair Value	Number		Fair Value		Total
ITH	4,591,223	$	34,847,383	-	$	-	$	34,847,383
Trevali	7,032,432		9,986,053	2,855,866		1,243,942		11,229,995
Wealth	5,022,806		3,164,368	-		-		3,164,368
Dorato	2,416,000		3,020,000	-		-		3,020,000
Indico	50,000		31,000	-		-		31,000
Kria Resources Ltd. (“Kria”)	15,000,000		3,150,000	15,000,000		2,400,000		5,550,000
Corvus	880,711		871,904	-		-		871,904
Abzu Gold	3,782,000		1,891,000	-		-		1,891,000
Ethos	100,000		80,000	-		-		80,000
		$	57,041,708		$	3,643,942	$	60,685,650

All the resource related companies are considered to be related parties by virtue of having directors and/or officers in common. All investments in shares are classified as available-for-sale under the financial instruments classification except for the investment in Ethos, which is classified as held-for-trading. As investments in warrants are considered to be derivative instruments, they are by definition classified as held-for-trading.

During the year ended October 31, 2011, the Company acquired additional investments for a total cost of $3,840,625 (2010 - $17,094,329; 2009 - $4,874,325). The Company sold investments for gross proceeds of $12,250,273 (2010 - $2,416,776; 2009 - $4,607,154) at a cost of $3,416,869 (2010 - $1,477,125; 2009 - $1,888,900) for net gains on sale of $8,833,403 (2010 - $939,651; 2009 - $2,718,254). Impairment losses on resource related investments amounted to $2,837,978 (2010 and 2009 - $Nil).

			2011			2010
			Exercise	Number of		Exercise	Number of
Warrants	Expiry Date		Price	Warrants		Price	Warrants
Trevali	May 11, 2011	$	1.30	-	$	1.30	625,000
	May 29, 2010	$	1.20	-	$	1.20	67,000
	October 9, 2011	$	1.00	-	$	1.00	735,294
	September 1, 2012	$	1.50	1,428,572	$	1.50	1,428,572
	July 29, 2012	$	1.00	1,825,000	$	1.00	-
	January 14, 2012	$	1.25	1,280,000	$	1.25	-
				4,533,572			2,855,866
Abzu Gold	December 21, 2011 (note 17)	$	0.75	3,782,000	$	0.75	-
Kria	July 29, 2012	$	1.00	-	$	1.00	15,000,000

During the year ended October 31, 2011, the Company recorded an unrealized loss (gain) on the fair value adjustment of derivatives of $2,936,073 (2010 – ($1,346,746); 2009 – ($349,424)) and acquired additional share purchase warrants at a value of $718,580 (2010 - $1,171,429; 2009 - $905,072)

12

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

6. EQUITY INVESTMENTS

		2011		2010
Abzu Resources Ltd.	$	-	$	1,131,253
Cardero Coal Ltd. (Ownership interest 42%)		-		4,105,287
	$	-	$	5,236,540

(a)	Abzu Resources Ltd. (“Abzu”)
	During the year ended October 31, 2010, the Company acquired 9,000,002 shares of Abzu at a gross cost of $1,350,000. The Company’s proportionate share of the net book value of Abzu’s assets at the acquisition date totaled $1,220,272. The difference between investment cost and the Company’s share of net assets is attributed to resource properties. The Company accounted for its investment in Abzu using the equity method and recorded the investment at a gross cost of $1,350,000. For the year ended October 31, 2010, the Company’s share of Abzu’s results of operations amounted to a loss of $218,748 based upon Abzu’s financial statements as of October 31, 2010. As at October 31, 2010, the Company held approximately 31.36% of the outstanding common shares of Abzu.
	On December 21, 2010, Totem Minerals Inc. acquired Abzu and changed its name to “Abzu Gold Inc.” (note 5). Between November 1, 2010 and December 20, 2010, the Company’s share of Abzu’s results of operations amounted to a loss of $10,775 based upon Abzu’s financial statements as of December 31, 2010.
	Following the above acquisition, the Company held 16.32% of Abzu Gold and changed this investment classification to “available-for-sale” from the equity method (note 5).
(b)	Cardero Coal
	During the year ended October 31, 2010, the Company acquired 14,200,000 shares of Cardero Coal at a gross cost of $4,370,000. The Company’s proportionate share of the net book value of Cardero Coal’s assets (liabilities) at the acquisition dates totaled $(60,669). The difference between investment cost and the Company’s share of net assets was attributed to resource properties. The Company accounted for its investment in Cardero Coal using the equity method and recorded the investment at a gross cost of $4,370,000. For the year ended October 31, 2010, the Company’s share of Cardero Coal’s results of operations amounted to a loss of $264,713 based upon Cardero Coal’s financial statements as of October 31, 2010. As at October 31, 2010, the Company held approximately 42% of the outstanding common shares of Cardero Coal.
	On December 16, 2010, the Company participated in a private placement in Cardero Coal and acquired 5,600,000 special warrants of Cardero Coal (“Special Warrants”) at a cost of $2,800,000. Each Special Warrant was exercisable to acquire one common share of Cardero Coal, and would be automatically exercised upon the third business day after the issuance of a receipt for a prospectus of Cardero Coal qualifying the issuance of the common shares upon the exercise of the Special Warrants. If such receipt was not issued by June 27, 2011, each Special Warrant would thereafter be exercisable to acquire 1.1 common shares, and if such receipt has not been issued by September 27, 2011, each Special Warrant would thereafter be exercisable to acquire 1.11 common shares.
	Pursuant to its “top-up” right, on December 21, 2010, the Company acquired by private placement an additional 3,608,143 common shares of Cardero Coal at a cost of $0.30 per share, for an additional investment of $1,082,443.
	During the year ended October 31, 2011, the Company acquired the balance of Cardero Coal’s outstanding securities pursuant to a Plan of Arrangement, effective June 1, 2011 (note 3).

13

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

6.	EQUITY INVESTMENTS (Continued)
	(b)	Cardero Coal (Continued)
		Before the acquisition, the Company’s share of Cardero Coal’s results of operations amounted to a loss of $782,419 based upon Cardero Coal’s financial statements as of May 31, 2011. The Company held approximately 45.5% (2010 - 42%) of the outstanding common shares of Cardero Coal before the acquisition.
	(c)	IMM Gold Ltd. (“IMMG”)
		Pursuant to a Memorandum of Understanding dated August 8, 2008 (but effective as and from April 25, 2008) between the Company and International Minerals and Mines Ltd. (“IMM”), a private Gibraltar company, the Company had the right to acquire up to a 30% interest in IMMG, a subsidiary of IMM. The Company is the manager of the exploration programs, but no properties have yet been acquired by IMMG. A director of Cardero is a director and significant shareholder of a private company, which is the major shareholder (67%) of IMM (note 9).
		The Company acquired a 15% interest in IMMG by issuing to IMM 500,000 common shares on November 24, 2008 valued at $795,000. The Company received 123,530 ordinary shares of IMMG, representing a 15% interest. The Company may also be required to issue up to an additional 250,000 common shares as consideration for the initial 15% interest in IMMG if, on November 24, 2009, the volume weighted average trading price for the Company’s common shares on the Toronto Stock Exchange (the “TSX”) for the five trading days immediately prior to such date (“Final VWAP”) is less than $1.83. In such case, the Company is then required to issue to IMM such number of additional common shares of the Company (up to a maximum of 250,000 additional shares) as is equal to the difference between the $1.83 and the Final VWAP, multiplied by 500,000 and divided by the Final VWAP.
		For the year ended October 31, 2009, the Company’s share of IMMG’s results of operations amounted to a loss of $199,677 based upon IMMG’s audited financial statements for the year then ended. After consideration of current market conditions and IMMG’s operating loss, the Company recorded an impairment charge of $595,323 to reduce the carrying value of the investment to $Nil.

14

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7.	RESOURCE PROPERTIES
	The Company’s capitalized acquisition and exploration expenditures on its resource properties are as follows:

		Mexico									Argentina			Peru			U.S.A.			Ghana			Canada
		(note 7(a))									(note 7(b))			(note 7(c))			(note 7(d))			(note 7(e))			(note 7(f))
														Iron Sands/			Longnose/			Ghana Sheini
		Baja			Other			Total						Marcona			TiTac			Iron Ore			Carbon Creek		Total
Balance, October 31, 2009	$	7,336,527		$	231,978		$	7,568,505		$	894,114		$	8,727,626		$	309,347		$	-		$	-	$	17,499,592
Acquisition costs –cash		302,911			10,966			313,877			4,887			649,772			70,714			50,000			-		1,089,250
Deferred exploration costs:
Camp		111,473			12,075			123,548			298,536			658,584			318,650			-			-		1,399,318
Drilling and analysis		654,228			-			654,228			784,761			27,097			1,614,088			-			-		3,080,174
Personnel and geology		92,944			6,108			99,052			489,337			191,016			336,178			170,916			-		1,286,499
Total exploration costs		858,645			18,183			876,828			1,572,634			876,697			2,268,916			170,916			-		5,765,991
Total expenditures for the year		1,161,556			29,149			1,190,705			1,577,521			1,526,469			2,339,630			220,916			-		6,855,241
Write-offs – Acquisition costs		(3,567,578	)		-			(3,567,578	)		-			-			-			-			-		(3,567,578	)
Write-offs – Exploration costs		(4,930,505	)		-			(4,930,505	)		-			-			-			-			-		(4,930,505	)
Total write-offs		(8,498,083	)		-			(8,498,083	)		-			-			-			-			-		(8,498,083	)
Balance, October 31, 2010		-			261,127			261,127			2,471,635			10,254,095			2,648,977			220,916			-		15,856,750
Acquisition costs:
Acquisition costs – shares (note 3)		-			-			-			-			-			-			-			57,021,938		57,021,938
Acquisition costs – cash		-			3,373			3,373			8,479			877,561			50,075			-			5,800		945,288
Total acquisition costs		-			3,373			3,373			8,479			877,561			50,075			-			57,027,738		57,967,226
Deferred exploration costs:
Camp		-			17,504			17,504			65,396			653,215			218,206			-			3,155,433		4,109,754
Drilling and analysis		-			-			-			94,927			114,397			578,031			-			1,823,913		2,611,268
Personnel and geology		-			-			-			61,210			29,700			268,835			-			946,296		1,306,041
Total exploration costs		-			17,504			17,504			221,533			797,312			1,065,072			-			5,925,642		8,027,063
Total expenditures for the year		-			20,877			20,877			230,012			1,674,873			1,115,147			-			62,953,380		65,994,289
Costs recovered – Exploration		-			(222,000	)		(222,000	)		-			-			(75,383	)		-			-		(297,383	)
Write-offs – Acquisition costs		-			(6,730	)		(6,730	)		(50,000	)		(4,383,054	)		-			(50,000	)		-		(4,489,784	)
Write-offs – Exploration costs		-			-			-			-			(7,545,914	)		-			(170,916	)		-		(7,716,830	)
Total write-offs		-			(6,730	)		(6,730	)		(50,000	)		(11,928,968	)		-			(220,916	)		-		(12,206,614	)
Balance, October 31, 2011	$	-		$	53,274		$	53,274		$	2,651,647		$	-		$	3,688,741		$	-		$	62,953,380	$	69,347,042
Represented by:
Acquisition costs	$	-		$	53,274		$	53,274		$	144,891		$	-		$	293,111		$	-		$	57,027,738	$	57,519,014
Exploration costs		-			-			-			2,506,756			-			3,395,630			-			5,925,642		11,828,028
Balance, October 31, 2011	$	-		$	53,274		$	53,274		$	2,651,647		$	-		$	3,688,741		$	-		$	62,953,380	$	69,347,042

15

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7.	RESOURCE PROPERTIES (Continued)
	(a)	Mexico
		The properties in Mexico consist of the following:

i.	Baja IOCG Project, Baja California State, Mexico
	Pursuant to an agreement dated December 1, 2002 (as amended by agreements dated November 26,
	2003 and June 30, 2005) between the Company and Anglo (the “Anglo Agreement”), Anglo agreed to manage and fund exploration expenditures for the identification and acquisition of not less than one mineral concession within an area of interest measuring approximately 50,050 square kilometres in size. Anglo could earn a 70% interest in the mineral concession(s) so acquired, as well as in certain previously acquired mineral concessions held by the Company, and a 70% interest in a new Mexican company to be formed to hold such concessions, by incurring aggregate exploration expenditures of not less than USD 3,700,000, as follows:

- USD 200,000 on or before December 1, 2003 (incurred);

- USD 800,000 on or before December 1, 2004 (incurred);

- USD 1,200,000 on or before December 1, 2005 (incurred); and

- USD 3,700,000 on or before December 1, 2006 (see below).

Upon Anglo incurring an aggregate USD 3,700,000 of exploration expenditures, a joint venture would be formed, with each party required to contribute its pro rata share of all future exploration expenditures. A non-participating party can be diluted to a minimum 10% working interest, below which percentage its interest would be automatically converted to a 5% net profit interest.

Pursuant to an amending agreement dated June 30, 2005 between the Company and Anglo, the Company assumed operation of the project. Under the terms of the amending agreement, the Company was required to incur exploration expenditures of not less than USD 500,000 within a 12-month period and, upon doing so, earned an additional 10% interest, thereby increasing its retained interest in the project to 40% upon the exercise by Anglo of its option. Upon having incurred the required USD 500,000 in exploration expenditures, the Company could either elect to terminate its expenditure period by delivering a resumption notice to Anglo, or to elect to remain as operator and continue to incur exploration expenditures. If the Company elected to continue incurring exploration expenditures following the USD 500,000 having been incurred, it would earn an additional 0.1% interest for each additional USD 10,000 of exploration expenditures incurred. If the Company elected to continue incurring exploration expenditures, at such time as it has incurred an aggregate of USD 1,400,000 (and has thereby increased its retained interest to 49% upon the exercise by Anglo of its option), it was required to deliver an election request notice to Anglo. Upon receipt by Anglo of a resumption notice or an election request notice, Anglo was required (unless it otherwise so elected) to immediately resume incurring aggregate exploration expenditures of USD 3,700,000 in order to earn its interest in the project (which will range from 60% to 51%, depending upon the amount of exploration expenditures incurred by the Company prior to the delivery of a resumption notice) with the original exploration expenditure dates extended to take into account the time the Company acted as operator. If the Company delivered a resumption notice, or if the Company delivered an election request notice and Anglo elected to continue incurring exploration expenditures, and thereafter Anglo fails to maintain its option in good standing, the Company could terminate the agreement. If the Company delivered an election request notice and Anglo did not elect to resume incurring exploration expenditures, the agreement would be automatically terminated. In either case, in the event of termination, the Company would retain its 100% interest in the project, with Anglo having no residual interest therein.

16

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7.	RESOURCE PROPERTIES (Continued)
	(a)	Mexico (Continued)
		i.	Baja IOCG Project, Baja California State, Mexico (Continued)
			Effective May 30, 2006, Anglo elected to terminate the Anglo Agreement and thereby forfeited any interest in, or rights to earn any interest in, the mineral concessions that were the subject of that agreement. Accordingly, the Company is now the owner of a 100% interest in the concessions comprising the Baja IOCG Project.
			On May 20, 2004, Western Telluric Resources Inc. (“WTR”) and Minera Olympic, S. de R.L. de C.V. (“Minera”) (collectively, the “Plaintiffs”) commenced an action (the “Action”) in the British Columbia Supreme Court (Vancouver Registry, No. S042795) against the Company and James Dawson, Murray McClaren and their respective companies, Dawson Geological Consultants Ltd. and 529197 B.C. Ltd. (carrying on business as Crockite Resources). The relief claimed against the Company is the setting aside of an agreement dated December 12, 2001 between the Company and Minera regarding the acquisition of mineral concessions. The Company filed a Statement of Defence, in which it denied any liability, as well as a counterclaim (the “Counterclaim”) against the Plaintiffs. Pursuant to an agreement dated October 17, 2007 (“Settlement Agreement”) among the Plaintiffs, the Company and all other parties to the various actions, all actions (including the Action and the Counterclaim) have been settled. As its part of the settlement, the Company has agreed to issue an aggregate of 500,000 shares to WTR and to grant to WTR a 1.5% net smelter return (“NSR”) royalty over its existing and future acquired Baja California properties, of which the Company can acquire one-half (0.75%) for $2,000,000. Fulfillment by the Company of its obligations under the Settlement Agreement was subject to the acceptance for filing thereof by the TSX (received on November 20, 2007) and the NYSE-A (formerly, the American Stock Exchange) (received on November 13, 2007). Effective May 23, 2008, the transaction closed and the 500,000 shares were released to WTR.
			During the year ended October 31, 2010, the Company wrote-off its remaining investment in the property in the amount of $8,498,083.
		ii.	Corrales Property, Chihuahua State, Mexico
			The Corrales property consists of one exploitation concession (100 hectares) located in the Municipality of Lopez, Chihuahua State, plus an additional 8,400-hectare exploration concession held 100% by the Company.
			Pursuant to an agreement dated October 23, 2007 between the Company and three Mexican individuals, the Company has been granted a five-year lease of the exploitation concession, with the right to purchase a 100% interest by making aggregate payments of USD 657,000 over five years to October 23, 2012, as follows:

- USD 24,000 on execution (paid);

- USD 18,000 on or before January 23, 2008 (paid);

- USD 15,000 on or before October 23, 2008 (paid);

- USD 60,000 on or before October 23, 2009 (note 7(a)(iv));

- USD 90,000 on or before October 23, 2010 (note 7(a)(iv));

- USD 100,000 on or before October 23, 2011 (note 7(a)(iv)); and

- USD 350,000 on or before October 23, 2012.

The Company has granted to a public company the option to acquire up to a 70% interest in the Corrales property (see note 7(a)(iv)).

17

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(a) Mexico (Continued)

iii.	Santa Teresa Property, Coahuila State
	The Santa Teresa property consists of 8,715 hectares of exploration concessions held 100% by the Company. The Company has granted to a public company the option to acquire up to a 70% interest in the Santa Teresa property (note 7(a)(iv)).
iv.	Ethos Capital Corp. Option/Joint Venture, Mexico
	The Company signed a letter of intent (“LOI”) dated June 12, 2008, as amended October 9, 2008 and May 29, 2009, with Ethos Capital Corp., a company listed on the TSX Venture Exchange (“TSXV”), pursuant to which Ethos has been granted an option to earn an interest in the Company’s Corrales and Santa Teresa silver-lead-zinc projects in Mexico (notes 7(a)(ii) and (iii).
	Pursuant to the LOI, Ethos has an exclusive option to earn an undivided 70% interest in the Corrales and Santa Teresa properties by:

(a) paying to the Company the sum of $500,000 (subsequently amended to $300,000), as follows :

(i)	$100,000 by July 17, 2009 (the “Acceptance Date”), which is five days after the LOI is accepted for filing by the TSXV (received August 18, 2009);
(ii)	an additional $150,000 (subsequently amended to $75,000) by the day, which is one year after the Acceptance Date (received on December 10, 2010);
(iii)	an additional $250,000 (subsequently amended to $125,000) by the day, which is two years after the Acceptance Date (not paid, currently under negotiation);

(b) delivering to the Company 1,434,000 (subsequently amended to 1,100,300) Ethos common shares, as follows:

(i)	100,000 shares with a fair value of $17,000 on the Acceptance Date (received);
(ii)	266,800 (subsequently amended to 150,000 with a fair value of $147,000) shares by the day, which is one year after the Acceptance Date (received on December 10, 2010);
(iii)	an additional 466,900 (subsequently amended to 250,000) shares by the day, which is two years after the Acceptance Date (not issued, currently under negotiation); and
(iv)	an additional 600,300 shares by the day, which is three years after the Acceptance Date; and

(c) maintaining the properties (including making all required payments pursuant to the underlying option agreements) in good standing during the option period.

Following the exercise of the option by Ethos, the Mexican subsidiaries of Ethos and the Company will enter into a joint venture, with each party being responsible for its ongoing share of further expenditures. If the interest of a participant is diluted to 10% or less, the interest of that participant will be converted to a 10% net profits interest royalty.

During the year ended October 31, 2009, the Company received $255,143 from Ethos, comprised of $138,143 of expenditure reimbursement and $117,000 of option payments.

During the year ended October 31, 2011, the Company received $222,000 in option payments from Ethos.

18

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(b) Argentina

i. Chingolo Silver Project, Jujuy Province, Argentina, consisting of the following concessions:

-           Cavok Property, Jujuy Province, Argentina

Pursuant to an agreement dated May 22, 2002 between the Company and a private Argentinean company, the Company has the right to acquire a 100% interest in three mineral concessions in Jujuy Province, Argentina, by making a payment of USD 10,000 on or before October 18, 2002 (paid) and issuing an aggregate of 250,000 common shares, as follows:

- 50,000 common shares on or before October 18, 2002 (issued);

- 100,000 common shares on or before October 18, 2003 (issued); and

- 100,000 common shares on or before October 18, 2006 (issued).

Two of these concessions form part of the Olaroz Silver Project and, during the fiscal year ended October 31, 2004, these two concessions were written down by $4,381,701 to a nominal value of $1. The third concession forms part of the Chingolo Silver Project. During the year ended October 31, 2009, the Company relinquished or abandoned, or commenced the process of relinquishing or abandoning, all properties relating to its investment in the Chingolo Project, resulting in a charge to operations of $679,055.

ii.	Huachi Property, Argentina
	Pursuant to an agreement dated June 13, 2005 between the Company and a private Argentinean company, the Company can acquire a 100% interest in 30 mining concessions referred to as the Huachi Property in the Province of San Juan, Argentina. In order to maintain the option in good standing and to be permitted to carry out exploration activities prior to such exercise, the Company is required to make payments and incur exploration expenditures as follows:
	Payments of USD 5,500,000, as follows:

- USD 70,000 on June 13, 2005 (paid);

- USD 70,000 on or before April 13, 2006 (paid);

- USD 200,000 on or before June 13, 2007 (paid);

- USD 600,000 on or before April 13, 2008 (renegotiated to USD 110,000, which was paid);

- USD 1,000,000 on or before June 13, 2009 (see below); and

- USD 3,560,000 on or before June 13, 2010.

Exploration expenditures of USD 2,000,000, as follows:

- USD 750,000 on or before December 13, 2007 (incurred); and

- USD 1,250,000 on or before June 13, 2010 (see below).

Pursuant to an agreement dated November 30, 2006 between the Company and an Argentinean individual, the Company can acquire a 50% interest in one mining concession (mina) adjacent to the 30 Huachi concessions noted above. In order to maintain the option in good standing, to be permitted to carry out exploration activities prior to such exercise, and to exercise the option, the Company is required to make aggregate payments of USD 965,000 to the vendor, as follows:

19

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(b) Argentina (Continued)

ii. Huachi Property, Argentina (Continued)

- USD 5,000 on signing (paid);

- USD 10,000 on November 30, 2007 ( paid);

- USD 50,000 on November 30, 2008 (see below);

- USD 150,000 on November 30, 2009;

- USD 250,000 on November 30, 2010; and

- USD 500,000 on November 30, 2011.

	The Company has relinquished or abandoned, or is in the process of relinquishing or abandoning, all properties relating to its investment in the Huachi Project, resulting in a charge to operations of $1,917,437 during the year ended October 31, 2009.
iii.	Other Argentinean Properties

(a)	Organullo Property, Salta Province, Argentina
	Pursuant to an agreement dated October 1, 2004 between the Company and an Argentinean individual, the Company purchased a 100% interest in eight minas in Salta Province, Argentina, in consideration of the issuance of 70,000 common shares. These common shares were issued during the year ended October 31, 2005.
	Pursuant to an agreement dated September 1, 2011 between the Company and Artha Resources Corporation (“Artha”) as accepted by Artha on September 9, 2011, the Company optioned its Organullo Gold project to Artha, whereby Artha can earn an undivided 55% working interest in the Organullo Project, and thereafter form a Joint Venture with Cardero Argentina.
	Artha has the option to earn an undivided 55% right, title and working interest in and to the Organullo property by incurring an aggregate of USD 1,500,000 in exploration expenditures over four years (USD 250,000 by September 9, 2012) and by issuing an aggregate of 350,000 common shares in the capital of Artha, also over three years (50,000 shares within 15 days of Exchange acceptance - received). Upon Artha having earned its initial 55% interest, Cardero has a right to maintain its 45% interest through pro-rata funding of exploration work going forward. Alternatively, Cardero may choose to be diluted down to a minimum of 10%, at which point its interest will be converted to a 2% NSR royalty.
(b)	Los Manantiales Property (formerly “Mina Angela”), Chubut Province, Argentina
	Pursuant to an agreement dated April 25, 2004 between the Company and a private Argentinean company, the Company can acquire a 100% interest in 44 mineral concessions in Chubut Province, Argentina, subject to a 1% NSR to the vendor, in consideration of aggregate cash payments to the vendor of USD 400,000, as follows:

- USD 50,000 on or before April 25, 2005 (paid);

- USD 50,000 on or before April 25, 2006 (renegotiated, with $10,000 paid on April 25, 2006 and the balance of USD 40,000 paid in October 2006);

- USD 150,000 on or before April 25, 2007 (paid); and

- USD 150,000 on or before April 25, 2008 (paid).

20

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(b) Argentina (Continued)

iii. Other Argentinean Properties (Continued)

(b)	Los Manantiales Property (formerly “Mina Angela”), Chubut Province, Argentina (Continued)
	The Company has the option to purchase the 1% NSR royalty from the vendor for the sum of USD 500,000 at any time.
	Pursuant to a binding LOI dated March 12, 2007, the Company has granted to a public company the option to acquire up to a 70% interest in the property. Pursuant to the LOI, the optionee had a period of 60 days to carry out due diligence. The Company received a payment of USD 40,000 on signing of the LOI, which was refundable to the optionee if it declined to proceed. The optionee elected to proceed. The optionee may earn an initial 60% interest in the property by incurring an aggregate of USD 3,500,000 in expenditures over four years (including making all payments required pursuant to the underlying agreement). Upon the optionee having earned an initial 60% interest, the Company may elect to either participate at its 40% interest level, or request the optionee to fund the preparation of a bankable feasibility study within four years of such request and thereby earn an additional 10% interest in the joint venture. Upon such request being made by the Company, the optionee may elect to fund the bankable feasibility study. If it does so, it will earn the additional 10% interest upon completion of the bankable feasibility study. Following the formation of the joint venture and the completion of its earn-in requirements by the optionee, each participant is responsible for funding its share of joint venture expenditures. If it does not do so, its interest will be diluted. Upon the interest of a participant being diluted to less than 10%, such interest will be converted to a 2% NSR.
	In June 2007, the optionee elected to make all remaining payments required under the underlying agreement, and thereby permit the Company to exercise the option and acquire the property (subject to the 1% NSR royalty). The property has been transferred to the Company. On December 3, 2008, the optionee terminated the option and returned all interest in the property to the Company.
(c)	Pirquitas Property, Jujuy Province, Argentina
	The Pirquitas Property consists of one cateo (approximately 4,382 hectares) near the town of Minas Pirquitas. The property was acquired by the Company through staking and application therefor.
	The Company has entered into an agreement dated July 9, 2009 with a private Australian company (subsequently assigned by the private company to a public British Columbia company), whereby the optionee may earn a 55% interest in the Pirquitas Property by incurring exploration expenditures of USD 1,000,000 over four years, of which USD 50,000 must be incurred in the first year (incurred) and an additional USD 100,000 in the second year (incurred). The effective date of the agreement is July 14, 2009. Following the optionee having earned its interest, the parties will enter into a joint venture, and thereafter each party is required to contribute its proportional share of further expenditures or be diluted on a straight-line basis.

21

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(c) Peru

i.	Marcona Project, Lucanas, Nazca and Caraveli Provinces, Peru (Carbonera and Daniella Properties)
	Pursuant to option agreements dated October 1, 2003 and October 23, 2003 between the Company and a private Peruvian company, the Company acquired mineral concessions covering approximately 30,000 hectares in Lucanas, Nazca and Caraveli Provinces, Peru. Approximately 10,500 hectares of these concessions are subject to an underlying agreement with Rio Tinto Mining and Exploration
	Limited (“Rio Tinto”). The private company holds the exclusive right and option to acquire a 100% interest from Rio Tinto, subject to a 0.5% NSR to Rio Tinto, by incurring USD 450,000 in exploration expenditures over three years ending August 22, 2006 and by paying Rio Tinto USD 500,000 (of which USD 50,000 has been paid) on or before January 27, 2008. The Company can earn a 100% interest in all 30,000 hectares by assuming and performing all commitments to Rio Tinto pursuant to the underlying agreement, paying the vendor an aggregate of USD 120,000 (paid) and issuing an aggregate of 650,000 common shares to the vendor, as follows:

- 150,000 common shares on TSXV acceptance (issued);

- 100,000 common shares on or before May 28, 2004 (issued);

- 200,000 common shares on or before November 28, 2004 (issued); and

- 200,000 common shares on or before November 28, 2005 (issued).

	The Company determined not to exercise the option from Rio Tinto, and terminated the underlying agreement with Rio Tinto. In addition, the Company abandoned all but five of the concessions (3,200 hectares) held by Minera Koripampa del Peru S.A. (“Koripampa”), (which retained concessions form part of the Company’s Iron Sands project (see note 7(c)(iii)).
ii.	Pampa de Pongo Property, Caraveli Province, Peru
	Pursuant to an option agreement dated February 2, 2004 between the Company and a private Peruvian company, the Company can acquire a 100% interest in mineral concessions covering approximately 7,970 hectares in Caraveli Province, Peru. The private Peruvian company holds the exclusive right and option to acquire a 100% interest in these concessions from Rio Tinto in consideration of the payment to Rio Tinto of aggregate payments of USD 500,000 over four years as follows:

- USD 50,000 on or before January 27, 2005 (paid);

- USD 50,000 on or before January 27, 2006 (paid);

- USD 100,000 on or before January 27, 2007 (paid); and

- USD 300,000 on or before January 27, 2008 (paid).

The Company can earn a 100% interest in the property by assuming all of the obligations of the private company pursuant to the underlying agreement with Rio Tinto, and making the following payments and share issuances:

Payments aggregating USD 130,900 as follows:

- USD 65,900 on or before March 12, 2004 (for back taxes on the property) (paid); and

- USD 65,000 on or before March 12, 2004 (paid).

Issuance of an aggregate of 70,000 common shares, as follows:

- 35,000 shares on or before March 12, 2004 (issued); and

- 35,000 shares on or before September 12, 2004 (issued).

22

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(c) Peru (Continued)

ii.	Pampa de Pongo Property, Caraveli Province, Peru (Continued)
	In January 2008, the Company gave notice to Rio Tinto that it was exercising the option, and made the final USD 300,000 payment as required to do so. Rio Tinto transferred title to the concessions to a Peruvian subsidiary of the Company in November 2008, subject to their continuing right of first refusal concerning any disposition of these concessions by the Company.
	In the summer of 2008, the Company made applications for ten additional concessions surrounding the Rio Tinto concessions (19,900 hectares), all of which form part of the Pampa de Pongo property.
	On October 24, 2008, the Company entered into an agreement with Nanjinzhao Group Co., Ltd., (“Nanjinzhao”), a private Chinese enterprise located in Zibo City, Shandong Province, PRC, whereby the Company agreed to sell the Pampa de Pongo property to Nanjinzhao for USD 200 million (subject to Rio Tinto declining to exercise its right of first refusal in respect thereof). The agreement requires an initial deposit of USD 10 million, payable on or before March 17, 2009, with a final payment of USD 190 million due on or before September 17, 2009. During the initial three-month period, Nanjinzhao will obtain the appropriate Chinese governmental consents to the transaction. The Pampa de Pongo property will be transferred to a Peruvian subsidiary of Nanjinzhao once the USD 10 million deposit has been received. The agreement permits Cardero to decline to proceed with the transaction at any time prior to the receipt of the USD 190 million final payment, provided that, if such decision is made at any time after the initial USD 10 million deposit has been paid, Cardero is required to return the deposit and pay Nanjinzhao an additional USD 20 million as a break-up fee. Upon repayment of the deposit (and break-up fee, if required), the Pampa de Pongo property will be retransferred to the Company. The Company will pay a finder’s fee to an arm’s length private company in consideration of the finder introducing Cardero to Nanjinzhao and providing ongoing advice in the negotiations. On December 17, 2008, the Company received notification from Rio Tinto that it was declining to exercise its right of first refusal with respect to the October 24, 2008 transaction between the Company and Nanjinzhao.
	The Company, Cardero Iron Peru and Zibo Hongda Mining Co., Ltd. (“Hongda”), a subsidiary of Nanjinzhao, agreed to amend the provisions of the October 24, 2008 sale agreement among the Company, Cardero Iron Peru and Nanjinzhao (the interest of Nanjinzhao in which was assigned to Hongda on April 3, 2009) for the purchase by Hongda of the Pampa de Pongo Iron Deposit in Peru.
	Hongda had requested a purchase price reduction due to difficult global economic conditions that have significantly adversely impacted iron ore prices. Following negotiations, Cardero and Cardero Iron Peru agreed to revise the final sale price to USD 100 million (of which USD 2 million had already been paid).
	Accordingly, on May 21, 2009 Hongda paid the required USD 10 million deposit to Cardero Iron Peru, which is non-refundable unless either (i) Cardero terminates the agreement or (ii) Rio Tinto exercises its right of first offer. Due to the new lower purchase price, pursuant to its right of first offer Rio Tinto had another 45-day period (expired on July 9, 2009) to match the revised terms. The Rio Tinto right of first offer expired unexercised, and therefore the USD 10 million deposit from Hongda is non-refundable unless Cardero chooses to terminate the purchase agreement.
	The balance of the purchase price of USD 88 million was split into three payments and paid as follows:

- USD 18 million, received on December 17, 2009;

- USD 40 million, received on December 17, 2009; and

- USD 30 million, to be received on December 31, 2009 (received January 11, 2010).

23

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7.	RESOURCE PROPERTIES (Continued)
	(c)	Peru (Continued)
		ii.	Pampa de Pongo Property, Caraveli Province, Peru (Continued)
			As of October 31, 2009, the payments received to date of $13,898,800 (USD 12 million) were recognized in other income, net of related property costs of $4,889,658 and transaction costs of $411,487, for a gain of $8,597,655 before applicable income taxes.
			During the year ended October 31, 2010, payments received of $93,607,400 (USD 88 million) were recognized in other income, net of related property costs of $645,276 and transaction costs of $5,234,967, for a gain of $87,727,157 before applicable income taxes.
		iii.	Iron Sands Project, Nazca and Caraveli Provinces, Peru

The Company’s Iron Sands Project consists of approximately 32,000 hectares of unconsolidated and semi-consolidated mineral bearing sands, the rights to which are encompassed by certain of the mineral claims comprising the Carbonera and Daniella properties (note 7(c)(i)), and an additional 39 mineral claims acquired by staking at a cost of USD 77,000, in the Departments of Arequipa, (Caraveli Province) and Ica (Nazca Province), Peru. As a result of work to date, some of the foregoing concessions have been dropped, and the property now consists of 16 concessions (12,100 hectares in four areas) owned 100% by the Company and five concessions (3,600 hectares in two areas) held under option as described below.

The Company has assumed, from a private Peruvian company, all rights and obligations under an agreement dated December 16, 2005 between a private Peruvian company and Minera Ataspacas S.A. (“Minera Ataspacas”), an arm’s length private Peruvian company, whereby the private Peruvian company has the option to acquire, from Minera Ataspacas, an initial 70% interest in five mineral sand concessions (3,600 hectares total) surrounded by certain of the Company’s mineral tenures noted above. In order to exercise the option, the Company is required to pay a total of USD 6,830,000 over five years to December 15, 2010 (with an initial payment of USD 20,000 on or before December 16, 2005 (paid)) and incur exploration expenditures of not less than USD 250,000 over the same period, as follows and as amended (see below):

- USD 80,000 on or before December 16, 2006 (paid);

- USD 100,000 on or before December 16, 2007 (paid);

- USD 150,000 on or before December 16, 2008 (paid);

- USD 500,000 on or before December 16, 2009 (paid); and
USD 6,000,000 on or before December 16, 2011 (amended to February 8, 2012) (not paid);

- USD 50,000 on or before December 16, 2007 (incurred);

- USD 50,000 on or before December 16, 2008 (incurred);

- USD 50,000 on or before December 16, 2009 (incurred);

- USD 50,000 on or before December 16, 2010 (incurred); and

- USD 50,000 on or before December 16, 2011 (incurred).

Upon the Company having acquired the 70% interest, a joint venture company will be formed with Minera Ataspacas, and each party will thereafter be required to contribute its share of ongoing expenditures or be diluted. If either party is diluted to less than 10%, such interest will be converted to a 2% NSR royalty. If Minera Ataspacas is reduced to the 2% NSR, the Company may purchase half the NSR (1%) for USD 2,000,000 within 24 months of the exercise of the option, and the remaining half (1%) for USD 8,000,000 within 36 months of the exercise of the option.

24

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7.	RESOURCE PROPERTIES (Continued)
	(c)	Peru (Continued)
		iii.	Iron Sands Project, Nazca and Caraveli Provinces, Peru (continued)
			The Company entered into an agreement dated October 20, 2005 with the Peruvian subsidiary of a public B.C. company (the “Optionee”), whereby the Company has granted the Optionee the right to earn a 70% interest in the “hard rock” mineral rights (thereby excluding the unconsolidated and semi-consolidated mineral sands on such claims) accruing to certain of the mineral claims comprising the Iron Sands Project (plus additional claims acquired from Koripampa (note 7(c)(i)).
			In order to exercise the option, the Optionee is required to incur an aggregate of USD 3,000,000 in expenditures over four years to November 18, 2009 and perform all of the obligations of the Company under the underlying agreements with respect to the Carbonera and Daniella properties (note 7(c)(i)), including making all payments and incurring all exploration expenditures required thereunder. Upon the Optionee having earned its 70% interest, the Optionee and the Company will incorporate a new Peruvian company to hold such rights, in which the Optionee and the Company will hold a 70% and a 30% interest therein, respectively. Each party will thereafter be required to contribute its pro rata share of future expenditures, and a party failing to contribute will have its interest in the joint venture company diluted. At such point as a party’s interest in the joint venture company is reduced to 10%, such interest will be acquired by the joint venture company in exchange for the grant to the diluted party of a 1% NSR. The Optionee terminated the agreement and returned its interest in the applicable concessions on April 16, 2007.
			In November 2009, the Company entered into agreements with Minera Ataspacas and others regarding its option on certain of the concessions comprised in its Iron Sands Project, Peru. Pursuant to two agreements dated November 13, 2009, the original option agreement of December 16, 2005 with Minera Ataspacas was amended to provide that the Company may now acquire a 100% interest in the shares of a new Peruvian company (into which Minera Ataspacas will transfer a 100% interest in the five concessions subject to the option in favour of the Company) by paying to the shareholders of such new company the sum of USD 500,000 upon execution (paid) and USD 6,150,000 on or before December 16, 2010. The option exercise date was further amended by an agreement dated January 13, 2011, such that the option is now exercisable on or before February 9, 2012 for an option payment of USD 6,000,000. In consideration of the extension, the Company paid USD 800,000, of which USD 150,000 was applied to reduce the final option payment and USD 650,000 was for the extension of the option exercise deadline.
			During the year ended October 31, 2011, the Company wrote-off its remaining investment in the property in the amount of $11,928,968.
		iv.	Amable Maria Property, Peru
			The Amable Maria Property consists of 37 mining concessions (approximately 29,620 hectares) located in the Provinces of Chanchamayo and Jauja, Department of Junin, Peru, and acquired by the Company through staking and application therefor. After an unsuccessful search for a joint venture partner, the property was abandoned in July 2009, and the Company has written off the associated costs of $473,795 at October 31, 2009.

25

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(d) United States of America

i.	TiTac Property, Minnesota
	Pursuant to an option agreement dated July 1, 2008 (as amended on July 24, 2008) between the
	Company and an arm’s length private mineral owner, the Company has a two-year option to enter into a mining lease for an aggregate of 1,402 acres (567 hectares) of mineral rights located in Louis County, Minnesota. The mining lease will grant a lease over any mineral substance of a metalliferous nature, including those intermingled or associated materials or substances, recovered from each ton of crude ore for the purpose of extracting iron (essentially, iron, titanium and vanadium).
	The option agreement requires an initial payment of USD 5,000 on execution (paid) plus an extension payment of USD 25,000 due on the first anniversary of the agreement in order to extend the option for an additional year (option exercised). There are no work commitments under the option, but the Company is required to comply with all laws and to maintain specified insurance in place during the option term.
	The initial term of the mining lease is for a period of 20 years, provided that the lease may be extended for an additional five-year period if the Company gives notice at least 180 days prior to the end of such term, and has either paid to the owner at least USD 10,000,000 in royalties over the initial term or pays to the owner the difference between the royalties actually paid and USD 10,000,000. In like manner, the lease can be extended for up to three additional five-year terms, provided that the appropriate notice is given and that the Company has paid to the owner at least USD 5,000,000 in royalties during the previous five-year term (or pays any deficiency in cash).
	On May 29, 2009, the Company, through Cardero Iron US, exercised its option to enter into a mining lease with respect to the TiTac property in Minnesota, and made the initial USD 2,500 payment required upon execution of the lease (which is dated July 1, 2009).
ii.	Longnose Property, Minnesota
	Pursuant to an agreement dated November 26, 2008 between the Company and an arm’s length individual on behalf of an arm’s length B.C. company, the Company was granted the option to acquire up to an 85% interest in the interest of the optionor in certain existing mineral leases, and in a lease to be entered into, covering 100% of the fee mineral rights (approximately 200 acres) located in St. Louis County, Minnesota, just north of the town of Hoyt Lakes. The Company can earn an initial 70% in the interest of the optionor interest by incurring cumulative expenditures of USD 1,850,000 as follows:

- USD 100,000 on or before December 8, 2009 (incurred);

- USD 250,000 on or before December 8, 2010 (incurred);

- USD 500,000 on or before December 8, 2011 (incurred); and

- USD 1,000,000 on or before December 8, 2012.

A payment of USD 50,000 (paid) to the optionor is required on or before August 15, 2009 (and each and every August 28 thereafter) to be used by the optionor to make the annual USD 50,000 advance royalty payment due to the underlying landowners. The Company can earn an additional 15% interest of the optionor (85% overall) by delivering a feasibility study (no time limit for delivery). Upon the Company having earned a 70% or 85% interest, the optionor can elect to convert its interest to a 10% net profits interest (if the Company elects not to earn the additional 15% interest) or a 5% net profits interest (if the Company elects to earn the full 85% interest). If the optionor does not so elect, upon the Company having earned its 70% or 85% interest, as applicable, the Company and the optionor will enter into a joint venture, with each party being responsible for its pro rata share of all joint venture expenditures. If a party to the joint venture is diluted to a 10% or lesser interest, such interest will be converted to a 2.5% net profits interest.

26

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(d) United States of America (Continued)

ii. Longnose Property, Minnesota (Continued)

	During the year ended October 31, 2010, the Company issued 75,000 common shares valued at $111,500 as a finder’s fee in connection with the acquisition of its interests in the TiTac and Longnose properties in Minnesota.
(e)	Ghana
	Pursuant to an agreement dated November 22, 2010 between Cardero Ghana and a private Ghanaian company, the parties entered into an arrangement under which Cardero Ghana will provide the financial resources and exploration expertise for the purpose of enabling the private Ghanaian company to apply to the Minerals Commission of Ghana for a prospecting license in respect of the certain lands in north-eastern Ghana referred to as the Sheini Iron Ore deposit. If the private Ghanaian company is successful in being awarded the prospecting license then, subject to the consent of the Government of Ghana, Cardero Ghana and the private Ghanaian company will enter into a joint venture to explore and, if warranted, develop and mine such deposit.
	All costs incurred prior to receiving prospecting license have been reflected in Property Evaluations in the Consolidated Statements of Operations.
	Upon the formation of such joint venture, the participants will be deemed to have the following respective interests:

Cardero Ghana – 100% participating interest
Private Ghanaian Company – 10% net profit interest

Upon the issuance of a mining lease subsequent to the expiry of the term of the prospecting license for the deposit, the Republic of Ghana will hold a ten percent free carried equity interest in the property subject to the mining lease.

Subsequent to October 31, 2011, three separate prospecting licenses covering the Sheini Iron Ore deposit were granted (dated December 8, 2011) and Cardero Ghana and the Private Ghanaian Company have entered into three separate joint ventures (one for each prospecting license), each dated December 12, 2011, to explore and, if warranted, develop the lands subject to the prospecting licenses.

Under the three joint ventures, Cardero Ghana will fund all expenditures under the particular joint venture and make the following payments to the Private Ghanaian Company:

For the Sheini Hills North prospecting license:

- USD 25,000 upon the agreement to enter into the joint venture (paid);

- USD 250,000 as an initial joint venture payment (paid);

- USD 1,000,000 upon the formation of the joint venture (Effective Date) (paid USD 700,000 and
USD 300,000 subsequent to October 31, 2011);

- USD 1,000,000 six months after the Effective Date (paid);

- USD 500,000 one year after the Effective Date;

- USD 1,000,000 two years after the Effective Date;

- USD 1,000,000 three years after the Effective Date;

- USD 500,000 four years after the Effective Date; and

- USD 500,000 five years after the Effective Date.

27

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(e)	Ghana (Continued)
	For the Middle Sheini prospecting license:

- USD 25,000 upon the agreement to enter into the joint venture (paid);

- USD 250,000 as an initial joint venture payment (paid);

- USD 1,000,000 upon the formation of the joint venture (Effective Date) (paid subsequent to October 31, 2011);

- USD 1,000,000 six months after the Effective Date (paid USD 100,000 subsequent to October 31, 2011);

- USD 500,000 one year after the Effective Date (paid);

- USD 1,000,000 two years after the Effective Date;

- USD 1,000,000 three years after the Effective Date;

- USD 500,000 four years after the Effective Date; and

- USD 500,000 five years after the Effective Date.

For the Sheini South prospecting license:

- USD 3,000,000 upon the formation of the joint venture (Effective Date) (paid subsequent to October 31, 2011);

- USD 1,000,000 one year after the Effective Date; and

- USD 1,000,000 two years after the Effective Date.

	The Company has agreed to issue, subject to regulatory acceptance, a finder’s fee of 2,000,000 common shares to an arm’s length British Columbia company in connection with the acquisition of the Sheini project. The shares are to be issued in stages, as to 500,000 upon execution of one or more joint venture agreements on the Sheini properties, and an additional 500,000 shares after 6, 12 and 18 months, provided that at least one of the joint venture agreements is still in effect and that further work is planned. Regulator acceptance has not yet been received.
(f)	Canada – Carbon Creek Property, British Columbia
	To acquire its interest in the Carbon Creek Metallurgical Coal Property, Cardero Coal entered into the following agreements:

i.	Johnson Agreement
	On May 18, 2010, Cardero Coal entered into a Coal Tenure Option Agreement (“Johnson Agreement”) to acquire, upon issuance, one coal license (“Johnson License”) over an area located in the Peace River Land District of British Columbia. Consideration for a 100% interest in the license consists of the following payments and share issuances:
	-	payments to date of $350,000 and an additional payment of $5,000,000 due within four months of the date the coal license is issued by the Government of British Columbia and transferred to Cardero Coal. Cardero Coal can extend the payment date by paying a $20,000 monthly fee for up to three additional months;
	-	issuance of 400,000 common shares of the Company. Such issuance is to be made concurrently with the $5,000,000 final payment; and
	-	issuance of an option to acquire 1,000,000 common shares of Cardero Coal at an exercise price of $0.1875 per share (issued). The option was exercised on March 9, 2011.
ii.	Burns Agreement
	On June 15, 2010, Cardero Coal entered into an option agreement (“Burns Agreement”) to acquire a lease of the coal situated on 10 Crown granted district lots (“CGDL”) located in the Peace River Land District of British Columbia. To maintain its option, Cardero Coal has paid $3,500,000 to date and is

28

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

7. RESOURCE PROPERTIES (Continued)

(f) Canada – Carbon Creek Property, British Columbia (Continued)

ii	Burns Agreement (continued)
	required to make a further $2,500,000 payment on or before December 30, 2011 (paid) (note 17). Upon making the final payment, Cardero Coal may exercise the option upon payment of $1.
	Under the lease agreement (“Burns Lease”), Cardero Coal will pay a 5% “freight on rail” royalty on all coal sold or $2 per metric tonne of coal sold, whichever is greater, and 20% on sales for any coal substances sold or consumed on the CGDL.

iii.	Joint Venture Agreement
	On June 15, 2010, Cardero Coal entered into a joint venture agreement (the “Joint Venture Agreement”) with a private Alberta partnership, to participate in common operation and exploration, development and production of the Carbon Creek Property. Under the Joint Venture Agreement, the Carbon Creek Property subject to the joint venture will consist of Cardero Coal’s interest in the Johnson License (once issued and transferred to Cardero Coal), Cardero Coal’s interest in the Burns Lease (once the option has been exercised), 10 coal licenses held by the joint venture partner (once issued), one coal license held by Cardero Coal (once issued) and any additional coal licenses acquired by a joint venturer within 25 kilometres of the balance of the Carbon Creek Property. Pursuant to the Joint Venture Agreement, the Company will have a 75% interest in the joint venture and is responsible for incurring all costs of carrying out the required exploration, development and mining of the Carbon Creek Property and the marketing of the product produced. The joint venture partner will have a 25% carried interest in the joint venture and will not be required to contribute to any such costs. The joint venture partner is entitled to receive 25% of the net proceeds of production following Cardero Coal having recovered, from the proceeds of any production, all monies paid under the Johnson Agreement and all costs incurred by Cardero Coal to develop the mine site and put it into production.
	To acquire its interest in the joint venture, the Company was required to issue 1,600,000 common shares (issued) plus warrants to purchase an additional 1,600,000 common shares (issued) and make total payments of $6,000,000, of which it has paid a total of $3,500,000 to date and is required to make a final payment of $2,500,000 on or before December 30, 2011 (paid) (note 17).
	On June 1, 2011, the Company acquired the balance of the outstanding securities of Cardero Coal (note 3).

(g)	Title and environmental
	Although the Company has taken steps to verify the title to mineral properties in which it has or had a right to acquire an interest in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee title (whether of the Company or of any underlying vendor(s) from whom the Company may be acquiring its interest). Title to mineral properties may be subject to unregistered prior agreements or transfers, and may also be affected by undetected defects or the rights of indigenous peoples. Environmental legislations are becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislations on the Company’s operations may cause additional expenses and restrictions. If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the property may be diminished or negated.
(h)	Asset retirement obligations
	The Company is not aware of any AROs as of October 31, 2011 and 2010.

29

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

8.	CAPITAL STOCK
	(a)	Authorized
		An unlimited number of common shares without par value.
		During the year ended October 31, 2010, the Company launched a normal course issuer bid to purchase up to 4,500,000 of its common shares through the facilities of the TSX. During the year ended October 31, 2010, the Company purchased 312,300 common shares. On October 14, 2011, these common shares were returned to treasury.
	(b)	Share purchase warrants
		The following common share purchase warrants entitle the holders thereof to purchase one common share for each warrant. Warrants transactions are as follows:

	2011					2010
				Weighted					Weighted
				Average					Average
	Number of			Exercise		Number of			Exercise
	Warrants			Price		Warrants			Price
Warrants outstanding, beginning of the year	-		$	-		4,303,100		$	1.47
Issued pursuant to Acquisition (note 3)	3,856,400		$	0.39		-		$	-
Exercised	(443,800	)	$	(0.39	)	(67,125	)	$	(1.35	)
Expired	-		$	-		(4,235,975	)	$	1.48
Warrants outstanding, end of the year	3,412,600		$	0.39		-		$	-

Warrants outstanding are as follows:

		2011			2010
		Exercise	Number of		Exercise	Number of
Expiry Date		Price	Warrants		Price	Warrants
December 17, 2011 (note 17)	$	0.63	428,400	$	-	-
March 1, 2012	$	0.06	240,000	$	-	-
March 29, 2012	$	0.16	5,600	$	-	-
April 6, 2012	$	0.16	12,600	$	-	-
May 20, 2012	$	0.06	120,000	$	-	-
June 14, 2012	$	0.38	336,000	$	-	-
June 15, 2012	$	0.06	120,000	$	-	-
September 22, 2012	$	0.44	70,000	$	-	-
January 12, 2013	$	0.13	240,000	$	-	-
May 29, 2013	$	0.13	240,000	$	-	-
June 1, 2013	$	0.50	1,600,000	$	-	-
			3,412,600			-

30

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

8.	CAPITAL STOCK (Continued)
	(c)	Stock options
		The Company has a stock option plan whereby the Company may grant options to directors, officers, employees and consultants to purchase common shares, provided that the aggregate number of shares subject to such options may not exceed 10% of the common shares outstanding at the time of any grant (not including agent or broker options). The exercise price of each option is required to be set at the higher of the closing price of the Company’s common shares on the trading day prior to the date of grant and the five-day volume-weighted average trading price for the five trading days prior to the date of grant (without any discounts). The option term and vesting period is determined by the Board of Directors within regulatory guidelines (the maximum term is ten years). All options are recorded at fair value when granted and are vested at the date for grant. A summary of the status of the stock option plan as of October 31, 2011 and 2010 and changes during the years ended on those dates is presented below:

	2011				2010
				Weighted				Weighted
				Average				Average
	Number of			Exercise	Number of			Exercise
	Options			Price	Options			Price
Options outstanding, beginning of the year	5,310,000		$	1.23	5,500,000		$	1.77
Granted pursuant to Acquisition (note 3)	2,029,143		$	0.32	-		$	-
Granted	1,100,000		$	1.83	3,510,000		$	1.21
Expired	(1,000,000	)	$	1.30	(3,700,000	)	$	(2.01	)
Exercised	(840,000	)	$	1.22	-		$	-
Options outstanding, end of the year	6,599,143		$	1.04	5,310,000		$	1.23

The weighted average remaining contractual life of options outstanding at October 31, 2011 was 1.02 years (2010 – 1.3 years).

Stock options outstanding are as follows:

		2011				2010
				Exercisable				Exercisable
		Exercise	Number of	at Year		Exercise	Number of	at Year-
Expiry Date		Price	Options	End		Price	Options	End
December 9, 2010	$	1.16	-	-	$	1.16	575,000	575,000
April 9, 2011	$	1.39	-	-	$	1.39	225,000	225,000
September 11, 2011	$	1.30	-	-	$	1.30	1,000,000	1,000,000
December 1, 2011    (note17)	$	1.31	360,000	360,000	$	1.31	360,000	360,000
February 2, 2012	$	1.41	500,000	500,000	$	1.41	500,000	500,000
July 29, 2012	$	1.16	1,485,000	1,485,000	$	1.16	1,525,000	1,525,000
August 11, 2012	$	1.16	1,125,000	1,125,000	$	1.16	1,125,000	1,125,000
September 8, 2012	$	1.28	100,000	100,000	$	-	-	-
January 28, 2013	$	1.83	1,000,000	1,000,000	$	-	-	-
June 1, 2013	$	0.06	280,000	-	$	-	-	-
June 1, 2013	$	0.16	100,000	-	$	-	-	-
June 1, 2013	$	0.31	320,000	-	$	-	-	-
June 1, 2013	$	0.38	980,000	-	$	-	-	-
June 1, 2013	$	0.44	349,143	-	$	-	-	-
			6,599,143	4,570,000			5,310,000	5,310,000

31

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

8.	CAPITAL STOCK (Continued)
	(c)	Stock options (Continued)
		At October 31, 2011, the aggregate intrinsic value of outstanding and exercisable stock options is $1,538,100 (2010 - $258,000).
		The Company uses the fair value method for determining stock-based compensation for all options granted during the fiscal years. The fair value was determined using the Black-Scholes option pricing model based on the following assumptions:

	2011	2010	2009
Expected life (years)	2.0	2.0	2.0
Interest rate	1.35%	1.43%	1.32%
Volatility (average)	61.21%	72.33%	102.04%
Dividend yield	0.00%	0.00%	0.00%

Stock-based compensation charges for the year ended October 31, 2011 totalled $1,301,935 (2010 - $1,695,941; 2009 - $1,192,109), allocated as follows:

		2011		2010		2009
Consulting fees	$	15,135	$	217,132	$	492,953
Investor relations		294,066		371,965		50,395
Salaries and benefits		992,734		1,106,844		648,761
	$	1,301,935	$	1,695,941	$	1,192,109

The weighted average fair value of options granted during the year was $0.60 (2010 - $0.48) .

9.	RELATED PARTY TRANSACTIONS
	(a)	Due to related parties
		During the years ended October 31, 2011, 2010 and 2009, the Company incurred the following expenses to officers or directors of the Company or companies with common directors:

		2011		2010		2009
Consulting fees	$	115,000	$	224,159	$	90,000
Professional fees	$	82,500	$	87,056	$	136,425

At October 31, 2011,there was $Nil (2010 - $7,700) included in accounts payable and accrued liabilities. Professional fees include amounts paid to a law firm of which a director is a shareholder.

32

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

9.	RELATED PARTY TRANSACTIONS (Continued)
	(b)	Due from related parties
		Amounts due from related parties are comprised as follows:

		2011		2010
Unsecured promissory notes, 1% per annum, due the earlier of 30 days    after demand or the due date, if applicable:
Trevali	$	142,945	$	78,227
Wealth		495,312		305,871
Dorato		261,882		143,193
Indico		49,891		468,819
Abzu		171,268		208,345
IMM		18,805		18,820
ITH		22,899		11,185
Others		76,041		127,090
	$	1,239,043	$	1,361,550

	The Company recovered $1,331,389 during the year ended October 31, 2011 (2010 - $894,131, 2009 - $764,875) in rent and administration costs from Wealth, ITH, Dorato, Indico, Trevali, Balmoral, Abzu, Corvus and Lawrence W. Talbot Law Corporation (“LWTLC”), companies with common officers or directors.
	These charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.
(c)	Loan receivable
	The Company entered into a loan agreement with Kria whereby the Company advanced Kria $8,064,000 (the “Loan”) to fund the USD 8,000,000 property payment due by Kria to Xstrata Canada Corporation (“Xstrata”) on or before January 16, 2011 under the terms of the revised Halfmile and Stratmat property purchase agreement dated July 15, 2009, between Kria and Xstrata. The Loan bears interest at 10% per annum, calculated monthly, not in advance. As security for the Loan, Kria has granted in favour of the Company a first charge, mortgage and security interest over all its assets and undertakings. In connection with the Loan, Kria issued to the Company 6,400,000 common share purchase warrants of Kria (the “Bonus Warrants”). Each Bonus Warrant entitles the holder to acquire a common share of Kria at an exercise price of $0.25 until January 14, 2012. The fair value of the warrants was calculated at $1,131,136 using the Black-Scholes model, and this amount was recognized as additional interest income under the term of the loan. On April 7, 2011, Trevali acquired Kria and the 6,400,000 Kria Bonus Warrants were exchanged for 1,280,000 Trevali warrants on 5:1 exchange ratio. The interest rate of the Loan was retroactively reduced to 8% to be calculated monthly and not in advance and is due on or before January 14, 2012 (note 17). Accrued interest of $516,096 is included in the loan balance presented.
(d)	Related parties
	Mr. Stephan Fitch, a director of the Company, is a director and significant shareholder of a private company that is the major shareholder (67%) of IMM. The Company has acquired a 15% interest in IMMG, a subsidiary of IMM (note 6(c)). This transaction was approved by the Company’s audit committee and Board of Directors (other than Mr. Fitch, who abstained from voting in each case). The Company considered the collectability of advances totalling $468,099 to IMMG to be doubtful and, accordingly, wrote them off during the year ended October 31, 2009.

33

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

9.	RELATED PARTY TRANSACTIONS (Continued)
	(d)	Related parties (Continued)
		Effective October 1, 2005, the Company retained Mr. Carlos Ballon of Lima, Peru, to provide management services on behalf of the Company in Peru through his private Peruvian company, Koripampa, for a fee of USD 10,000 per month (reduced to USD 7,500 per month starting from March 2007), which has been expensed to consulting fees. Mr. Ballon became President of Cardero Peru in April 2006. Accordingly, Mr. Ballon is a related party with respect to the Company. Prior to Mr. Ballon becoming a related party, the Company entered into a number of mineral property acquisition/option agreements with either Koripampa or Sudamericana de Metales Peru S.A., another private Peruvian company controlled by Mr. Ballon. Such property transactions include those with respect to the Carbonera and Daniella Properties (note 7(c)(i)), the Pampa de Pongo Property (note 7(c)(ii)), the Katanga Property and the Corongo Property.
		The presidents of MMC and Cardero Argentina provide management services for USD 3,750 each per month, which is expensed to consulting fees or capitalized to property costs, depending upon the nature of the services.
		The Company has entered into a retainer agreement dated May 1, 2007 with LWTLC, pursuant to which LWTLC agrees to provide legal services to the Company. Pursuant to the retainer agreement, the Company has agreed to pay LWTLC a minimum annual retainer of $82,500 (plus applicable taxes and disbursements). The retainer agreement may be terminated by LWTLC on reasonable notice, and by the Company on one year’s notice (or payment of one year’s retainer in lieu of notice).
10.	GEOGRAPHIC SEGMENTED DATA
	The Company operates in one industry segment, the mineral resources industry, and in six geographical segments, Canada, Peru, Mexico, Argentina, Ghana and the United States. The significant asset categories identifiable with these geographical areas are as follows:

		2011
		Canada		Argentina		Others		Total
Resource properties	$	62,953,380	$	2,651,647	$	3,742,015	$	69,347,042
Cash and cash equivalents		5,821,354		15,799		148,481		5,985,634
Resource related investments		32,551,104		-		-		32,551,104
Others		12,452,096		158,982		834,425		13,445,503
	$	113,777,934	$	2,826,428	$	4,724,921	$	121,329,283

		2010
		Canada		Argentina		Others		Total
Resource properties	$	-	$	2,471,635	$	13,385,115	$	15,856,750
Cash and cash equivalents		6,152,489		16,496		46,095,018		52,264,003
Resource related investments		60,685,650		-		-		60,685,650
Equity investments		5,236,540		-		-		5,236,540
Others		972,345		47,991		1,141,875		2,162,211
	$	73,047,024	$	2,536,122	$	60,622,008	$	136,205,154

34

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

11.	INCOME TAXES
	A reconciliation of income taxes at Canadian statutory rates (2011 – 26.83%; 2010 – 30.31%; 2009 – 27.42%) is as follows for the years ended October 31:

		2011			2010			2009
Income tax expense (benefits)	$	(5,404,676	)	$	20,715,743		$	130,966
Permanent differences		38,991			(255,155	)		(69,679	)
Stock-based compensation		349,353			487,583			359,620
Non-taxable portion of capital gains		(1,185,149	)		(135,075	)		(410,004	)
Change in timing differences on mineral properties		-			5,463,032			-
Write-off of resource property		3,275,441			2,443,199			924,735
Future income taxes on sale of Pampa de Pongo		-			-			(2,564,900	)
Other temporary differences		(1,574,676	)		714,802			398,566
Change in timing differences		(11,466,565	)		206,620			-
Effect of tax rates in other jurisdictions		(33,992	)		(62,996	)		(23,470	)
Effect of rate change		828,255			(316,272	)		62,945
Change in valuation allowance		19,764,889			(5,879,979	)		1,923,341
	$	4,591,871		$	23,381,502		$	732,120

The components of future income tax assets (liabilities) are as follows:

		2011			2010
Future income tax assets
Non-capital loss carry-forwards	$	14,587,869		$	9,584,878
Difference between undepreciated capital cost over net book value of          property and equipment		133,630			56,628
Cumulative eligible capital deduction		13,678			13,678
Share issue costs		162,765			154,416
Tax value in excess of book value of resource properties		5,585,137			-
Other		1,436,957			297,085
Total future income tax assets		21,920,036			10,106,685
Valuation allowance		(21,065,584	)		(586,039	)
Net future income tax assets	$	854,452		$	9,520,646
Future income tax liabilities
Book value in excess of tax values of investments	$	(854,452	)	$	(4,649,040	)
Book value in excess of tax values of resource properties – Cardero Coal        (note 3)		(11,713,033	)		(4,871,606	)
Total future income tax liabilities	$	(12,567,485	)	$	(9,520,646	)
Net income tax assets (liabilities)	$	(11,713,033	)	$	-

The valuation allowance reflects the Company’s estimate that the tax assets, more likely than not, will not be realized.

35

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

11.	INCOME TAXES (Continued)
	The Company has available approximate non-capital losses that may be carried forward to apply against future years' income for income tax purposes in all jurisdictions. The losses expire as follows:

Available to		Canada		Foreign		Total
2012	$	-	$	1,465,295	$	1,465,295
2013		-		894,185		894,185
2014		1,446,622		693,716		2,140,338
2015		2,950,454		511,021		3,461,475
2016		2,850,458		4,909,884		7,760,342
2017		-		356,852		356,852
2018		-		918,397		918,397
2019		-		477,096		477,096
2020		-		1,066,883		1,066,883
2021		-		488,452		488,452
2027		3,086,818		69,804		3,156,622
2028		4,130,985		354,363		4,485,348
2029		2,258,886		230,673		2,489,559
2030		6,446,014		559,083		7,005,097
2031		14,217,604		659,878		14,877,482
Deferred expiry		-		3,174,361		3,174,361
	$	37,387,841	$	16,829,943	$	54,217,784

12.	COMMITMENTS
	The Company was committed to monthly lease payments of $11,907 for its premises at 1901 – 1177 West Hastings Street, Vancouver, under its current lease, which expired August 31, 2010. On September 8, 2008, the Company sub-leased the premises to another company for the remaining term of the lease with the landlord’s consent. The Company entered into a sub-lease dated May 14, 2008 for new office space located at 1920 – 1188 West Georgia Street, Vancouver. The new sub-lease commenced August 1, 2008 for a term of 51 months. The initial lease payments are $14,654 per month for basic rent and $9,623 per month for estimated operating costs, commencing in September 2008.
	The Company entered into a lease dated November 18, 2010 for office space located at 2300 – 1177 West Hastings Street, Vancouver for a term commencing April 1, 2011 for a period of ten years to March 31, 2021 (subject to renewal for an additional five years). The rent for the first three years is $312,579 per annum, plus operating costs and $335,733 per annum, plus operating costs for the next two years.
	The Company’s subsidiary Cardero Coal entered into a lease dated November 24, 2011 for office space located at 1800 - 1177 West Hastings Street, Vancouver for a term commencing May 1, 2012 for a period of eight years and eleven months. The rent for the first three years is $139,023 per annum, plus operating cost and $149,321 plus operating costs per annum for the next two years.
	Other commitments are disclosed elsewhere in these consolidated financial statements as appropriate.
13.	RISK AND CAPITAL MANAGEMENT; FINANCIAL INSTRUMENTS
	The Company manages its capital structure, and makes adjustments to it, based on the funds available to the Company in order to support future business opportunities. The Company defines its capital as shareholders’ equity. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.

36

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

13.	RISK AND CAPITAL MANAGEMENT; FINANCIAL INSTRUMENTS (Continued)
	The Company currently has no source of revenues; as such, the Company is dependent upon external financings or the sale of assets (or an interest therein) to fund activities. In order to carry future projects and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company’s approach to capital management during the year ended October 31, 2011. The Company is not subject to externally imposed capital requirements.
	The Company classified its cash and cash equivalents as held-for-trading; accounts receivable and due from related parties as loans and receivables; and accounts payable and accrued liabilities as other financial liabilities. The classification of resource related investments is set out in note 5. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of these financial instruments. The fair values of amounts due from related parties have not been disclosed, as their fair values cannot be reliably measured since the parties are not at arm’s length.
	The Canadian Institute of Chartered Accountants (“CICA”) Handbook Section 3862 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table sets forth the Company’s financial assets measured at fair value by level within the fair value hierarchy.

2011		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	5,985,634	$	-	$	-	$	5,985,634
Resource related investments		32,006,649		-		-		32,006,649
Resource related investments		-		544,455		-		544,455
	$	37,992,283	$	544,455	$	-	$	38,536,738

2010		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	52,264,003	$	-	$	-	$	52,264,003
Resource related investments		57,041,708		-		-		57,041,708
Resource related investments		-		3,643,942		-		3,643,942
	$	109,305,711	$	3,643,942	$	-	$	112,949,653

37

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

13.	RISK AND CAPITAL MANAGEMENT; FINANCIAL INSTRUMENTS (Continued)
	The Company’s exposure to risk on its financial instruments is summarized below:
	(a)	Credit risk
		The Company manages credit risk, in respect of cash and cash equivalents, by purchasing highly liquid, short-term investment grade securities held at major financial institutions in Canada and Peru in accordance with the Company’s investment policy. In regards to amounts receivable, the Company is not exposed to significant credit risk, as they are primarily due from governmental agencies.
		Concentration of credit risk exists with respect to the Company’s cash and cash equivalents, as all amounts in Canada and Peru are held at major financial institutions. The Company’s concentration of credit risk and maximum exposure thereto is as follows relating to funds held in Canada, Peru and other countries:

		2011		2010
Bank accounts - Canada	$	5,436,725	$	6,035,679
Bank accounts - Peru		457		46,042,361
Bank accounts - Others		548,452		185,963
	$	5,985,634	$	52,264,003

	The credit risk associated with cash and cash equivalents is minimized substantially by ensuring that these financial assets are placed with major financial institutions with strong investment-grade ratings given by a primary ratings agency. The Company does not hold any asset-backed securities.
	With respect to the $1,239,043 (2010 - $1,361,550) due from related parties, the credit risk has been assessed as low by management as the Company has strong working relationships with the related parties involved.
(b)	Liquidity risk
	Liquidity risk is the risk that the Company will encounter difficulty in settling its commitments. The Company’s approach to managing liquidity risk is to provide reasonable assurance that it will have sufficient funds to meet liabilities when due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. The Company maintains sufficient cash and cash equivalents at October 31, 2011 of $5,985,634 (2010 - $52,264,003) in order to meet short-term business requirements. At October 31, 2011, the Company had accounts payable and accrued liabilities of $4,038,261 (2010 - $832,087), which are due within 30 days.
(c)	Market risk
	Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk.
	i.	Interest rate risk
		The Company’s cash and cash equivalents consist of cash held in bank accounts and guaranteed investment certificates that earn interest at variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on estimated fair values as of October 31, 2011 Future cash flows from interest income on cash and cash equivalents will be affected by interest rate fluctuations. The Company manages interest rate risk by maintaining an investment policy that focuses primarily on preservation of capital and liquidity.

38

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

13.	RISK AND CAPITAL MANAGEMENT; FINANCIAL INSTRUMENTS (Continued)
	(c)	Market risk (Continued)
		ii.	Foreign currency risk
			The Company is exposed to foreign currency risk to the extent that monetary financial instruments are denominated in United States, Mexican, Argentinean and Peruvian currencies. The Company has not entered into any foreign currency contracts to mitigate this risk as it believes this risk is minimized by the amount of cash held in these foreign jurisdictions. The Company’s sensitivity analysis suggests that a consistent 5% change in the rate of exchange in all foreign jurisdictions where it has assets employed would change mineral properties and foreign exchange gain or loss by $11,839 (2010 - $2,332,000).
		iii.	Other price risk
			Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company’s investments are carried at market value and are, therefore, directly affected by fluctuations in the market value of the underlying securities. The Company’s sensitivity analysis suggests that a 1% change in market prices would change the value of the resource related investments by $325,511, and the change on resource related investments in warrants cannot be predicted.

14.	COMPARATIVE FIGURES
	Certain of the figures for 2010 and 2009 have been reclassified to conform to the presentation adopted for the current year.

39

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

15.	DIFFERENCES BETWEEN CANADIAN AND US GAAP
	Differences in accounting principles
	(a)	Exploration expenditures
		Under Canadian GAAP, acquisition costs and exploration expenditures are capitalized. Under US GAAP, exploration costs incurred in locating areas of potential mineralization are expensed as incurred.
		Commercial feasibility is established in compliance with the Securities and Exchange Commission (“SEC”)
		Industry Guide 7, which consists of identifying that part of mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination. After an area of interest has been assessed as commercially feasible, expenditures specific to the area of interest for further development are capitalized. In deciding when an area of interest is likely to be commercially feasible, management may consider, among other factors, the results of pre-feasibility studies, detailed analysis of drilling results, the supply and cost of required labour and equipment, and whether necessary mining and environmental permits can be obtained.
		Under US GAAP, mining projects are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable. If estimated future cash flows expected to result from the use of the mining project or property, and their eventual disposition are less than the carrying amount of the mining project or property, an impairment is recognized based upon the estimated fair value of the mining project or property. Fair value generally is based on the present value of estimated future net cash flows for each mining project, property, calculated using estimated mineable reserves, mineral resources, based on engineering reports, projected rates of production over the estimated mine, recovery rates, capital requirements, remediation costs and future prices considering the Company’s hedging and marketing plans. At October 31, 2011, all resource properties considered active under US GAAP had a book value of $57,519,014 (2010 - $4,048,400) (note 7), after all applicable impairment charges.
	(b)	Reconciliation of total assets, liabilities and shareholders’ equity as of October 31:

		2011			2010
Total assets per Canadian GAAP	$	121,329,283		$	136,205,154
Exploration expenditures on resource properties expensed under US GAAP		(11,828,028	)		(11,808,350	)
Total assets per US GAAP	$	109,501,255		$	124,396,804
Total liabilities per Canadian and US GAAP	$	15,751,294		$	27,679,401
Total shareholders’ equity per Canadian GAAP		105,577,989			108,525,753
Exploration expenditures on resource properties expensed under US GAAP		(11,828,028	)		(11,808,350	)
Total shareholders’ equity per US GAAP		93,749,961			96,717,403
Total liabilities and shareholders’ equity per US GAAP	$	109,501,255		$	124,396,804

40

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

15.	DIFFERENCES BETWEEN CANADIAN AND US GAAP (Continued)
	Differences in accounting principles (Continued)
	(c)	Reconciliation of net income/(loss) and comprehensive income/(loss) reported in Canadian GAAP and US GAAP:
		Statements of operations for the years ended October 31:

		2011			2010			2009
Net income (loss) per Canadian GAAP	$	(24,733,528	)	$	44,950,970		$	(254,628	)
Exploration and development costs		(8,027,063	)		(5,765,991	)		(2,789,143	)
Reverse exploration and developments costs    written-off		7,716,830			4,930,505			1,668,856
Exploration and development costs recovered		297,383			-			3,399,882
Total difference		(12,850	)		(835,486	)		2,279,595
Net income (loss) per US GAAP	$	(24,746,378	)	$	44,115,484		$	2,024,967
Weighted average number of common shares    outstanding		68,988,456			58,571,515			58,421,309
Basic and diluted income (loss) per share in    accordance with Canadian GAAP	$	(0.36	)	$	0.77		$	(0.01	)
Total differences		(0.00	)		(0.02	)		0.04
Basic and diluted income (loss) per share in    accordance with US GAAP	$	(0.36	)	$	0.75		$	0.03

Statements of comprehensive income (loss) for the years ended October 31:

		2011			2010			2009
Comprehensive income (loss) in accordance    with Canadian GAAP	$	(45,885,557	)	$	62,175,067		$	10,131,128
Total difference in net income (loss) between    Canadian and US GAAP		(12,850	)		(835,486	)		2,279,595
Total comprehensive income (loss) in    accordance with US GAAP	$	(45,898,407	)	$	61,339,581		$	12,410,723

41

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

15.	DIFFERENCES BETWEEN CANADIAN AND US GAAP (Continued) Differences in accounting principles (Continued)
	(d)	Reconciliation of cash flows in accordance with Canadian GAAP and US GAAP:
		Statements of cash flows for the years ended October 31:

		2011			2010			2009
Net cash used in operating activities in accordance     with Canadian GAAP	$	(44,769,071	)	$	(10,923,832	)	$	(5,057,303	)
Adjustments to net loss involving use of cash    Write-off of capitalized resource property    exploration costs		(5,124,364	)		(5,855,417	)		(2,919,150	)
Net cash used in operating activities in accordance     with US GAAP		(49,893,435	)		(16,779,249	)		(7,976,453	)
Net cash provided by (used in) investing activities in     accordance with Canadian GAAP		(1,337,411	)		60,525,140			9,459,769
Reclassification of capitalized resource property     exploration costs		5,124,364			5,855,417			2,919,150
Net cash provided by (used in) investing activities     in accordance with US GAAP		3,786,953			66,380,557			12,378,919
Net cash flows provided by (used in)financing activities     in accordance with Canadian and US GAAP		1,197,868			(283,075	)		164,250
Effect of foreign exchange on cash in accordance with     Canadian and US GAAP		(1,369,755	)		(2,877,426	)		(32,360	)
Net (decrease) increase in cash and cash equivalents     in accordance with Canadian and US GAAP		(46,278,369	)		46,440,807			4,534,356
Cash and cash equivalents, beginning of the year in     accordance with Canadian and US GAAP		52,264,003			5,823,196			1,288,840
Cash and cash equivalents, end of the year in     accordance with Canadian and US GAAP	$	5,985,634		$	52,264,003		$	5,823,196

(e)

Cumulative development stage reporting

The Company is not required and has opted to not report such information for Canadian reporting and for US GAAP purposes; the Company is considered an exploration stage company. Statement of Financial Accounting Standards No. 7 – “Accounting and Reporting by Development Stage Enterprises” requires the disclosure of cumulative-to-date information for each line item on the statements of operations and cash flow plus annual summaries of each component of shareholders’ equity since inception. Under Canadian GAAP, Accounting Guideline “AcG 11 – Enterprises in the Development Stage”, issued by the Canadian Institute of Chartered Accountants, does not require reporting of this information. Had the consolidated financial statements been prepared in accordance with US GAAP such information would have been disclosed.

42

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

15.	DIFFERENCES BETWEEN CANADIAN AND US GAAP (Continued)
	Differences in accounting principles (Continued)
	(f)	Income taxes
		Under Canadian GAAP, future tax assets and liabilities are recorded at substantively enacted tax rates. Under US GAAP, deferred tax assets and liabilities are recorded at enacted tax rates. There were no significant differences between enacted and substantively enacted tax rates for any of the periods presented.
		In 2006, FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement 109”. This interpretation prescribes a recognition threshold and measurement criteria for the financial statement recognition of a tax position taken or expected to be taken in a tax return. This interpretation was effective for the Company on February 1, 2008. The Company is required to determine whether it is more likely than not that a tax position will be sustained upon examination and such positions that meet this threshold will be measured at the most likely amount to be realized upon settlement.
		The Company has reviewed its tax positions and determined that the application of FIN 48 does not result in any material adjustment for US GAAP purposes
	(g)	Derivatives
		Under US GAAP, the Company is required to adopt EITF Issue No. 07-5, “Determining Whether an
		Instrument (or embedded Feature) is Indexed to an Entity’s Own Stock”. The standard provides guidance on when certain contingent and other adjustment features in equity-linked financial instruments are indexed solely to an entity’s own stock. Such adjustment features also include strike prices which are denominated in a foreign currency. The adoption of this standard did not have a material impact on the consolidated financial statements.
	(h)	Marketable securities
		Prior to June 1, 2007, under Canadian GAAP marketable securities and long-term investments were carried at the lower of cost or market, and adjustments to the carrying value are shown as an expense on the Statement of Operations. Under US GAAP marketable equity securities are carried at market value, and changes to the market value are shown as a component of shareholder's equity (if the securities are classified as available-for-sale securities) or as gain or loss in the Statement of Operations (if the securities are classified as trading securities). Effective June 1, 2007, the Company’s accounting for financial instruments, equity and comprehensive income under US GAAP is substantially equivalent to the accounting under Canadian GAAP.
	(i)	Adoption of IFRS
		On November1, 2011, the Company will transition from the current Canadian GAAP standards to IFRS. The Company will not provide a reconciliation to United States GAAP in future consolidated financial statements.

43

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

16. SUPPLEMENTAL CASH FLOW INFORMATION

		2011		2010		2009
Supplemental Cash Flow Information
Accounts payable related to property expenditure	$	3,195,677	$	292,977	$	203,551
Accounts receivable related to property expenditure	$	769,880	$	-	$	-
Shares issued on Acquisition of Cardero Coal (note 3)	$	35,095,503	$	-	$	-
Shares issued for debt settlement	$	-	$	-	$	204,676
Shares issued for equity investment	$	-	$	-	$	795,000
Shares issued for property option payments	$	-	$	111,500	$	-
Option payment received in shares	$	-	$	-	$	17,000
Obligation to issue shares	$	-	$	-	$	111,500
Interest paid	$	-	$	-	$	-
Income taxes paid	$	25,601,634	$	2,138,634	$	-

17.	SUBSEQUENT EVENTS
	Subsequent to October 31, 2011:
	(a)	On November 29, 2011, the Company completed a non-brokered private placement pursuant to which the Company sold 8,029,750 units (“Units”) at a price of $ 0.95 per Unit for aggregate gross proceeds of $7,628,263. Each Unit consists of one common share of the Company (a “Share”) and one-half of one common share purchase warrant (each whole warrant, a “Warrant”). Each Warrant is exercisable into one additional Share until November 29, 2012 at an exercise price of $1.25.
	(b)	The Company granted 1,400,000 stock options at a price of $1.10 for a period of two years ending November 9, 2013.
	(c)	On November 17, 2011 the Company entered into a Letter of Intent (“LOI”) with Anglo Pacific Group PLC (“Anglo Pacific”) to acquire 100% of Trefi Coal Corporation (“Trefi”), a wholly-owned subsidiary of Angolo Pacific which owns the Trefi Metallurgical Coal deposit in the Peace River Coalfield, British Columbia, Canada.
		The main terms of the proposed acquisition are as follows:

• In consideration of the payment of $3.5 million, and the issuance of 500,000 common shares of the Company plus warrants to acquire an additional 1,000,000 common shares of the Company at a price of $1.40 per share for a period of 18 months after closing, Cardero will be granted the option (“First Option”) to acquire 50% of the issued shares of Trefi.

• In order to exercise the First Option, the Company will be required to deliver a bankable feasibility study (“BFS”) with respect to the Trefi Coal project within four years of closing.

• If the BFS delivered by the Company is positive (defined as a BFS which demonstrates an IRR greater than 20%, utilizing a discount rate of 10% and an industry consensus forward looking 4 year price for the coal proposed to be delivered from the project), the Company may acquire the balance of Trefi (50%) by making a production decision, paying Anglo Pacific $5.0 million and issuing $1 million of Cardero shares (valued at the 5 day VWAP price to the date of issuance).

• If the BFS is positive, but the Company does not elect to make a production decision, then Anglo Pacific will have the option to reacquire the 50% of Trefi from the Company by paying the Company 50% of the total expenditures by the Company on the BFS.

• If the BFS is not positive, then the Company will retain its 50% of Trefi and commit to periodic reviews of the BFS. If, after 2 years, the BFS remains not positive and Company has not elected to make a production decision and acquire the balance of Trefi by making the $5.0 million payment and issuing the $1.0 million of Cardero shares, then a buy-sell process may be initiated, by which the party offering to pay the highest price to the other party will be able to purchase the interest of the other party.

• Once in production, Anglo Pacific will be paid a gross revenue royalty of 3% to be priced on an FOB basis, with the obligation for payment of the royalty to be secured.

44

CARDERO RESOURCE CORP.

(AN EXPLORATION STAGE COMPANY)

Notes to Consolidated Financial Statements

Years ended October 31, 2011, 2010 and 2009

17.	SUBSEQUENT EVENTS (Continued)
	(d)	The Company received repayment of the USD 8,000,000 loan plus USD 645,260 in interest (note 9(c)) from Trevali on January 16, 2012. The loan was repaid as follows:
		•	USD 5,000,000 in cash, and
		•	USD 3,645,260 (CAD $3,734,569) through the issuance of 4,149,521 units (“Units”) of Trevali at a deemed price of $0.90 per Unit. Each Unit is comprised of one common share of Trevali (“Common Share”) and one-half of one transferrable common share purchase warrant (a “Warrant”). Each whole Warrant will entitle the holder thereof to purchase one Common Share (“Warrant Share”) at a price of $1.10 per share until January 16, 2014. The Common Shares, Warrants and any Warrant Shares issued are subject to a hold period in Canada expiring on May 17, 2012.
	(e)	The Company sold the remaining balance of its investments in ITH (note 5) for net proceeds of $15,306,885 and resulting in a gain on sale of $9,748,727.
	(f)	360,000 options exercisable at a price of $1.31 per share expired unexercised on December 1, 2011.
	(g)	The Company issued 428,400 common shares on exercise of 428,400 agents’ warrants for gross proceeds of $269,892.
	(h)	3,782,000 Abzu warrants (note 5) exercisable at a price of $0.75 expired unexercised on December 21, 2011.
	(i)	Cardero Coal paid final option payment of $2,500,000 pursuant to the Burns Agreement (note 7(f)(ii)) and exercised to option to enter into a mining lease over the coal situate in the CGDL’s.
	(j)	Cardero Coal paid the final option payment of $2,500,000 pursuant to the Joint Venture Agreement (note 7(f)(iii)).
	(k)	The Company sold 593,000 Corvus shares (note 5) for net proceeds of $373,964 and resulting in a loss on sale of $112,296.
	(l)	The Company granted 1,500,000 stock options at a price of $1.51 for a period of two years ending January 26, 2014.

45