8-K

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934

Date of Report (Date of earliest event reported): January 18, 2007

STERLING MINING COMPANY

(Exact name of registrant as specified in its charter)

	000-51669
	(Commission File No.)
Idaho		82-0300575
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2201 Government Way, Suite E, Coeur d’Alene, ID 83814

(Address of principal executive offices)

(208) 666-4070

(Registrant’s telephone number)

Not Applicable

(Former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240. 13e-4(c))

Item 3.02 Unregistered Sales of Equity Securities

On January 18, 2007, Sterling Mining Company (“Sterling”) closed a US$8,498,500 private placement offering to institutional and accredited investors consisting of 3,695,000 units (“Units”) at a price of US$2.30 per Unit. Each Unit is comprised of one common share of Sterling and one common share purchase warrant. Each warrant is exercisable for one common share at an exercise price of US$4.25 for 24 months following the closing date of the offering. Five of the investors are located in Canada and one in the United States.

The shares of common stock, warrants, and common stock underlying have not been registered under the Securities Act of 1933, or any state securities laws, and unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933 and applicable state securities laws. The shares of common stock sold to the purchasers and the shares underlying the warrants will be registered for resale on a registration statement to be filed by Sterling in the United States.

Proceeds from the private placement will be used to fund the ongoing rehabilitation and upgrade of the Sunshine Mine as part of Sterling’s mine plan to resume silver production there in early 2008 the purchase of a tailings pond, and for general working capital purposes.

The Offering was completed on a best-efforts basis with Blackmont Capital Inc. and TD Securities Inc. of Toronto, Canada engaged as co-agents. In connection with the private placement, Sterling paid a cash commission of 7% of the gross proceeds of the private placement, and issued non-transferable compensation options to purchase 258,650 of Units (equal to 7% of the Units sold under the private placement), exercisable at US$2.30 per unit for a period of 18 months after the closing date of the offering.

The private placement was made without registration in reliance on Regulation S adopted under the Securities Act of 1933 and Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D adopted thereunder based on the investors’ representations regarding residency and/or accredited investor status.

Item 9.01 Financial Statements and Exhibits

Exhibits

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

SEC Ref. No	Description of Document
10.1	Agency Agreement dated January 18, 2007 (Excluding Exhibit A, which is filed as separate exhibits to this report)
10.2	Form of Registration Rights Agreement dated January 18, 2007
10.3	Form of Warrant dated January 18, 2007
10.4	Form of Subscription Agreement
99.1	Press Release dated January 18, 2007, entitled “Sterling Mining Completes US $8,498,500 Offering.”

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	STERLING MINING COMPANY
Dated: January 19, 2007	By:	/s/ James N. Meek
		James N. Meek,
		Vice-President and Chief Financial Officer

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EX-10.1

Exhibit 10.1

AGENCY AGREEMENT

January 18, 2007

Sterling Mining Company

2201 Government Way

Suite E, Coeur d’Alene ID

83814 USA

Attention: Raymond De Motte, President

Dear Sirs:

The undersigned, Blackmont Capital Inc. and TD Securities Inc., Blackmont Capital Corp. and TD Securities (USA) LLC (collectively, the “Agents”), understand that Sterling Mining Company (the “Company”) proposes to issue and sell up to 3,695,000 units (individually, a “Unit” and, collectively, the “Units”) having the terms described herein, at a price of US$2.30 per Unit (the “Issue Price”) for aggregate gross proceeds to the Company of up to US$8,498,500. Each Unit is comprised of one Common Share (as hereinafter defined) of the Company’s common stock, par value US$0.05 per Common Share (the “Unit Shares”) and one Series A Common Share purchase warrant (the “Warrants”). Each Warrant is exercisable for one Common Share at an exercise price of US$4.25 for 24 months following the Closing Date.

Upon and subject to the terms and conditions set forth herein, the Agents hereby agree to act, and upon acceptance hereof the Company hereby appoints the Agents, as the Company’s exclusive agents to offer for sale the Units on a “best efforts” agency basis, without any obligation to purchase such Units, at the Issue Price, and agree to arrange for purchasers for the Units resident in the Selling Jurisdictions (as hereinafter defined).

The Purchasers (as hereinafter defined), Agents and other holders (including subsequent transferees) of the Units (and any holders of Registrable Securities (as hereinafter defined) will be entitled to the benefit of the registration rights agreement, to be dated as of the Closing Date (the “Registration Rights Agreement”), among the Company and the Agents, in the form attached hereto as Exhibit A.

In consideration of the services to be rendered by the Agents in connection with the Offering, the Company shall pay to the Agents the Commission (as hereinafter defined) and issue to the Agents the Compensation Options as set out in section 14 hereof.

DEFINITIONS

In this Agreement, in addition to the terms defined above, the following terms shall have the following meanings:

“Act” means the Securities Act (Ontario).

“Affiliates” means the affiliates of the Agents, as such term is defined in the Act.

“Agents” means Blackmont Capital Inc., TD Securities Inc., Blackmont Capital Corp. and TD Securities (USA) LLC collectively.

“Agreement” means the agreement resulting from the acceptance by the Company of the offer made by the Agents hereby.

“Business Day” means a day which is not a Saturday, Sunday or statutory or civic holiday in the city of Toronto, Ontario.

“Closing” means the closing on the Closing Date of the transaction of purchase and sale in respect of the Units as contemplated by this Agreement and the Subscription Agreements.

“Closing Date” means January 18, 2007 or such other date as the Agents and the Company may agree.

“Closing Time” means 10:00 a.m. (Toronto time) on the Closing Date or such other time on the Closing Date as the Company and the Agents may agree.

“Commission” shall have the meaning ascribed to such term in section 14 hereof.

“Common Shares” means shares of common stock, par value US$0.05 per share, in the capital of the Company.

“Company” means Sterling Mining Company and includes any successor corporation to or of the Company.

“Company’s Auditors” means Williams and Webster, P.S., or such other firm of chartered accountants as the Company may have appointed or may from time to time appoint as auditors of the Company.

“Compensation Options” shall have the meaning ascribed to such term in section 14 hereto.

“Compensation Option Certificate” means the certificate evidencing the Compensation Options and containing the terms thereof.

“Debt Instrument” means any loan, bond, debenture, promissory note or other instrument evidencing indebtedness (demand or otherwise) for borrowed money or other liability.

“Disclosure Documents” means collectively, the Corporation’s annual report on Form 10-K for the year ended December 31, 2005, and all subsequent documents filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14(a) or 15(d) of the Exchange Act prior to the Closing Date, including the quarterly reports filed on Form 10-Q for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005, and the current reports filed on Form 8-K since January 1, 2005;

“Environmental Laws” has the meaning ascribed in section 4(a)(xxix) hereof.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Financial Statements” has the meaning ascribed in section 4(a)(vi) hereof.

“Final Prospectus” means the (final) non-offering prospectus of the Company to be filed in the Qualifying Province for the purpose of becoming a reporting issue in such province.

“including” means including without limitation.

“Institutional Accredited Investor” means an “accredited investor”, as defined in Rule 501(a)(1), (2), (3) and (7) of the U.S. Securities Act.

“Investment Company Act” means the United States Investment Company Act of 1940, as amended.

“Issue Price” shall have the meaning ascribed to such term on the face page of the Agreement.

“Leased Premises” means all premises which are material to the Company and which the Company or a Material Subsidiary occupies as tenant.

“Material Agreement” means any material note, indenture, mortgage or other form of indebtedness and any contract, commitment, agreement (written or oral), instrument, lease or other document, including licence agreements and agreements relating to intellectual property, to which the Company is a party and which is material to the Company.

“Material Subsidiaries” shall have the meaning ascribed thereto in section 4(a)(ii) hereof.

“MRRS” means the mutual reliance review system procedures provided for under National Policy 43-201 – Mutual Reliance Review System for Prospectuses and Annual Information Forms.

“misrepresentation”, “material fact”, “material change”, “subsidiary”, “affiliate”, “associate”, and “distribution” have the respective meanings ascribed thereto in the Act or the U.S. Securities Act, as applicable.

“Offering” means the offering of Units pursuant to the Subscription Agreement and the Agency Agreement.

“person” means any individual (whether acting as an executor, trustee, administrator, legal representative or otherwise), corporation, firm, partnership, sole proprietorship, syndicate, joint venture, trustee, trust, unincorporated organization or association, and pronouns have a similar extended meaning.

“Preliminary Prospectus” means the Canadian preliminary prospectus of the Company filed in accordance with the MRRS.

“Prospectus” shall mean, collectively, the Preliminary Prospectus and the Final Prospectus.

“Public Record” means the Company’s annual report on Form 10-K for the year ended December 31, 2005, as amended, the quarterly reports filed on Form 10-Q for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006, as amended, and the current reports filed on Form 8-K since January 1, 2006.

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“Purchasers” means the persons who, as purchasers, acquire Units by duly completing, executing and delivering Subscription Agreements and any other required documentation and permitted assignees or transferees of such persons from time to time.

“Qualifying Province” means the Province of Ontario.

“Registration Rights Agreement” shall have the meaning ascribed to such term on the face page of this Agreement.

“Registration Statement” means the registration statement or statements of the Company that may be filed with the SEC in order to register the Registerable Securities.

“Registerable Securities” means the Common Shares comprising part of the Units and the Warrant Shares underlying the Warrants and the Common Shares and Warrants comprising the Units underlying the Compensation Options.

“Regulation D” means Regulation D under the U.S. Securities Act.

“Regulation S” means Regulation S under the U.S. Securities Act.

“Rule 144” means Rule 144 under the U.S. Securities Act.

“Rule 144A” means Rule 144A under the U.S. Securities Act.

“SEC” means the United States Securities and Exchange Commission.

“Securities Laws” means, as applicable, the securities laws, regulations, rules, rulings and orders in the Selling Jurisdictions, the applicable policy statements issued by the securities regulators in the Selling Jurisdictions, the securities laws of the United States, any applicable States and any jurisdictions outside of Canada and the United States, the regulations and rules thereunder and the forms prescribed thereby and the rules of any applicable stock exchange.

“Securities Regulators” means the securities commissions or other securities regulatory authorities of the Selling Jurisdictions, including the SEC, or, as the context may require, any one or more of Selling Jurisdictions.

“Selling Jurisdictions” means the Province of Ontario and such other jurisdictions outside of Canada (including the United States) as may be agreed to by the Agents and the Company as evidenced by the Company’s acceptance of a Subscription Agreements with respect thereto.

“State” means any one of the 50 states of the United States of America or the District of Columbia.

“Subscription Agreements” means the subscription agreements in the form agreed upon by the Agents and the Company pursuant to which Purchasers agree to subscribe for and purchase the Units herein contemplated and shall include, for greater certainty, all schedules thereto.

“Sunshine Mine” means the patented and unpatented mining claims forming part of the sunshine mine property of the Company in the Coeur d’Alene Mining District of northern Idaho, United States.

“Supplementary Material” means, collectively, any amendment to the Preliminary Prospectus, the Final Prospectus, the Registration Statement, or any amended or supplemental prospectus or ancillary material required to be filed with any of the Securities Regulators pursuant to the Canadian Securities Laws.

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“Taxes” shall have the meaning ascribed thereto in section 4(a)(viii).

“Transaction Documents” means, collectively, this Agreement, the Subscription Agreements, the Registration Rights Agreement, the Warrant Certificate and the Compensation Option Certificate.

“Transfer Agent” means Columbia Stock Transfer Company.

“Unit” shall have the meaning ascribed to such term on the face page of this Agreement.

“Unit Shares” shall have the meaning ascribed to such term on the face page of this Agreement.

“United States” means the United States of America, its territories and possessions, any state of the United States, and the District of Columbia.

“U.S. Securities Act” means the United States Securities Act of 1933, as amended.

“Warrant Certificate” means the warrant certificates dated as of the Closing Date representing the Warrants.

“Warrants” shall have the meaning ascribed to such term on the face page of the Agreement.

“Warrant Shares” means the Common Shares of the Company issuable upon exercise of the Warrants.

“$” as used herein means Canadian dollars, unless otherwise defined.

TERMS AND CONDITIONS

1. (a) Sale on Exempt Basis. The Agents will offer for sale and sell the Units in the Selling Jurisdictions on a “private placement” basis in those jurisdictions where they may lawfully be offered for sale or sold and only at the Issue Price. The Agents will offer the Units to persons who they reasonably believe are Institutional Accredited Investors, or “accredited investors” as defined in the Act, in transactions which comply with the exemptions from registration or do not require the filing of a prospectus or offering memorandum with respect to those Units under the laws of any Selling Jurisdiction. The Agents are duly registered to effect the sale of the Units in the Selling Jurisdictions.

(b) Filings. The Company undertakes to file or cause to be filed all forms or undertakings required to be filed by the Company in the Selling Jurisdictions in connection with the purchase and sale of the Units so that (assuming compliance by the Agents with section 1(a) above), the distribution of the Units and the issuance of the Units may lawfully occur without the necessity of filing a prospectus, a registration statement or an offering memorandum in Canada or the United States (but on terms that will permit the Units acquired by the Purchasers in the Selling Jurisdictions to be sold by such Purchasers at any time in the Selling Jurisdictions subject to the terms of this Agreement and applicable securities laws, including, but not limited to, compliance with applicable hold periods), and the Agents undertake to cause Purchasers of Units to complete any forms reasonably requested by the Company in order to comply with the Securities Laws. All fees payable in connection with such filings shall be at the expense of the Company.

(c) No Offering Memorandum. Neither the Company nor the Agents shall: (i) provide to prospective purchasers of the Units any document or other material that would constitute an offering memorandum or future oriented financial information within the meaning of Securities Laws in Canada or

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in the United States or any State or territory thereof; or (ii) engage in any form of general solicitation or general advertising in connection with the offer and sale of the Units, including, but not limited to, causing the sale of the Units to be advertised in any newspaper, magazine, printed public media, printed media or similar medium of general and regular paid circulation, broadcast over radio, television or telecommunications, including electronic display, or conduct any seminar or meeting relating to the offer and sale of the Units whose attendees have been invited by general solicitation or advertising.

2. Description of the Units.

Each Unit is comprised of one Unit Share and one Warrant. Each Warrant is exercisable for one Common Share at an exercise price of US$4.25 for 24 months following the Closing Date.

3. (a) Covenants. The Company hereby covenants to the Agents and to the Purchasers and their permitted assigns, and acknowledges that each of them is relying on such covenants, that the Company shall:

(i) cause the Final Prospectus and any other related documents required to be filed in connection with the Final Prospectus to be prepared and filed in accordance with the Securities Laws of the Qualifying Province, within 120 days after the Closing Date;

(ii) file a resale Registration Statement and use its best efforts to have such registration statement declared effective by the SEC within 180 days of closing to register the resale of the Common Shares and the Common Shares underlying the Warrants;

(iii) the Company shall not take any action which would be reasonably expected to result in the delisting or suspension of its Common Shares on the over-the-counter bulletin board system or from any other securities exchange, market or trading or quotation facility on which its Common Shares become listed or quoted (including the Toronto Stock Exchange or the TSX Venture Exchange) and the Company shall comply, in all material respects, with the rules and regulations thereof;

(iv) allow the Agents and their representatives the opportunity to conduct all due diligence which the Agents may reasonably require to be conducted prior to the Closing Time in order to fulfil their obligations as Agents under Securities Laws;

(v) duly execute and deliver the Transaction Documents at the Closing Time, and comply with and satisfy all terms, conditions and covenants therein contained to be complied with or satisfied by the Company;

(vi) use its best efforts to fulfil or cause to be fulfilled, at or prior to the Closing Date, each of the conditions set out in section 8 hereof;

(vii) ensure that the Unit Share and Warrants shall be duly and validly created, authorized and issued and shall have the attributes corresponding in all material respects to the description thereof set forth in this Agreement and the Subscription Agreements;

(viii) ensure that the Unit Shares shall be duly issued as fully paid and non-assessable securities in the capital of the Company, free of contractual pre-emptive rights;

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(ix) ensure that the Warrants shall be duly and validly created, authorized and issued and shall have the attributes corresponding in all material respects to the description thereof in this Agreement;

(x) ensure that, at all times prior to the expiry of the Warrants, a sufficient number of Warrant Shares, are allotted and reserved for issuance, and, upon exercise of the Warrants, shall be duly issued as fully paid and non-assessable securities in the capital of the Company, free of contractual pre-emptive rights;

(xi) ensure that the Compensation Options shall be duly and validly created, authorized and issued;

(xii) ensure that the Common Shares and Warrants comprising the Units underlying the Compensation Options shall be duly and validly created, authorized and issued upon the exercise or deemed exercise of the Compensation Options and shall have the attributes corresponding in all material respects to the description thereof in this Agreement and the Compensation Option Certificate;

(xiii) ensure that, at all times prior to the expiry of the Warrants underlying the Compensation Options, a sufficient number of Warrant Shares are allotted, created and reserved for issuance upon the due exercise of such Warrants, as the case may be and upon such due exercise, such Warrant Shares and shall be duly issued as fully paid and non-assessable securities in the capital of the Company;

(xiv) not to issue, offer, sell, contract to sell or otherwise dispose of any additional securities for 90 days after the Closing Date without the prior written consent of the Agents, such consent not to be unreasonably withheld, except in conjunction with: (A) existing director or employee stock options, bonus or purchase plans, or under such director or employee stock options or bonuses granted subsequently in accordance with regulatory approval; or (B) under any existing agreement or as a result of the exercise of currently outstanding share purchase warrants or options; or (C) in connection with a bona fide acquisition by the Company (other than a direct or indirect acquisition, whether by way of one or more transactions, of an entity, all or substantially all of the assets of which are cash, marketable securities or financial in nature or an acquisition that is structured primarily to defeat the intent of this provision),

(xv) execute and file with the Securities Regulators all forms, notices and certificates required to be filed pursuant to the Securities Laws in the time required by the applicable Securities Laws, including, not later than 15 days after the Closing Date, file five copies of a notice on Form D under the U.S. Securities Act (one of which will be manually signed by a person duly authorized by the Company); to otherwise comply with the requirements of Rule 503 under the U.S. Securities Act; and to furnish promptly to the Agents evidence of each such required timely filing (including a copy thereof);

(xvi) not to be or become, at any time prior to the expiration of five years after the Closing Time, an open-end investment company, unit investment trust, closed-end investment company or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act;

(xvii) comply with the U.S. Securities Act so as to permit the completion of the distribution of the Unit Shares, Warrants and Warrant Shares contemplated hereby. At any time when

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the Company is not subject to Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time to time of Unit Shares, Warrants and Warrant Shares, to furnish at its expense, upon request, to holders of such securities and prospective purchasers of any such securities information satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the U.S. Securities Act;

(xviii) furnish to the holders of the Unit Shares and Warrants, as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants), which requirement will be satisfied by making publicly available the Company’s Annual Report on Form 10-K (or any applicable successor thereto under the Exchange Act), and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending March 31, 2007), consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail, which requirement will be satisfied by making publicly available the Company’s Quarterly Report on Form 10-Q (or any applicable successor thereto under the Exchange Act);

(xix) the Registration Statement and the Prospectus and any amendments or supplements thereto will not and the Disclosure Documents do not, as of their respective dates, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Agents or their counsel;

(xx) the Company will timely file such reports pursuant to the Exchange Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the Agents the benefits contemplated by, the last paragraph of Section 11(a) of the U.S. Securities Act;

(xxi) the Company shall use its best efforts to list the Common Shares on the Toronto Stock Exchange or the TSX Venture Exchange within 120 days after the Closing Date;

(b) The Agents hereby covenant and agree to conduct their activities in connection with the sale of the Units in compliance with all applicable laws, including Securities Laws and to obtain from each Purchaser a completed and executed Subscription Agreement (including all certifications, forms and other documentation contemplated thereby or as may be required by applicable Securities Regulators) in a form acceptable to the Company and the Agents relating to the Offering.

4. (a) Representations and Warranties of the Company. The Company represents and warrants to the Agents and to the Purchasers, and acknowledges that each of them is relying upon such representations and warranties, that:

(i) the Company and the Material Subsidiaries (as hereinafter defined) have been duly incorporated and are in good standing under the laws of their respective jurisdictions, and are current and up-to-date in all material respects with all filings required to be made by them in such jurisdiction, have all requisite corporate power and authority and are duly qualified and possess all certificates, authorizations, permits and licences issued by the appropriate state, provincial, municipal, federal regulatory agencies or bodies necessary (and has not received or is aware of any modification or revocation to such licences,

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authorizations, certificates or permits) to carry on its business as now conducted and to own its properties and assets and the Company and the Material Subsidiaries have all requisite corporate power and authority to carry out their obligations under the Transaction Documents;

(ii) the Company has no material subsidiaries other than as listed below (the “Material Subsidiaries”) and the Company beneficially owns, directly or indirectly, the percentage indicated below of the issued and outstanding shares in the capital of the Material Subsidiaries free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances, claims or demands of any kind whatsoever, all of such shares have been duly authorized and validly issued and are outstanding as fully paid and non-assessable shares and no person has any right, agreement or option, present or future, contingent or absolute, or any right capable of becoming a right, agreement or option, for the purchase from the Company of any interest in any of such shares or for the issue or allotment of any unissued shares in the capital of the Material Subsidiaries or any other security convertible into or exchangeable for any such shares:

Name	Jurisdiction of Incorporation or Continuance	Beneficial Equity/Voting Ownership
Sterling Mining de Mexico S.A. de C.V.	Mexico	99%
North American Silver, Limited	Montana	100%

(iii) all consents, approvals, permits, authorizations or filings as may be required for the execution and delivery of the Transaction Documents, the issuance and sale of the Unit Shares and Warrants, the issue and sale of the Warrant Shares upon the exercise of the Warrants, the issuance of the Compensation Options and the issuance of the Unit Shares and Warrants upon exercise or of the Compensation Options, the issue and sale of the Warrant Shares upon the exercise of the Warrants comprising the Units underlying the Compensation Options, all in conformance with this Agreement, and the consummation of the transactions contemplated in this Agreement, have been made or obtained, as applicable, except for the filing of the notification on Form D with the SEC required to be made within 15 days of Closing;

(iv) each of the execution and delivery of the Transaction Documents, the performance by the Company of its obligations hereunder or thereunder, the issuance and sale of the Unit Shares and Warrants, the issue and sale of the Warrant Shares upon the exercise of the Warrants, the issuance of the Compensation Options, the issuance of the Unit Shares and Warrants upon exercise of the Compensation Options, the consummation of the transactions contemplated in this Agreement, do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, (whether after notice or lapse of time or both), (A) any statute, rule or regulation applicable to the Company including, without limitation, Securities Laws or other applicable securities laws; (B) the constating documents, articles or resolutions of the Company which are in effect at the date hereof; (C) any Debt Instruments, Material Agreement, mortgage, note, indenture, contract, agreement, instrument, lease or other document to which the Company is a party or by which it is bound; or (D) any judgment, decree order, statute, rule, law or regulation binding the Company or the property or assets of the Company;

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(v) The Disclosure Documents, when they were or are filed with the SEC, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the SEC thereunder and when read together did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;

(vi) the audited financial statements of the Company as at and for the year ended December 31, 2005 and unaudited interim financial statements as at and for the nine month period ended September 30, 2006 (collectively, the “Financial Statements”) have been prepared in accordance with generally accepted accounting principles in the United States, as applicable, consistently applied with prior periods, except as otherwise noted therein and present fairly, in all material respects, the financial position (including the assets and liabilities, whether absolute, contingent or otherwise) of the Company as at such dates and results of operations of the Company for the periods then ended and there has been no material change in accounting policies or practices of the Company or the Material Subsidiaries since December 31, 2005. All disclosures in the Disclosure Documents regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the SEC) comply with Regulation G, to the extent applicable;

(vii) there has been no adverse material change to the Company or the Material Subsidiaries (actual, proposed or prospective, whether financial or otherwise) in the business, affairs, operations, assets, liabilities (contingent or otherwise) or shareholders’ equity of the Company or the Material Subsidiaries since September 30, 2006, which has not been generally disclosed to the public and, in all material respects, the business of the Company and the Material Subsidiaries have been carried on in the usual and ordinary course consistent with past practice since September 30, 2006 to the extent that such past practice is consistent with the current business direction of the Company and the Material Subsidiaries;

(viii) all taxes (including income tax, capital tax, payroll taxes, employer health tax, workers’ compensation payments, property taxes, custom and land transfer taxes), duties, royalties, levies, imposts, assessments, deductions, charges or withholdings and all liabilities with respect thereto including any penalty and interest payable with respect thereto (collectively, “Taxes”) due and payable or required to be collected or withheld and remitted, by the Company and the Material Subsidiaries have been paid, collected or withheld and remitted, as applicable. All tax returns, declarations, remittances and filings required to be filed by the Company and the Material Subsidiaries have been filed with all appropriate governmental authorities and all such returns, declarations, remittances and filings are complete and accurate and no material fact or facts have been omitted therefrom which would make any of them misleading. No examination of any tax return of the Company or the Material Subsidiaries is currently in progress and there are no issues or disputes outstanding with any governmental authority respecting any taxes that have been paid, or may be payable, by the Company and the Material Subsidiaries. There are no agreements, waivers or other arrangements with any taxation authority providing for an extension of time for any assessment or reassessment of taxes with respect to the Company and the Material Subsidiaries;

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(ix) the auditors who audited the Financial Statements of the Company and the Material Subsidiaries for the year ended December 31, 2005 and the year ended December 31, 2004 and who provided their audit report thereon are independent public accountants as required under the U.S. Securities Act and the Exchange Act;

(x) the Company’s auditors have not provided any material comments or recommendations to the Company regarding its accounting policies, internal control systems or other accounting or financial practices;

(xi) there has never been a “reportable event” (within the meaning of National Instrument 51-102) with the present or former auditors of the Company;

(xii) except as set forth in Schedule “A” to this Agreement and as otherwise disclosed to the Agents and their counsel, no holder of outstanding securities of the Company will be entitled to any contractual pre-emptive or any similar rights to subscribe for any of the Common Shares or other securities of the Company and no rights, warrants or options to acquire, or instruments convertible into or exchangeable for, any shares in the capital of the Company are outstanding, and except as set forth on Schedule “A”, other than the holders of the Units Shares and Warrants there are no persons with registration rights or other similar rights to have any securities registered pursuant to the Registration Statement or otherwise registered by the Company under the U.S. Securities Act;

(xiii) there is not, in its articles of incorporation, by-laws or in any Debt Instrument, Material Agreement, agreement, mortgage, note, debenture, indenture or other instrument or document to which the Company or the Material Subsidiaries is a party, any restriction upon or impediment to, the declaration or payment of dividends by the directors of the Company or the payment of dividends by the Company to the holders of its Common Shares;

(xiv) neither the Company nor any of its subsidiaries are a party to or bound or affected by any commitment, agreement or document containing any covenant which expressly limits the freedom of the Company or the Company’s subsidiaries to compete in any line of business, transfer or move any of its assets or operations or which materially or adversely affects the business practices, operations or condition of the Company and the Company’s subsidiaries taken as a whole;

(xv) the Company and the Material Subsidiaries have conducted and are conducting their business in compliance in all material respects with all applicable laws and regulations of each jurisdiction in which it holds assets or carries on business (including, without limitation, all applicable federal, provincial, municipal, local environmental anti-pollution and licensing laws, regulations and other lawful requirements of any Canadian, United States or foreign governmental or regulatory body including exploration and exploitation permits and concessions) and has not received a notice of non-compliance, nor knows of, nor has reasonable grounds to know of, any facts that could give rise to a notice of material non-compliance with any such laws, regulations or permits;

(xvi) the Company and the Material Subsidiaries are not aware of any pending change or contemplated change to any applicable law or regulation or governmental position that would materially effect the business of the Company or the Material Subsidiaries or the business or legal environment under which the Company or the Material Subsidiaries operate;

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(xvii) this Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms;

(xviii) upon the execution and delivery thereof, each of the Transaction Documents shall constitute a valid and binding obligation of the Company and each shall be enforceable against the Company in accordance with its terms;

(xix) at the Closing Time, all necessary corporate action will have been taken by the Company to: (a) validly create, authorize and issue the Unit Shares and Warrants comprising the Units; (b) allot, reserve and authorize the issuance of the Unit Shares as fully paid and non-assessable securities in the capital of the Company; (c) validly create, allot and authorize the issuance of the Warrants; (d) validly allot, reserve and authorize the issuance of the Warrant Shares upon the payment therefor as fully paid non-assessable securities in the capital of the Company upon the exercise of the Warrants; (e) validly create, allot and authorize the issuance of the Compensation Options; (f) validly allot, reserve and authorize the issuance of the Unit Shares comprising part of the Units underlying the Compensation Option Shares upon the payment therefor as fully paid non-assessable securities in the capital of the Company upon the exercise of such Warrants; (g) validly create, allot and authorize the issuance of the Warrants comprising part of the Units underlying the Compensation Options upon the exercise of the Compensation Options; and (h) validly allot, reserve and authorize the issuance of the Warrant Shares upon the payment therefor as fully paid non-assessable securities in the capital of the Company upon the exercise of the Warrants comprising part of the Units underlying the Compensation Options;

(xx) as of the close of business on January 17, 2007, the authorized capital of the Company consists of 40,000,000 Common Shares of which 25,148,568 Common Shares are issued and outstanding as fully paid and non-assessable;

(xxi) the currently issued and outstanding Common Shares currently trade on the Over-the-counter market and are quoted on the over-the counter bulletin board under the symbol “SRLM” and no order ceasing or suspending trading in any securities of the Company or the trading of any of the Company’s issued securities is currently outstanding and no proceedings for such purpose are, to the knowledge of the Company, pending or threatened;

(xxii) all information which has been prepared by the Company relating to the Company and the Material Subsidiaries and their respective business, property and liabilities and either publicly disclosed or provided to the Agents, including all financial, marketing, sales and operational information provided to the Agents and all Disclosure Documents did not and will not contain a misrepresentation or an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;

(xxiii) the Company and the Material Subsidiaries are not party to any agreement, nor is the Company or the Material Subsidiaries aware of any agreement, which in any manner affects the voting control of any of the securities of the Company or the Material Subsidiaries;

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(xxiv) other than the notification filing on Form D required to be filed with the SEC 15 days after the Closing Date (and a Form 45-106F1 within 10 days after the Closing Date), all filings required to be made by the Company and the Material Subsidiaries pursuant to the Securities Laws and general corporate law applicable to them have been made and such filings were true and accurate as at the respective dates thereof and the Company has not filed any confidential material change reports;

(xxv) the Company and the Material Subsidiaries are in compliance in all material respects with all laws respecting employment and employment practices, terms and conditions of employment, occupational health and safety, pay equity and wages; and there is not currently any labour disruption or conflict involving the Company or the Material Subsidiaries;

(xxvi) the Company and the Material Subsidiaries do not have any loans or other indebtedness outstanding which has been made to any of its shareholders, officers, directors or employees, past or present, or any person not dealing at “arm’s length” (as such term is defined in the Income Tax Act (Canada)) with it;

(xxvii) the assets of the Company and the Material Subsidiaries and their respective business and operations are insured against loss or damage with responsible insurers on a basis consistent with insurance obtained by reasonably prudent participants in comparable businesses, and such coverage is in full force and effect, and the Company and the Material Subsidiaries have not breached the terms of any policies in respect thereof or failed to promptly give any notice or present any material claim thereunder;

(xxviii) other than the Agents and its representatives, there are no persons acting or purporting to act at the request or on behalf of the Company, that are entitled to any brokerage or finder’s fee in connection with the transactions contemplated by this Agreement;

(xxix) the Company and the Material Subsidiaries are in material compliance in all respects with each license and permit held by it and is not in violation of, or in default under, the applicable statutes, ordinances, rules, regulations, orders or decrees (including, without limitation, “Environmental Laws” as defined below) of any United States governmental entities, regulatory agencies or bodies having asserting or claiming jurisdiction over it or over any part of its operations or assets;

(xxx) the Company and the Material Subsidiaries (i) are in compliance in all material respects with any and all applicable federal, provincial, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”) in each jurisdiction in which they hold assets or conduct business; (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct its business; and (iii) are in compliance in all material respects with all terms and conditions of any such permit, license or approval;

(xxxi) there are no known environmental audits, evaluations, assessments, studies or tests relating to the Company or any of the Material Subsidiaries except for ongoing assessments conducted by or on behalf of the Company in the ordinary course;

(xxxii) other than as disclosed in the Disclosure Documents, there have been no past unresolved, and there are no pending or threatened claims, complaints, notices or requests for

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information received by the Company or the Material Subsidiaries with respect to any alleged violation of any Environmental Law; and no conditions exist at, on or under any property now or previously owned, operated or leased by the Company or the Material Subsidiaries which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law that, individually or in the aggregate, has or may reasonably be expected to have, an adverse effect with respect to the Company or the Material Subsidiaries;

(xxxiii) the Company and/or the Material Subsidiaries are not party to any Debt Instrument or any agreement, contract or commitment to create, assume or issue any Debt Instrument or other indebtedness;

(xxxiv) other than the Company, there is no person that is or will be entitled to demand the proceeds of this Offering under the terms of any Debt Instrument, Material Agreement, mortgage, note, indenture, contract, instrument, lease agreement (written or unwritten) or otherwise;

(xxxv) the Company and the Material Subsidiaries are not, nor to the knowledge of the Company, any other person is not in default in the observance or performance of any material term, covenant or obligation to be performed by it under any Debt Instrument, Material Agreement, contract, agreement or arrangement to which the Company is a party and no event has occurred which with notice or lapse of time or both would constitute such a default and all such contracts, agreements and arrangements are in good standing;

(xxxvi) the minute books and records of the Company and the Material Subsidiaries which have made available to the Agents and its counsel in connection with its due diligence investigation of the Company and the Material Subsidiaries for the periods from its inception date to the date of examination thereof, are all of the minute books and material records of the Company and the Material Subsidiaries and contain copies of all material proceedings (or certified copies thereof) of the shareholders, the boards of directors and all committees of the boards of directors of the Company and the Material Subsidiaries to the date of review of such corporate records and minute books. There have been no other material meetings, resolutions or proceedings of the shareholders, boards of directors or any committees of the boards of directors of the Company and the Material Subsidiaries to the date of review of such corporate records and minute books not reflected in such minute books and other records or provided to the Agents and its counsel;

(xxxvii) with respect to each of the Leased Premises, the Company and/or the Material Subsidiaries occupy the Leased Premises, have the exclusive right to occupy and use the Leased Premises and each of the leases pursuant to which the Company and the Material Subsidiaries occupy the Leased Premises is in good standing and in full force and effect. The performance of obligations pursuant to and in compliance with the terms of this Agreement and the completion of the transactions described herein by the Company and the Material Subsidiaries, will not afford any of the parties to such leases or any other person the right to terminate such lease or the Company’s or the Material Subsidiary’s right to occupy and use the Leased Premises or, result in any additional or more onerous obligations under such leases;

(xxxviii) the Company or the Material Subsidiaries are the absolute legal and beneficial owner of, and have good and marketable title to, all of the material property or assets thereof to the

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extent described in the Disclosure Documents, free of all mortgages, liens, charges, pledges, security interests, encumbrances, claims or demands whatsoever, other than those described in the Disclosure Documents, and no other property rights are necessary for the conduct of the business of the Company or the Material Subsidiaries as currently conducted or contemplated to be conducted, the Company and the Material Subsidiaries know of no claim or basis for any claim that might or could adversely affect the right thereof to use, transfer or otherwise exploit such property rights and except as disclosed in the Disclosure Documents, the Company and the Material Subsidiaries have no responsibility or obligation to pay any commission, royalty, licence fee or similar payment to any person with respect to the property rights thereof;

(xxxix) the Company and the Material Subsidiaries hold either freehold title, mining leases, mining claims or other conventional property, proprietary or contractual interests or rights, recognized in the jurisdiction in which a particular property is located in respect of the ore bodies and minerals located in properties in which the Company and the Material Subsidiaries have an interest as described in the Disclosure Documents under valid, subsisting and enforceable title documents or other recognized and enforceable agreements or instruments, which are currently sufficient to permit the Company and the Material Subsidiaries to explore the minerals relating thereto, all such property, leases or claims and all property, leases or claims in which the Company or the Material Subsidiaries have any interest or right have been validly located and recorded in accordance with all applicable laws and are valid and subsisting, the Company or the Material Subsidiaries currently have all necessary surface rights, access rights and other necessary rights and interest relating to the properties in which the Company or the Material Subsidiaries have an interest as described in the Disclosure Documents granting the Company or the Material Subsidiaries the right and ability to explore for minerals, ore and metals for development purposes as are appropriate in view of the rights and interests therein of the Company or the Material Subsidiaries, with only such exceptions as do not materially interfere with the use made by the Company or the Material Subsidiaries of the rights or interests so held and each of the proprietary interests or rights and each of the documents, agreements and instruments and obligations relating thereto referred to above are currently in good standing in the name of the Company or the Material Subsidiaries;

(xl) any and all of the agreements and other documents and instruments pursuant to which the Company and the Material Subsidiaries hold their property and assets (including any interest in, or right to earn an interest in, any property) are valid and subsisting agreements, documents or instruments in full force and effect, enforceable in accordance with the terms thereof, the Company and the Material Subsidiaries are not in default of any of the material provisions of any such agreements, documents or instruments nor has any such default been alleged, and such properties and assets are in good standing under the applicable statutes and regulations of the jurisdictions in which they are situated, and there has been no default under any lease, licence or claim pursuant to which the Company or the Material Subsidiaries derives an interest in such property or assets and all taxes required to be paid with respect to such properties and assets to the date hereof have been paid. The interests of the Company or the Material Subsidiaries in, or rights of the Company or the Material Subsidiaries to earn an interest in, any property of the Company or the Material Subsidiaries are not subject to any right of first refusal or purchase or acquisition rights other than as described in the Disclosure Documents;

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(xli) the Company has disclosed all material information relating to the Sunshine Mine project in the Disclosure Documents in compliance with Securities Laws and such disclosure is true and complete and accurate in all material respects;

(xlii) the Company’s primary material mineral property are its interests in the mining claims comprising the Sunshine Mine;

(xliii) all mineral exploration activities conducted by the Company and the Material Subsidiaries since the acquisition of their mineral properties has been conducted in accordance with good mining and engineering practices and all applicable workers’ compensation, health and safety and workplace laws, regulations and policies have been complied with in all material respects;

(xliv) other than as described in the Disclosure Documents and as otherwise disclosed to the Agents and their counsel, there are no actions, suits, proceedings or inquiries pending or, to the knowledge of the Company or the Material Subsidiaries, threatened against or affecting the Company or the Material Subsidiaries or their property or assets at law or in equity or before or by any federal, provincial, municipal or other governmental department, commission, board, bureau, agency or instrumentality;

(xlv) there are no judgments against the Company or the Material Subsidiaries which are unsatisfied, nor are there any consent decrees or injunctions to which the Company or the Material Subsidiaries are subject;

(xlvi) the Transfer Agent, at its principal offices in the state of Idaho has been duly appointed as transfer agent and registrar in respect of the Common Shares;

(xlvii) no proceedings have been taken, instituted or, to the knowledge of the Company, are pending for the dissolution or liquidation of the Company or the Material Subsidiaries;

(xlviii) none of the transactions contemplated by this Agreement including, without limitation, the use of the proceeds from the sale of the Units will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations G, T, U, and X of the Board of Governors of the Federal Reserve System;

(xlix) there is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply in all material respects with any applicable provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications;

(l) prior to the date hereof, neither the Company nor any of its affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Units;

(li) the Company is subject to Section 13 or 15(d) of the Exchange Act;

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(lii) the Company is not, and after giving effect to the offering and sale of the Units, will not be an “investment company”, or an entity “controlled” by an “investment company”, as such terms are defined in the Investment Company Act;

(liii) assuming compliance with the terms of the Subscription Agreement, and this Agreement, neither the Company nor any person acting on its behalf has offered or sold the Units (or any securities issuable on conversion thereof) by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the U.S. Securities Act or, with respect to Units (or any such securities) sold outside the United States to non-U.S. persons (as defined in Rule 902 under the U.S. Securities Act), by means of any directed selling efforts within the meaning of Rule 902 under the U.S. Securities Act and the Company, any affiliate of the Company and any person acting on its or their behalf has complied with and will implement the offering restriction requirements of Rule 902 under the U.S. Securities Act; and

(liv) the Company and each of the Material Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since December 31, 2005, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

The principal executive officer and principal financial officer of the Company have made all certifications required by the Sarbanes-Oxley Act of 2002 and any related rules and regulations promulgated thereunder by the SEC, and the statements contained in all such certifications were complete and correct in all material respects as of the respective dates made. Neither the Company nor any of its officers has received notice from the SEC questioning or challenging the accuracy, completeness, content, form or manner of filing or submission of such certifications.

(b) Representations, Warranties and Covenants of the Agents. The Agents hereby represent, warrant and covenant to the Company, and acknowledge that the Company is relying upon such representations and warranties, that:

(i) in respect of the offer and sale of the Units, the Agents will comply with all Securities Laws of the jurisdictions in which it offers Units;

(ii) the Agents and their representatives have not engaged in or authorized, and will not engage in or authorize, any form of general solicitation or general advertising in connection with or in respect of the Units in any newspaper, magazine, printed media of general and regular paid circulation or any similar medium, or broadcast over radio or television or otherwise or conducted any seminar or meeting concerning the offer or sale of the Units whose attendees have been invited by any general solicitation or general advertising;

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(iii) each of the Agents is an “accredited investor” as such term is defined in National Instrument 45-106 - Prospectus and Registration Exemptions.

(iv) neither the Agents, their affiliates nor any persons acting on their behalf, has engaged or will engage in any hedging transaction with respect to any of the Unit Shares or Warrants during the Distribution Compliance Period except in compliance with the U.S. Securities Act. For the purposes of this provision, “Distribution Compliance Period” means a one year period that begins on the Closing Date, except that all offers and sales by the Agents, a dealer, or other person that participates in the distribution of the Units pursuant to a contractual arrangement, of an unsold allotment or subscription of Units shall be deemed to be made during the Distribution Compliance Period.

5. Prospectus and Registration Statement Matters

(a) The Company will cause the Final Prospectus and any other related documents required to be filed in connection with the Final Prospectus to be prepared and filed in accordance with the Securities Laws of the Qualifying Province and use its best efforts to obtain a receipt of the applicable securities regulator in connection with such Final Prospectus, within 120 days after the Closing Date, in each case in form and substance satisfactory to the Agents acting reasonably;

(b) The Company will file a resale Registration Statement and use its best efforts to have such registration statement declared effective by the SEC within 180 days of closing to register the resale of the Common Shares and the Common Shares underlying the Warrants;

(c) The Preliminary Prospectus, the Final Prospectus, and any Supplementary Material will contain the disclosure required by all requirements of the Securities Laws of the Qualifying Jurisdiction;

(d) The Registration Statement (and each amendment or supplement thereto), will contain the disclosure required by all requirements of the Securities Laws of the United States;

(e) The Company recognizes that it is fundamental to the Purchasers that the Final Prospectus be filed in Canada and a receipt is obtained for such Prospectus, the Unit Shares and Warrants be registered for resale in the United States under the Registration Statement so that the Unit Shares and Warrant Shares will be tradable in such Qualifying Province and in the United States without the necessity of the holder thereof filing a prospectus or effecting the trade in a manner which falls within one of the various private placement exemptions or exemptions from registration under applicable securities legislation or subject to any statutory or regulatory hold periods or trade restrictions in such Qualifying Province and in the United States (provided such trade is not a “control distribution” as defined by the applicable Securities Laws, or an “affiliate” as defined in Rule 144). The Company acknowledges that it is for this reason that the Company has agreed to use its best efforts to ensure that the Preliminary Prospectus and the Final Prospectus are to be filed with the Securities Regulators in the Qualifying Province and receipts are to be obtained therefore and the Registration Statement is to be filed with the SEC in the United States within the time periods contemplated by this Agreement.; and

(f) The Company agrees that if it does not file and obtain a receipt for the Final Prospectus pursuant to section 5(a) and the Registration Statement pursuant to section 5(b) is not declared effective within 180 days of the Closing, the Company shall from 180 days after the Closing pay to each subscriber 1% of the total subscription amount paid by each Purchaser per month to a maximum of 12%, on a pro rata basis, payable quarterly.

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6. Delivery of Prospectuses

(a) The Company shall deliver or cause to be delivered to the Agents and the Agents’ counsel the documents set out below at the respective times indicated:

(i) contemporaneously, as nearly as practicable, with the filing with the Securities Regulators (i) in the Qualifying Province of the Preliminary Prospectus or of the Final Prospectus copies of the Preliminary Prospectus or of the Final Prospectus signed as required by applicable Securities Laws, and (ii) with the SEC of the Registration statement and all amendments thereto;

(ii) as soon as they are available, copies of any Supplementary Material required to be filed under any of the Securities Laws in Canada and the United States, signed as required by applicable Securities Laws and including copies of any documents or information incorporated by reference therein which have not been previously delivered to the Agents;

7. Closing Deliveries. The purchase and sale of the Units shall be completed at the Closing Time at the offices of the Company’s counsel, Cassels Brock & Blackwell LLP, Toronto, Ontario at 10:00 a.m. (Toronto time), or at such other place as the Agents and the Company may agree upon. At or prior to the Closing Time, the Company shall duly and validly deliver to the Agents certificates in definitive form representing the Unit Shares and Warrants in the names of such Purchasers or as indicated on their respective Subscription Agreements, against payment to the Company of the Issue Price therefor, in lawful money of the United States. The Agents may discharge its payment obligations under this paragraph 7 by wire transfer from the Agents to the Company or Cassels Brock & Blackwell LLP, in trust for the Company equal to the aggregate Issue Price for the Units less the Agent’s expenses, as set out in paragraph 10 hereto and less the Commission.

8. Closing Conditions. Each Purchaser’s obligation to purchase the Units at the Closing Time shall be conditional upon the fulfilment at or before the Closing Time of the following conditions:

(a) the Agents shall have received a certificate, dated as of the Closing Date, signed by the President and Chief Financial Officer of the Company, or such other officers of the Company as the Agents may agree, certifying for and on behalf of the Company, to the best of their knowledge, information and belief, that:

(i) no order, ruling or determination having the effect of suspending the sale or ceasing the trading in any securities of the Company (including the Common Shares) has been issued by any regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or are pending or, to the knowledge of such officers, contemplated or threatened by any regulatory authority;

(ii) the Company has duly complied with all the terms, covenants and conditions of this Agreement on its part to be complied with up to the Closing Time; and

(iii) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and the Material Subsidiaries considered as a whole, whether or not arising in the ordinary course of

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business and the representations, warranties and covenants of the Company contained in this Agreement are true and correct as of the Closing Time with the same force and effect as if made at and as of the Closing Time after giving effect to the transactions contemplated by this Agreement;

(b) the Agents shall have received at the Closing Time certificates dated the Closing Date, signed by appropriate officers of the Company addressed to the Agents and their counsel, with respect to the articles and by-laws of the Company, all resolutions of the Company’s board of directors relating to this Agreement and the transactions contemplated hereby and thereby, the incumbency and specimen signatures of signing officers, and such other matters as the Agents may reasonably request;

(c) the Agents shall have received at the Closing Time, evidence of all requisite approvals, consents and acceptances of the appropriate regulatory authorities required to be made or obtained by the Company in order to complete the Offering;

(d) the Subscription Agreements, the Registration Rights Agreement, the Unit Shares and Warrants, the certificates representing the Warrants and the certificates representing the Compensation Options shall have been executed and delivered by the parties thereto in form and substance satisfactory to the Agents and their counsel, acting reasonably;

(e) the Agents shall have received favourable legal opinions addressed to the Agents, and the Purchasers, in form and substance satisfactory to the Agents’ counsel acting reasonably, dated each applicable Closing Date, from Parsons Behle Latimer, Hull and Branstetter Chartered and Cassels Brock & Blackwell LLP, counsel for the Company and where appropriate, counsel in the other Selling Jurisdictions, which counsel in turn may rely, as to matters of fact, on certificates of auditors, public officials and officers of the Company in the Forms of Exhibits B-1, B-2 and B-3 hereto;

(f) the Agents shall have received favourable legal opinions addressed to the Agents in form and substance satisfactory to the Agents’ counsel, acting reasonably, dated the Closing Date from local counsel to the Company in the United States as to the title and ownership interest in the Sunshine Mine;

(g) the Agents shall have received good standing certificates or similar certificates with respect to the jurisdictions in which the Company and the North American Silver, Limited are incorporated;

(h) the Agents shall, in their sole discretion, be satisfied with their due diligence review with respect to the business, assets, financial condition, affairs and prospects of the Company; and

(i) the Company will cause its Transfer Agents to deliver a certificate as to the issued and outstanding Common Shares.

9. Rights of Termination

(a) Due Diligence Out. In the event that the due diligence investigations performed by the Agents and/or their representatives reveals any material information or fact not generally known to the public which might, in the Agents’ sole opinion, acting reasonably, adversely affect the market price of the securities of the Company, quality of the investment or marketability of the Offering, the Agents shall be entitled, at their sole option and in accordance with subparagraph 9(h) of this Agreement, to terminate its

obligations under this Agreement (and the obligations of the Purchasers arranged by it to purchase Units) by notice to that effect given to the Company any time prior to the Closing Time.

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(b) Litigation. If any inquiry, action, suit, investigation or proceeding, whether formal or informal, (including matters of regulatory transgression or unlawful conduct and including any inquiry or investigation by any Securities Regulator) is commenced, announced or threatened in relation to the Company or any of the officers or directors of the Company or any of its principal security holders, the Agents shall be entitled, at their sole option and in accordance with subparagraph 9(h) of this Agreement, to terminate their obligations under this Agreement (and the obligations of the Purchasers arranged by them to purchase Units) by notice to that effect given to the Company any time prior to the Closing Time.

(c) Disaster Out. In the event that prior to the Closing Time, there should develop, occur or come into effect any action, state, or condition, including, without limitation, terrorism, accident, a new or change in any governmental law or regulation, or other condition or major financial occurrence of national or international consequence, which, in the sole opinion of the Agents materially adversely affects, or may adversely affect, the financial markets generally or the business, operations, affairs or profitability of the Company, or the trading, market price or value of the securities of the Company, the Agents shall be entitled at their sole option, in accordance with subparagraph 9(h) of this Agreement, to terminate their obligations under this Agreement (and the obligations of the Purchasers arranged by them to purchase Units) by written notice to that effect given to the Company prior to the Closing Time.

(d) Change in Material Fact. In the event that prior to the Closing Time, the Agents or the Agents’ representatives, through their due diligence investigations, or otherwise discover or there should occur a material change or a change in any material fact or new material fact shall arise, which, in the sole opinion of the Agents has or could be expected to have a significant adverse effect on the market price or value of the securities of the Company, the Agents shall be entitled, at their sole option, in accordance with subparagraph 9(h), to terminate its obligations under this Agreement (and the obligations of the Purchasers arranged by them to purchase Units) by written notice to that effect given to the Company prior to the Closing Time.

(e) Non-Compliance With Conditions. The Company agrees that all terms, conditions and covenants in this Agreement shall be construed as conditions and complied with so far as the same relate to acts to be performed or caused to be performed by the Company and that it will use its best efforts to cause such conditions to be complied with, and any breach or failure by the Company to comply with any of such conditions or in the event that any representation or warranty given by the Company becomes false and is not rectified as at the Closing Time, shall entitle the Agents, at their sole option in accordance with subparagraph 9(h), to terminate their obligations under this Agreement (and the obligations of the Purchasers arranged by it to purchase the Units) by notice to that effect given to the Company at or prior to the Closing Time. The Agents may waive, in whole or in part, or extend the time for compliance with, any terms and conditions without prejudice to its rights in respect of any other of such terms and conditions or any other or subsequent breach or non-compliance, provided that any such waiver or extension shall be binding upon the Agents only if the same is in writing and signed by it.

(f) Cease Trade Order. In the event that a stop order exists with respect to the securities of the Company, the Agents shall be entitled, at their sole option, in accordance with subparagraph 9(h) of this Agreement, to terminate their obligations under this Agreement (and the obligations of the Purchasers arranged by it to purchase Units) by written notice to that effect given to the Company prior to the Closing Time.

(g) Profitably Marketed. In the event that prior to the Closing Time, the state of the Canadian, U.S. or international financial markets is such that, in the sole opinion of the Agents, the Units cannot be

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profitably marketed, the Agents shall be entitled at their sole option, in accordance with subparagraph 9(h) of this Agreement, to terminate their obligations under this Agreement by written notice to that effect given to the Company prior to the Closing Time.

(h) Exercise of Termination Rights. The rights of termination contained in subparagraphs 9(a), (b), (c), (d), (e) (f) and (g) may be exercised by the Agents and are in addition to any other rights or remedies the Agents may have in respect of any default, act or failure to act or non-compliance by the Company in respect of any of the matters contemplated by this Agreement or otherwise. In the event of any such termination by the Agents, there shall be no further liability on the part of the Agents to the Company or on the part of the Company to the Agents except in respect of any liability which may have arisen or may arise after such termination in respect of acts or omissions prior to such termination under sections 10 and 12.

10. Expenses. All expenses relating to the Offering, including the fees, taxes and disbursements of the Company’s legal counsel, auditors, roadshow consultants, printers and other consultants and service providers retained by the Company in connection with the Offering shall be the responsibility of the Company. In addition, whether or not the Offering is completed, the Company will reimburse the Agents upon request for all reasonable out-of-pocket expenses incurred by the Agents in connection with the Agents engagement hereunder in relation to the Offering and excluding any expenses relating to the filing of any prospectus or registration statement which shall be dealt with under a separate engagement letter, including, but not limited to, the fees, taxes and, disbursements of the Agents’ legal counsel, subject to a maximum of $75,000 exclusive of any taxes and disbursements, and any advertising, printing, courier, telecommunications, data search, roadshow presentation, travel, entertainment and other expenses incurred by the Agents, together with related Goods and Services Tax (“GST”) and provincial sales taxes. All reasonable fees and expenses incurred by the Agents or on their behalf including the fees of the Agents’ counsel shall be payable by the Company immediately upon receiving an invoice therefor.

11. Survival of Representations and Warranties. All terms, warranties, representations, covenants and agreements herein contained or contained in the Transaction Documents shall survive the purchase and sale of the Units and continue in full force and effect for the benefit of the Agents and Purchasers and shall not be limited or prejudiced by any investigation made by or on behalf of the Agents in connection with the purchase and sale of the Units.

12. (a) Indemnity. In consideration for the Agents accepting the engagement (the “Engagement”) agrees to indemnify and save harmless the Agents, their affiliates and their respective directors, officers, employees, partners, agents, advisors and shareholders (collectively, the “Indemnified Parties” and individually, an “Indemnified Party”) from and against any and all losses, claims, actions, suits, proceedings, damages, liabilities or expenses of whatsoever nature or kind (excluding loss of profits), including the aggregate amount paid in reasonable settlement of any actions, suits, proceedings, investigations or claims and the reasonable fees, disbursements and taxes of their counsel in connection with any action, suit, proceeding, investigation or claim that may be made or threatened against any Indemnified Party or in enforcing this indemnity (collectively, the “Claims”) to which an Indemnified Party may become subject or otherwise involved in any capacity insofar as the Claims relate to, are caused by, result from, arise out of or are based upon, directly or indirectly, the Engagement whether performed before or after the Company’s execution of the Agreement and to reimburse each Indemnified Party forthwith, upon demand, for any legal or other expenses reasonably incurred by such Indemnified Party in connection with any Claim.

In the event and to the extent that a court of competent jurisdiction in a final judgment (in a proceeding to which an Agent is a party) that has become non-appealable determines that an Indemnified Party was grossly negligent or guilty of wilful misconduct in connection with a Claim in respect of which the

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Company has advanced funds to the Indemnified Party pursuant to this indemnity, such Indemnified Party will reimburse such funds to the Company and thereafter this indemnity will not apply to such Indemnified Party in respect of such Claim. The Company agrees to waive any right the Company might have of first requiring the Indemnified Party to proceed against or enforce any other right, power, remedy or security or claim payment from any other person before claiming under this indemnity.

In case any action, suit, proceeding or claim is brought against an Indemnified Party or an Indemnified Party has received notice of the commencement of any investigation in respect of which indemnity may be sought against the Company, the Indemnified Party will give the Company prompt written notice of any such action, suit, proceeding, claim or investigation of which the Indemnified Party has knowledge and the Company will undertake the investigation and defence thereof on behalf of the Indemnified Party, including the prompt employment of counsel acceptable to the Indemnified Parties affected and the payment of all expenses. Failure by the Indemnified Party to so notify will not relieve the Company of its obligation of indemnification hereunder unless (and only to the extent that) such failure results in forfeiture by the Company of substantive rights or defences.

No admission of liability and no settlement, compromise or termination of any action, suit, proceeding, claim, or investigation will be made without the Company’s consent and the consent of the Indemnified Parties affected, such consents not to be unreasonably withheld. Notwithstanding that the Company will undertake the investigation and defence of any Claim, an Indemnified Party will have the right to employ separate counsel with respect to any Claim and participate in the defence thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless:

(a) employment of such counsel has been authorized in writing by the Company;

(b) the Company has not assumed the defence of the action within a reasonable period of time after receiving notice of the claim;

(c) the named parties to any such claim include both the Company and the Indemnified Party and the Indemnified Party will have been advised by counsel to the Indemnified Party that there may be a conflict of interest between the Company and the Indemnified Party; or

(d) there are one or more defences available to the Indemnified Party which are different from or in addition to those available to the Company;

in which case such fees and expenses of such counsel to the Indemnified Party will be for the Company’s account. The rights accorded to the Indemnified Parties hereunder will be in addition to any rights an Indemnified Party may have at common law or otherwise.

If for any reason the foregoing indemnification is unavailable (other than in accordance with the terms hereof) to the Indemnified Parties (or any of them) or is insufficient to hold them harmless, the Company will contribute to the amount paid or payable by the Indemnified Parties as a result of such Claims in such proportion as is appropriate to reflect not only the relative benefits received by the Company or the Company’s shareholders on the one hand and the Indemnified Parties on the other, but also the relative fault of the parties and other equitable considerations which may be relevant. Notwithstanding the foregoing, the Company will in any event contribute to the amount paid or payable by the Indemnified Parties as a result of such Claim any amount in excess of the fees actually received by the Indemnified Parties hereunder.

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The Company hereby constitutes the Agents as trustees for each of the other Indemnified Parties of the Company’s covenants under this indemnity with respect to such persons and the Agents agree to accept such trust and to hold and enforce such covenants on behalf of such persons.

The Company also agrees that no Indemnified Party will have any liability (either direct or indirect, in contract or tort or otherwise) to the Company or any person asserting claims on the Company’s behalf or in right for or in connection with the Engagement, except to the extent that any losses, expenses, claims, actions, damages or liabilities incurred by the Company are determined by a court of competent jurisdiction in a final judgment (in a proceeding to which an Agent is a party) that has become non-appealable to have resulted from the gross negligence or wilful misconduct of such Indemnified Party.

The Company agrees to reimburse the Agents monthly for the time spent by the Agents’ personnel in connection with any Claim at their normal per diem rates. The Company also agrees that if any action, suit, proceeding or claim will be brought against, or an investigation commenced in respect of the Company or the Company and an Agent and personnel of an Agent be required to testify, participate or respond in respect of or in connection with the Engagement, an Agent will have the right to employ its own counsel in connection therewith and the Company will reimburse an Agent monthly for the time spent by its personnel in connection therewith at their normal per diem rates together with such disbursements and reasonable out-of-pocket expenses as may be incurred, including fees and disbursements of an Agent’s counsel.

13. Advertisements. The Company acknowledges that the Agents shall have the right, subject to clauses 1(a) and (c) of this Agreement, at its own expense, to place such advertisement or advertisements relating to the sale of the Units contemplated herein as the Agents may consider desirable or appropriate and as may be permitted by applicable law. The Company and the Agents each agree not to make or publish any advertisement in any media whatsoever relating to, or otherwise publicize, the transaction provided for herein so as to result in any exemption from the prospectus and registration requirements of Securities Laws in any of the Selling Jurisdictions or any other jurisdiction in which the Units shall be offered or sold being unavailable in respect of the sale of the Units to prospective purchasers.

14. Commission. In connection with the issue and sale of the Units pursuant to the Offering, the Agents will receive from the Company on Closing, a cash commission equal to 7.0% of the gross proceeds from the Offering (the “Commission”) Such Commission will be payable in respect of any securities sold by the Company to any prospective investor that is identified or contact by the Agent prior to the date hereof in relation to the Offering, where such sale is completed within 120 days of the Closing, such Commission to be paid to the Agent forthwith upon such sale of securities. The Company will also issue to the Agents compensation options (the “Compensation Options”) exercisable, without payment of additional consideration, to acquire Units in the amount that is equal to 7.0% of the number of Units sold pursuant to the Offering. Each Compensation Options will entitle the holder to acquire one Unit for US$2.30 for a period of eighteen months following Closing.

15. Right of First Refusal. If within six (6) months after Closing, the Company (a) requires additional equity or debt financing, (b) proposes to acquire or dispose of any assets or securities out of the ordinary course of your business, (c) decides to hedge, lock-in or swap any currency or interest rate exposure relating to your business, (d) proposes a material corporate transaction, such as an amalgamation, recapitalization, merger, take-over bid, joint venture, plan of arrangement or reorganization, or (e) receives an unsolicited take-over bid or merger proposal, the Company will engage the Agents as lead managers, underwriters, private placement agents and/or exclusive financial advisors (as the case may be, depending upon the nature of the transaction) in connection with such transaction, subject to agreeing on mutually acceptable fee arrangements. The terms and conditions relating to any such engagement will be outlined in a separate engagement letter, underwriting agreement or agency

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agreement and the fees for such services will be in addition to the fees payable hereunder, will be negotiated separately and in good faith and will be consistent with customary industry fees, on terms acceptable to both parties. If both the Agents do not accept the terms and conditions contained in the Company’s offer within ten days of receipt of such offer, you may engage any other financial institution as manager, underwriter, private placement agent and/or exclusive financial advisor (as the case may be, depending upon the nature of the transaction) in connection with such transaction, provided that the terms and conditions of any such engagement shall be no more favourable on the whole to such other financial institution than the terms and conditions offered by the Company to the Agents.

16. Notices. Unless otherwise expressly provided in this Agreement, any notice or other communication to be given under this Agreement (a “notice”) shall be in writing addressed as follows:

(a) in the case of the Company, to:

Sterling Mining Company

2201 Government Way

Suite E, Coeur d’Alene ID

83814 USA

Attention: Raymond De Motte

Fax: (208) 676-1629

with a copy to (which shall not constitute notice):

Cassels Brock & Blackwell LLP

2100 Scotia Plaza

40 King Street West

Toronto, Ontario M5H 3C2

Attention: David Poynton

Fax: (416) 644-9348

and to:

Parsons Behle & Latimer

201 South Main Street

Suite 1800

Salt Lake City, Utah 84111

Attention: Mark Lehman

Fax: (801) 536-6111

(b) in the case of the Subscriber, at the address specified on the face page hereof, with a copy to the Agents at:

Blackmont Capital Inc.

BCE Place, 181 Bay St.

Suite 900

Toronto, Ontario M5J 2T3

Attention: Chad Williams

Fax: (416) 864-9151

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with a copy to (which shall not constitute notice):

TD Securities Inc.

Toronto-Dominion Tower

66 Wellington Street W., 9th Floor

Toronto, Ontario M5K 1A2

Attention: Gorden Glen

Fax: (416) 983-3176

and to:

Fraser Milner Casgrain LLP

1 First Canadian Place

39th Floor

100 King Street West

Toronto, Ontario M5X 1B2

Attention: John Sabine

Fax: (416) 863-4592

and to:

Dorsey & Whitney LLP

Canada Trust Tower, BCE Place

Suite 4310

161 Bay Street

Toronto, ON M5J 2S1

Attention: Gil Cornblum

Fax: (416) 367-7371

or to such other address as any of the parties may designate by notice given to the others.

Each notice shall be personally delivered to the addressee or sent by facsimile transmission to the addressee and (i) a notice which is personally delivered shall, if delivered on a Business Day, be deemed to be given and received on that day and, in any other case, be deemed to be given and received on the first Business Day following the day on which it is delivered; and (ii) a notice which is sent by facsimile transmission shall be deemed to be given and received on the first Business Day following the day on which it is sent.

17. Time of the Essence. Time shall, in all respects, be of the essence hereof.

18. Headings. The headings contained herein are for convenience only and shall not affect the meaning or interpretation hereof.

19. Singular and Plural, etc. Where the context so requires, words importing the singular number include the plural and vice versa, and words importing gender shall include the masculine, feminine and neuter genders.

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20. Entire Agreement; No Advisory or Fiduciary Relationship.

(a) This Agreement constitutes the only agreement between the parties with respect to the subject matter hereof and shall supersede any and all prior negotiations and understandings. This Agreement may be amended or modified in any respect by written instrument only. All schedules attached to this Agreement are deemed to be part hereof and are hereby incorporated by reference.

(b) The Company acknowledges and agrees that (a) the offer of Units pursuant to this Agreement, including the determination of the offering price of the Units and any related commissions, is an “arm’s length” commercial transaction between the Company and the Agents, (ii) in connection with the Offering contemplated hereby and the process leading to such transaction the Agents are and have been acting solely as a principal and is not the agent or fiduciary of the Company, or its shareholders, creditors, employees or any other party, (c) the Agents have not assumed or will assume an advisory or fiduciary responsibility in favour of the Company with respect to the Offering contemplated hereby and the process leading thereto (irrespective of whether the Agents have advised or are currently advising the Company on other matters) and the Agents have no obligation to the Company with respect to the Offering contemplated hereby except the obligations expressly set forth herein, (iv) the Agents and its affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company, and (v) the Agents have not provided any legal, accounting, regulatory or tax advice with respect to the Offering contemplated hereby and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

21. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Agreement.

22. Governing Law; Attornment to Ontario. This Agreement shall be governed by and construed in accordance with the laws of Ontario and the laws of Canada applicable therein. Any and all disputes arising under this Agency Agreement, whether as to interpretation, performance or otherwise, shall be subject to the exclusive jurisdiction of the courts of the Province of Ontario and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such province.

23. Successors and Assigns. The terms and provisions of this Agreement shall be binding upon and enure to the benefit of the Company, the Agents and the Purchasers and their respective executors, heirs, successors and permitted assigns; provided that, except as provided herein, or in the Subscription Agreements, this Agreement shall not be assignable by any party without the written consent of the others.

24. Further Assurances. Each of the parties hereto shall do or cause to be done all such acts and things and shall execute or cause to be executed all such documents, agreements and other instruments as may reasonably be necessary or desirable for the purpose of carrying out the provisions and intent of this Agreement.

25. Effective Date. This Agreement is intended to and shall take effect as of the date first set forth above, notwithstanding its actual date of execution or delivery.

26. Language. The parties hereby acknowledge that they have expressly required this Agreement and all notices, statements of account and other documents required or permitted to be given or entered into pursuant hereto to be drawn up in the English language only. Les parties reconnaissent avoir expressément demandé que la présente Convention ainsi que tout avis, tout état de compte et tout autre document à être ou pouvant être donné ou conclu en vertu des dispositions des présentes, soient rédigés en langue anglaise seulement.

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27. Counterparts and Facsimile. This Agreement may be executed in any number of counterparts and by facsimile, each of which so executed shall constitute an original and all of which taken together shall form one and the same agreement.

28. Authority of Blackmont Capital Inc. All actions which must or may be taken by the Agents in connection with this Agreement, including any agreement, waiver, order, notice, direction, receipt or other action to be made, given or taken by the Agents hereunder may be made, given or taken by Blackmont Capital Inc. on behalf of the Agents and the Company shall accept notification of any such actions from, and deliver the certificates representing the Units to, or to the order of, Blackmont Capital Inc. Blackmont Capital Inc. acknowledges that where practicable to do so they will discuss any action to be taken by them hereunder with the other Agent prior to taking such action, provided that the failure of Blackmont Capital Inc. to so discuss will not detract from the right of the Company to rely on the action of Blackmont Capital Inc. in accordance with this provision.

[intentionally blank]

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If the Company is in agreement with the foregoing terms and conditions, please so indicate by executing a copy of this letter where indicated below and delivering the same to the Agents.

Yours very truly,

Blackmont Capital Inc.

Per:	/s/
	Authorized Signing Officer

TD Securities Inc.

Per:	/s/
	Authorized Signing Officer

The foregoing is hereby accepted on the terms and conditions therein set forth.

DATED as of January 18, 2007.

Sterling Mining Company

Per:	/s/
	Authorized Signing Officer

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SCHEDULE “A”

Shares	3,695,000
Warrants	3,695,000
Commission	258,650
Commission - warrants	258,650
Total Shares to commit	7,907,300
Fully diluted shares	39,279,093
Registration rights
Pennaluna Offering
Common Stock	2,334,908
Warrants	2,334,908
Special warrants	583,727
Other - Western Continental	120,000
Total	5,373,543
Summary of Shares after TD/Blackmont offering
Shares issued	28,843,568
Warrants	10,330,525
Options	25,000
Convertible debt	80,000
Fully diluted shares	39,279,093

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EXHIBIT “A”

FORM OF REGISTRATION RIGHTS AGREEMENT

- 1 -

EX-10.2

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is made and entered into as of this18th day of January, 2007 by and among Sterling Mining Company, a corporation incorporated under the laws of Idaho (the “Company”), Blackmont Capital Inc. and TD Securities Inc. (collectively, the “Agents”) on behalf of each purchaser in the offering by the Company of Units and in connection with the agency agreement, dated January 18, 2007 (the “Agency Agreement”), between the Company and the Agents.

The parties hereby agree as follows:

1. Certain Definitions.

Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Agency Agreement. As used in this Agreement, the following terms shall have the following meanings:

“Affiliate” means, with respect to any person, any other person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such person.

“Business Day” means a day, other than a Saturday or Sunday, on which banks in Toronto are open for the general transaction of business.

“Common Shares” shall mean the Company’s shares of common stock, US$0.05 par value, and any securities into which such shares may hereinafter be reclassified.

“Effective Date” shall mean the date a Registration Statement is declared effective by the SEC.

“Investors” shall mean the Purchasers, Subscribers and the Agents.

“NASD” means National Association of Securities Dealers, Inc.

“Offering” shall mean the private placement offering of Units in the provinces of Ontario, the United States and elsewhere in accordance with the terms of the Agency Agreement.

“Offering Price” shall mean a price of US$2.30 per Unit in the Offering.

“Prospectus” shall mean the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus.

“Purchasers” shall mean the purchasers in connection with the Offering and any Affiliate or permitted transferee of any Purchaser who is a subsequent holder of any Restricted Security.

“Register,” “registered” and “registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act, and the declaration or ordering of effectiveness of such Registration Statement or document.

“Registrable Securities” shall mean (i) the Unit Shares, (ii) the Warrant Shares, (iii) the Common Shares and Warrant Shares underlying the Compensation Options, any (iv) other securities issued or issuable with respect to or in exchange for Registrable Securities.

“Registration Statement” shall mean any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

“Regulation D” means Regulation D adopted by the SEC under the 1933 Act.

“Regulation S” means Regulation S adopted by the SEC under the 1933 Act.

“Restricted Security” shall have the meaning ascribed thereto in Rule 144(a)(3) of the 1933 Act.

“SEC” means the U.S. Securities and Exchange Commission.

“Subscribers” shall mean the subscribers identified in the Subscription Agreements and any Affiliate or permitted transferee of any Subscriber who is a subsequent holder of Registrable Securities.

“Units” means the units of the Company, each Unit consisting of one Common Share and one Warrant.

“Warrants” means the warrants issued by the Company pursuant to the Agency Agreement, each Warrant entitling the holder to purchase one Common Share of the Company at a price of US$4.25 per share at any time for 24 months following the Closing Date.

“1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

2. Registration.

(a) Registration Statements. Promptly following the closing of the purchase and sale of the securities contemplated by the Subscription Agreements and the Agency Agreement (the “Closing Date”) but no later than 180 days after the Closing Date, the Company shall prepare and file with the SEC one or more Registration Statements on Form S-3 or S-1 (or, if Form S-3 or S-1 is not then available to the Company, on such form of registration statement as is then available to effect a

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registration for resale of the Registrable Securities), covering the resale of the Registrable Securities in an amount at least equal to the aggregate of the Registrable Securities. Such Registration Statements also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Shares resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities. The Registration Statements (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Agents and their counsel prior to its filing or other submission.

(b) Expenses. The Company shall pay all expenses associated with the registration, including filing and printing fees, counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws, fees and expenses of one Canadian counsel and one United States counsel to the Agents, on behalf of the Investors and the Investors’ expenses in connection with the registration.

(c) Effectiveness.

(i) The Company shall use its best efforts to have each Registration Statement declared effective by the SEC as soon as practicable. The Company shall notify the Investors by facsimile or e-mail as promptly as practicable, and in any event, within three (3) Business Days, after the Registration Statement is declared effective and shall simultaneously provide the Investors with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby, if required by the Investors.

(ii) No more than three (3) times in any twelve (12) month period for an aggregate of not more than thirty (30) days, the Company may delay the disclosure of material non-public information concerning the Company, by suspending the use of any Prospectus included in any registration statement contemplated by this Section containing such information, the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company as evidenced in writing, in the best interests of the Company (an “Allowed Delay”); provided, that the Company shall promptly (a) notify the Investors in writing of the existence of (but in no event, without the prior written consent of an Investor, shall the Company disclose to such Investor any of the facts or circumstances regarding) material non-public information giving rise to an Allowed Delay, and (b) advise the Investors in writing to cease all sales under the Registration Statement until the end of the Allowed Delay.

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3. Company Obligations. The Company will use its best efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will:

(a) use its best efforts to cause the Registration Statements to become effective and use its best efforts to keep the Registration Statements continuously effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement, as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by such Registration Statement may be sold pursuant to Rule 144(k) under the 1933 Act;

(b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the period specified in Section 3(a) and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;

(c) provide copies to and permit the counsel designated by the Agents on behalf of the Investors to review each Registration Statement and all amendments and supplements thereto prior to their filing with the SEC and not file any document to which such counsel reasonably objects; provided, however, that the Company is entitled to file any such document, and rely on the assumption that there is no objection, if the Company does not receive a written objection from Agent’s counsel within three Business Days after the document is provided, and provided, however, that the period from the date of any such objection of counsel through the date on which such objection is resolved by the Company in good faith shall extend by an equal number of days, any deadlines which the Company is obligated to meet hereunder or under the Agency Agreement or Subscription Agreement;

(d) furnish to the Investors and their legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company copies of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor that are covered by the related Registration Statement;

(e) use its best efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment;

(f) use its best efforts to cause all Common Shares covered by a Registration Statement to be listed on the Toronto Stock Exchange or TSX Venture Exchange;

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(g) immediately notify the Investors, at any time when a Prospectus relating to Registrable Securities is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and at the request of any such holder, promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the Investors of such Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be slated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

(h) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder, and make available to its security holders, as soon as reasonably practicable, but not later than the due date for reports due under Section 13 or 15(d) of the Exchange Act, an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11 (a) of the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of this subsection 3(h), the Company shall be deemed to have satisfied the requirements of this paragraph by filing such reports as are required by Section 13(a) or 15(d) of the Exchange Act within the time required for filing those reports, including its annual report on Form 10-K and its quarterly reports on Form 10-Q; and

(i) with a view to making available to the Investors the benefits of Rule 144 (or its successor rule) under the 1933 Act and any other rule or regulation of the SEC that may at any time permit the Investors to sell Common Shares to the public without registration, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable Securities may be resold pursuant to Rule 144(k) or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act; and (iii) furnish to each Investor upon request, as long as such Investor owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy of the Company’s most recent annual report on Form 10-K (or such other form then available to the Company), and (C) such other information as may be reasonably requested in order to avail such Investor of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration.

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The Company will not be required to take any actions required under this Section 3 that are not, in the written opinion of counsel for the Company, satisfactory to the Investors acting reasonably, in compliance with applicable law.

The Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Investor wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.

4. Obligations of the Investors.

(a) Each Investor, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

(b) Specifically, it shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities that the Investor furnish to the Company information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such securities and shall execute such documents in connection with such registration as the Company may reasonably request.

(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of an event pursuant to Section 3(e) hereof, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor’s receipt of the copies of the supplemented or amended prospectus filed with the SEC and declared effective and, if so directed by the Company, the Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the Investor’s possession of the Prospectus covering the Registrable Securities current at the time of receipt of such notice.

5. Indemnification.

(a) Indemnification by the Company. The Company will indemnify and hold harmless each Investor and its officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or

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alleged untrue statement of any material fact contained in any Registration Statement, any preliminary prospectus or Prospectus contained therein, or any amendment or supplement thereof, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) any violation by the Company of any rule or regulation promulgated under the 1933 Act applicable to the Company and relating to action or inaction required of the Company in connection with such registration; or (iv) any failure to register or qualify the Registrable Securities included in any such Registration in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on an Investor’s behalf (the undertaking of any underwriter chosen by the Company being attributed to the Company) and will reimburse such Investor, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Investor or any such controlling person in writing specifically for use in such Registration Statement or Prospectus.

(b) Indemnification by the Investors. In connection with any registration pursuant to the terms of this Agreement, each Investor will furnish to the Company in writing such information as the Company reasonably requests concerning the holders of Registrable Securities or the proposed manner of distribution for use in connection with any Registration Statement or Prospectus and agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders, agents and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or an alleged untrue statement of a material fact or any omission of a material fact or an alleged omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission or alleged untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto. In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

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(c) Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the prior written consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

(d) Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

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6. Miscellaneous.

(a) Amendments and Waivers. This Agreement may be amended only in writing signed by the Company and the Agents. The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Agents.

(b) Notices. All notices and other communications provided for or permitted hereunder shall be made (i) as set forth in Section 16 of the Agency Agreement and (ii) to each Subscriber at the address listed on Page 1 of its respective Subscription Agreement.

(c) Assignments and Transfers by Investors. The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns. An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Investor to such person, provided that such Investor complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected.

(d) Assignments and Transfers by the Company. This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Agents; provided, however, that the Company may assign its rights and delegate its duties hereunder to any surviving or successor corporation in connection with a merger or consolidation of the Company with another corporation, or a sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation, without the prior written consent of the Agents, after notice duly given by the Company to each Investor.

(e) Benefits of the Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties; for greater clarity, the benefit of this Agreement will also inure to any transferees of Units and Registrable Securities. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

(f) Counterparts; Faxes. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.

(g) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

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(h) Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.

(i) Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

(j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(k) Governing Law; Attornment to Ontario. This Agreement shall be governed by and construed in accordance with the laws of Ontario and the laws of Canada applicable therein. Any and all disputes arising under this Registration Rights Agreement, whether as to interpretation, performance or otherwise, shall be subject to the exclusive jurisdiction of the courts of the Province of Ontario and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such province.

[intentionally blank]

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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

BLACKMONT CAPITAL INC.

TD SECURITIES INC.

The foregoing is hereby accepted on the terms and conditions therein set forth.

DATED as of January 18, 2007.

STERLING MINING COMPANY

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EX-10.3

Exhibit 10.3

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (i) JANUARY 18, 2007, AND (ii) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND SUCH LAWS COVERING SUCH SECURITIES, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT.

SERIES “A” COMMON STOCK PURCHASE WARRANT

STERLING MINING COMPANY

Warrants:                      Initial Issuance Date: January 18, 2007

THIS SERIES A COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,                      (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Initial Issuance Date and on or prior to the close of business on the two year anniversary of the Initial Issuance Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Sterling Mining Company, an Idaho corporation (the “Company”), up to                      shares (the “Warrant Shares”) of common stock, par value $.05 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Subscription Agreement (the “Subscription Agreement”), dated January 18, 2007, among the Company and the purchasers signatory thereto.

Section 2. Exercise.

a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the

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Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); and, within three Business Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States or Canadian bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Business Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within one Business Day of receipt of such notice. In the event of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be U.S.$4.25, subject to adjustment hereunder (the “Exercise Price”).

c) Cashless Exercise. If at any time after a Registration Statement covering the Warrant Shares has been declared effective by the Securities and Exchange Commission (the “Commission”) there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A)  = the daily volume weighted average price of the Common Stock on the Business Day immediately preceding the date of such election on the trading market on which the Common Stock is then listed or quoted, based on a Business Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time (“VWAP);

(B)  = the Exercise Price of this Warrant, as adjusted; and

(X)  = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

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d) Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, such Holder (together with such Holder’s Affiliates (as such term is defined under Rule 144 of the Securities Act), and any other person or entity acting as a group together with such Holder or any of such Holder’s Affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by such Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by a Holder that the Company is not representing to such Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and such Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which a portion of this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be each Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Business Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by such Holder or its Affiliates since

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the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Beneficial Ownership Limitation provisions of this Section 2(d)(i) may be waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice to the Company to change the Beneficial Ownership Limitation to 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant, and the provisions of this Section 2(d) shall continue to apply. Upon such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not be further waived by such Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d)(i) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

e) Mechanics of Exercise.

i. Authorization of Warrant Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

ii. Delivery of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be delivered by the transfer agent of the Company to the Holder to the address specified by the Holder in the Notice of Exercise within 3 Business Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares, have been paid.

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iii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iv. Rescission Rights. If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

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vi. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

vii. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

viii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

ix. Exercise Mechanics if Registration Statement Not Effective: Notwithstanding any provision to the contrary contained herein, if the issuance of Warrant Shares upon the exercise of Warrants requires the maintenance of an effective Registration Statement, with respect to such Warrant Shares under the Securities Act, in no event shall such Warrant Shares be issued unless the Warrant Shares are registered under the Securities Act pursuant to an effective Registration Statement; provided, however, that if the Registration Statement ceases to be effective, prior to the Termination Date and for so long as the Registration Statement is not effective, subject to applicable law, a holder of any Warrant may only exercise the right to purchase Warrant Shares issuable upon the exercise of the Warrants the circumstances noted below:

A. exercise such Warrants, if the holder is a purchaser who is not (A) a resident of the United States or (B) a U.S. Person (a “U.S. Purchaser”) and the holder delivers a duly completed and executed Notice of Exercise (If Registration Statement Not Effective) certifying that the holder: (A)(1) is not in the United States; (2) is not a U.S. Person and is

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not exercising the Warrants for, or on behalf or benefit of, a U.S. Person or person in the United States; (3) did not execute or deliver the Warrant exercise form in the United States; (4) agrees not to engage in hedging transactions with regard to the Common Shares prior to the expiration of the one-year distribution compliance period set forth in Rule 903(b)(3) of Regulation S under the Securities Act (“Regulation S”); (5) acknowledges that the Warrant Shares issuable upon exercise of the Warrants are “restricted securities” as defined in Rule 144 of the Securities Act and upon the issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act or applicable U.S. state laws and regulations, the certificates representing the Warrant Shares will bear a restrictive legend; and (6) acknowledges that the Company shall refuse to register any transfer of the Warrant Shares not made in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration under the 1933 Act; and (B) neither the Corporation nor the holder has engaged in any “directed selling efforts” (as defined in Regulation S) in the United States; or

B. exercise such Warrants in a transaction that does not require registration under the Securities Act or any applicable U.S. state laws and regulations and the holder has (A) delivered a duly completed and executed Notice of Exercise (If Registration Statement Not Effective) certifying that the holder is exercising the Warrants pursuant to such exemptions and (B) furnished to the Company, prior to such exercise, an opinion of counsel of recognized standing in form and substance satisfactory to the Company to such effect.

x. Legending if Registration Statement Not Effective: Unless the Warrant is exercised pursuant to an effective Registration Statement, the certificate representing the Warrant Shares is issued upon exercise of the Warrant will bear legends restricting the transfer without registration under the U.S. Securities Act and applicable state securities laws and restricting transfer under the Toronto Stock Exchange, substantially in the form set forth below:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES

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LAWS. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND SUCH LAWS COVERING SUCH SECURITIES, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT.”

If the Common Shares are also then listed on the Toronto Stock Exchange or the TSX Venture Exchange certificates representing the Common Shares will also bear the following legend

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE [TORONTO STOCK EXCHANGE (“TSX”)][TSX VENTURE EXCHANGE (“TSX-V”)]; HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF [TSX][TSX-V] SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON [TSX][TSX-V].”

xi. Suspensions of Registration Statement, etc,…: If any Warrant Shares issuable upon the exercise of Warrants require the maintenance of a current Registration Statement, with respect to such Warrant Shares under the Securities Act, the Company shall have the authority to suspend the exercise of any or all Warrants while such registration statement is not current. Similarly, a Holder residing in a state where a required registration or governmental approval of issuance of the Warrant Shares is not in effect as of or has not been obtained within a reasonable time after the surrender date of the Warrant Certificate for exercise shall not be entitled to exercise Warrants, unless in the opinion of counsel to the Company such registration or approval in such state shall not be required or the Company otherwise authorizes the issuance. In such event, the Holder shall be entitled to transfer the Warrants to others, but only prior to the Termination Date for the Warrants being transferred. If no Registration Statement is effective at any time when any Warrant is exercised, such Holder shall be notified forthwith by the transfer agent that such Holder is entitled, at his or her option, to exercise the Warrant only in

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accordance with the conditions set forth in Sections 2(e)(ix)(A) and (B) and upon delivery of a Notice of Exercise (If Registration Statement Not Effective) to the Company.

Section 3. Certain Adjustments.

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b) Subsequent Equity Sales. If the Company, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or equivalent securities (“Common Stock Equivalents”) entitling any Person to acquire shares of Common Stock (the “Additional Shares”), at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced to a price determined by multiplying the Exercise Price then in effect by a fraction (i) the numerator of which shall be (A) the number of Common Shares deemed outstanding (as determined below) immediately prior to such issue or sale, plus (B) the number of Common Shares that the aggregate Base Share Price amount received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such Exercise Price, and (ii) the denominator of which shall be the number of Common Shares deemed outstanding (as defined below) immediately prior to such issue or sale plus the total number of Additional Shares of

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Common Stock so issued. Such adjustment shall be made whenever such Additional Shares are issued. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of any issuance under or pursuant to: (i) shares of Common Stock or options issued to employees, officers or directors of the Company pursuant to the Company’s 2006 Equity Incentive Plan and 2006 Employee Stock Purchase Plan adopted by the Board of Directors on September 28, 2006, and pursuant to any other stock or option plan duly adopted for such purpose by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors, (ii) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, (iii) securities issuable upon obligations or instruments outstanding on the date of this Agreement, and (iv) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided any such issuance shall only be to a Person which is, itself or through its subsidiaries, a company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. The Company shall notify the Holder in writing, no later than the Business Day following the issuance of any Additional Shares subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). Upon the expiration or other termination without being exercised, exchanged, or converted of Common Stock Equivalents that triggered any adjustment under this Section 3(b), the number of Common Shares deemed to be outstanding pursuant to this Section 3(b) shall be reduced by the number of shares as to which the Common Stock Equivalents shall have expired or terminated unexercised, and the Exercise Price then in effect shall forthwith be readjusted and thereafter be the price that it would have been had adjustment been made on the basis of the issuance only of the Common Shares actually issued. For purposes of this Section 3(b), the number of Common Shares deemed to be outstanding as of a given date shall be the sum of (x) the number of Common Shares actually outstanding, (y) the number of Common Shares for which this Warrant could be exercised on the day immediately preceding the given date, and (z) the number of Common Shares which could be obtained through the exercise or conversion of all other rights, options and convertible securities outstanding on the day immediately preceding the given date.

c) Pro Rata Distributions. If the Company, at any time prior to the Termination Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (which shall be subject to Section 3(a) or 3(b) as applicable), then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to

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receive such distribution by a fraction of which the denominator shall be the VWAP as of the Business Day immediately prior to the record date mentioned above, and of which the numerator shall be such VWAP as of the Business Day immediately prior to such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, (a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in an all cash transaction, cash equal to the value of this Warrant as determined in accordance with the Black-Scholes option pricing formula. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the

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provisions of this Section 3(e) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

f) Voluntary Adjustment By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

g) Notice to Holder.

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to

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exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice.

Section 4. Transfer of Warrant.

a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer, that (i) the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable

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transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, and (ii) the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company, and (iii) the transferee be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3) and (a)(7) promulgated under the Securities Act.

Section 5. Miscellaneous.

a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(e)(ii).

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

d) Authorized Shares.

The Company covenants that during the period the Warrant remains outstanding it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Common Stock may be listed.

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such

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actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Subscription Agreement.

f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state, provincial and federal securities laws.

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement.

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

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j) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

o) Counterparts and Facsimile. This Warrant may be executed in any number of counterparts and by facsimile, each of which so executed shall constitute an original and all of which taken together shall form one and the same Warrant.

********************

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

STERLING MINING COMPANY

By:

Name:

Title:

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NOTICE OF EXERCISE

TO: STERLING MINING COMPANY

(1) The undersigned hereby elects to purchase             Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2) Payment shall take the form of (check applicable box):

¨ in lawful money of the United States; or

¨ [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

The Warrant Shares shall be delivered by physical delivery of a certificate to:

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity:

Signature of Authorized Signatory of Investing Entity:

Name of Authorized Signatory:

Title of Authorized Signatory:

Date:     

NOTICE OF EXERCISE

(If Registration Statement Not Effective)

TO: STERLING MINING COMPANY

The undersigned holder of the within Warrant Certificate, hereby exercises certain Warrants (the “Exercised Warrants”) evidenced thereby and hereby subscribes for a number of Common Shares of Sterling Mining Company equal to such number of Common Shares or number or amount of other securities or property, or combination thereof, to which such exercise entitles him under the provisions of the Warrant at an aggregate price equal to the product of the Exercise Price and the number of Exercised Warrants, and on the terms specified in such Warrant Certificate, and in payment therefor, delivers herewith a bank draft, certified cheque or money order payable to Sterling Mining Company. Capitalized terms not defined herein shall have the definitions set forth in the Agency Agreement.

The undersigned represents that it (A) has had access to such current public information concerning Sterling Mining Company as it considered necessary in connection with its investment decision and (B) understands that the securities issuable upon exercise hereof have not been registered under the United States Securities Act of 1933, as amended (the “1933 Act”).

The undersigned represents and warrants that it: [CHECK ONE ONLY]

A. is not a U.S. Purchaser and it (1) is not in the United States; (2) is not a U.S. Person and is not exercising the Warrants for, or on behalf or benefit of, a U.S. Person or person in the United States; (3) did not execute or deliver the Subscription Form in the United States; (4) agrees not to engage in hedging transactions with regard to the Common Shares prior to the expiration of the one-year distribution compliance period set forth in Rule 903(b)(3) of Regulation S; (5) acknowledges that the Common Shares issuable upon exercise of the Warrants are “restricted securities” as defined in Rule 144 of the 1933 Act and upon the issuance thereof, and until such time as the same is no longer required under the applicable requirements of the 1933 Act or applicable U.S. state laws and regulations, the certificates representing the Common Shares will bear a restrictive legend; and (6) acknowledges that the Company shall refuse to register any transfer of the Common Shares not made in accordance with the provisions of Regulation S, pursuant to registration under the 1933 Act, or pursuant to an available exemption from registration under the 1933 Act; and (B) it holder has not engaged in any “directed selling efforts” (as defined in Regulation S) in the United States.

B. the undersigned is delivering a written opinion of United States counsel or a written confirmation from the Company to the effect that the Common Shares to be delivered upon exercise hereof have been registered under the 1933 Act or are exempt from registration thereunder.

C. the undersigned elects to exercise its the “cashless” exercise right in accordance with the terms hereof and Section 2(c) of the Warrant Certificate with respect to             Warrants. The undersigned receive that number of Common Shares equal to quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the daily volume weighted average price of the Common Stock on the Business Day immediately preceding the date of such election on the trading market on which the Common Stock is then listed or quoted, based on a Business Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time (“VWAP);

(B) = the Exercise Price of this Warrant, as adjusted; and

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

Unless Box C above is checked, the undersigned holder understands that the certificate representing the Company’s Common Shares is issued upon exercise of this Warrant will bear a legend restricting the transfer without registration under the U.S. Securities Act and applicable state securities laws substantially the form set forth in Section 2(e)(x) of the Warrant certificate.

If the holder has checked Box C above, upon exercise of the Warrants pursuant to the cashless exercise provision in Section 2(c) of the Warrant Certificate, the holder must tender the original warrant certificate; the exercise form and this Notice of Exercise directly to Sterling Mining Company.

Name:

Please print or type name and address (including postal code)

Address:

Number of Warrants being Exercised:

DATED this      day of                     ,         

Signature guaranteed by:

Name of registered holder (please print)

Signature of or on behalf of registered holder

Office, Title or other Authorization (if holder not an individual)

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [            ] all of or [            ] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

                                                                                               whose address is

.

Dated:                     ,             

Holder’s Signature:

Holder’s Address:  

Signature Guaranteed:                                                                      

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-10.4

Exhibit 10.4

STERLING MINING COMPANY

SUBSCRIPTION AGREEMENT FOR UNITS

TO:	STERLING MINING COMPANY
AND TO:	BLACKMONT CAPITAL INC.
AND TO:	TD SECURITIES INC.
AND TO:	BLACKMONT CAPITAL CORP. AND TD SECURITIES (USA) LLC

The Subscriber (as hereinafter defined) hereby irrevocably subscribes for and agrees to purchase from Sterling Mining Company (the “Company”) that number of units of the Company (the “Units”) set out below at a price of US$2.30 per Unit. Each Unit is comprised of one share of the Company’s common stock, par value $0.05 per share (the “Common Shares”) and one Series A Common Share purchase warrant (the “Warrants”). Each Warrant is exercisable for one Common Share at an exercise price of US$4.25 for 24 months following the Closing Date. The Subscriber agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of Subscription for Units” including, without limitation, the representations, warranties and covenants set forth in the applicable schedules attached thereto. The Subscriber further agrees, without limitation, that the Company and the Agents may rely upon the Subscriber’s representations, warranties and covenants contained in such documents.

SUBSCRIPTION AND SUBSCRIBER INFORMATION

Please print all information (other than signatures), as applicable, in the space provided below

(Name of Subscriber)

Account Reference (if applicable):                             

By:                                                                               

Authorized Signature

(Official Capacity or Title – if the Subscriber is not an individual)

(Name of individual whose signature appears above if

different than the name of the subscriber printed above.)

(Subscriber’s Address, including Municipality and

Province/State)

(Telephone Number)                         (Email Address)

Account Registration Information:

(Name)

(Account Reference, if applicable)

(Address, including Postal or Zip Code)

Number and kind of securities of the Company held, directly or

indirectly, if any:

Number of Units:                                          xUS$2.30

Aggregate Subscription Cost:                                      

(the “Subscription Amount”)

Please complete if purchasing as Agents or trustee for a principal (beneficial purchaser) (a “Disclosed Principal”) and not purchasing as trustee or Agents for accounts fully managed by it.

(Name of Disclosed Principal)

(Address of Disclosed Principal)

(Account Reference, if applicable)

Delivery Instructions as set forth below:

(Name)

(Account Reference, if applicable)

(Address)

(Contact Name)                            (Telephone Number)

TERMS AND CONDITIONS OF SUBSCRIPTION FOR

UNITS

ARTICLE 1 - INTERPRETATION

1.1 Definitions

Whenever used in this Subscription Agreement, unless there is something in the subject matter or context inconsistent therewith, the following words and phrases shall have the respective meanings ascribed to them as follows:

“Agents” means Blackmont Capital Inc., TD Securities Inc., Blackmont Capital Corp. and TD Securities (USA) LLC collectively.

“Agency Agreement” means the agency agreement to be entered into between the Company on the one hand and the Agents on the other, to be dated as of the Closing Date, in respect of the Offering.

“Blue Sky Laws” means the securities laws of any State.

“Business Day” means a day other than a Saturday, Sunday or any other day on which the principal chartered banks located in the City of Toronto are not open for business.

“Closing” shall have the meaning ascribed to such term in Section 4.1.

“Closing Date” shall have the meaning ascribed to such term in Section 4.1.

“Closing Time” shall have the meaning ascribed to such term in Section 4.1.

“Common Shares” means shares of common stock in the capital of the Company.

“Compensation Options” shall have the meaning ascribed to such term in Section 8.1.

“Company” means Sterling Mining Company and includes any successor corporations to or of the Company.

“Disclosed Principal” shall have the meaning ascribed to such term on the face page of this Subscription Agreement.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

“Final Receipt” means the final receipt for the Prospectus issued by the securities regulatory authorities in all Jurisdictions.

“Insider” means (a) a director or senior officer of the Company (or a subsidiary of the Company), (b) any person who beneficially owns, directly or indirectly, voting securities of the Company or who exercises control or direction over voting securities of the Company or a combination of both carrying more than 10% of the voting rights attached to all voting securities of the Company for the time being outstanding or (c) an insider of a person described in (a) or (b) above.

“Institutional Accredited Investor” means an “accredited investor”, as defined in Rule 501(a)(1), (2), (3) and (7) of the U.S. Securities Act.

“Jurisdiction” means all provinces of Canada where the Subscribers reside.

“NI 45-106” means National Instrument 45-106 - Prospectus and Registration Exemptions of the Canadian Securities Administrators.

“Offering” means the offering of Units pursuant to this Subscription Agreement and the Agency Agreement.

“person” means any individual (whether acting as an executor, trustee, administrator, legal representative or otherwise), corporation, firm, partnership, sole proprietorship, syndicate, joint venture, trustee, trust, unincorporated organization or association, and every other form of legal or business entity of whatever nature or kind, and pronouns have a similar extended meaning.

“Prospectus” means the (final) non-offering prospectus of the Company to be filed in the Jurisdictions to qualify the Common Shares and Warrants comprising the Units and the Units issuable upon the exercise of the Compensation Options.

“Public Record” means the Company’s annual report on Form 10-K for the year ended December 31, 2005, as amended, the quarterly reports filed on Form 10-Q for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006, as amended, and the current reports filed on Form 8-K since January 1, 2006.

“Registration Statement” means the registration statement or statements of the Company that may be filed with the SEC in order to register the Registerable Securities.

“Registerable Securities” means the Common Shares comprising part of the Units and the Warrant Shares underlying the Warrants and the Common Shares and Warrants comprising the Units underlying the Compensation Options.

“Regulation D” means Regulation D under the U.S. Securities Act.

“Regulation S” means Regulation S under the U.S. Securities Act.

“Rule 144” means Rule 144 under the U.S. Securities Act.

“Rule 144A” means Rule 144A under the U.S. Securities Act.

“SEC” means the United States Securities and Exchange Commission.

“Securities Laws” means, as applicable, the securities laws, regulations, rules, rulings and orders in the Jurisdictions, the applicable policy statements issued by the securities regulators in the Jurisdictions, the securities laws of the United States, any applicable States and any jurisdictions outside of Canada and the United States, the regulations and rules thereunder and the forms prescribed thereby and the rules of any applicable stock exchange.

“State” means any one of the 50 states of the United States of America or the District of Columbia.

“Subscriber” means the person purchasing the Units as set out on the face page of this Subscription Agreement and includes, as applicable, each Disclosed Principal for whom it is acting.

“Subscription Agreement” means this subscription agreement (including any schedules hereto) and any instrument amending this Subscription Agreement.

“Subscription Amount” shall have the meaning ascribed to such term on the face page of this Subscription Agreement.

“Term Sheet” means the term sheet attached hereto as Schedule “A”.

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“United States” means the United States of America, its territories and possessions, any State of the United States and the District of Columbia.

“Units” shall have the meaning ascribed to such term on the face page of this Subscription Agreement.

“U.S. Institutional Accredited Investor Status Certificate” means the certificate attached hereto as Schedule “C” which is required to be completed by a Subscriber who is resident in the United States

“U.S. Person” has the meaning set forth in Rule 902(k) of Regulation S under the U.S. Securities Act.

“U.S. Securities Act” means the United States Securities Act of 1933, as amended.

“Warrants” means the common share purchase warrants of the Company that partly comprise the Units, as described on the face page hereof.

“Warrant Shares” means the Common Shares of the Company issuable upon exercise of the Warrants.

1.2 Gender and Number

Words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine gender and words importing persons shall include firms and corporations and vice versa.

1.3 Currency

Unless otherwise specified, all dollar amounts in this Subscription Agreement, including the symbol “$”, are expressed in U.S. dollars.

1.4 Subdivisions and Headings

The division of this Subscription Agreement into Articles, Sections, Schedules and other subdivisions and the inclusion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Subscription Agreement. The headings in this Subscription Agreement are not intended to be full or precise descriptions of the text to which they refer. Unless something in the subject matter or context is inconsistent therewith, references herein to an Article, Section, Subsection, paragraph, clause or Schedule are to the applicable article, section, subsection, paragraph, clause or schedule of this Subscription Agreement.

ARTICLE 2 - SCHEDULES

2.1 Description of Schedules

The following are the Schedules attached to and incorporated in this Subscription Agreement by reference and deemed to be a part hereof:

Schedule “A”	-	Term Sheet
Schedule “B”	-	Accredited Investor Status Certificate
Schedule “C”	-	U.S. Institutional Accredited Investor Status Certificate

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ARTICLE 3- SUBSCRIPTION AND DESCRIPTION OF UNITS

3.1 Subscription for Units

The Subscriber hereby confirms its subscription for and offer to purchase the Units from the Company, on and subject to the terms and conditions set out in this Subscription Agreement, for the Subscription Amount, which is payable as described in Article 4 hereto.

3.2 Creation and Issuance of Units

The Units shall be created and issued by the Company and evidenced by unit certificates to be dated as of the Closing Date. The Term Sheet, a copy of which is attached hereto as Schedule “A”, summarizes the terms of the Units.

The Company will file a Prospectus to qualify the Common Shares in Canada within 120 days of Closing. The Company will file a resale Registration Statement and use its best efforts to have such registration statement declared effective by the SEC within 180 days of Closing to register the resale of the Common Shares and the Common Shares underlying the Warrants.

If the Company does not file a Prospectus to qualify the Common Shares in Canada and a resale Registration Statement to register the resale of the Common Shares and the Common Shares underlying the Warrants in the United States within 180 days of Closing, the Company shall thereafter pay each Subscriber 1% of the Subscription Amount per month to a maximum of 12%, on a pro-rata basis, payable quarterly.

3.3 Acceptance and Rejection of Subscription by the Company

The Subscriber acknowledges and agrees that the Company reserves the right, in its absolute discretion, to reject this subscription for Units, in whole or in part, at any time prior to the Closing Time. If this subscription is rejected in whole, any cheques or other forms of payment delivered to the Agents representing the Subscription Amount will be promptly returned to the Subscriber without interest or deduction. If this subscription is accepted only in part, a cheque representing any refund of the Subscription Amount for that portion of the subscription for the Units which is not accepted, will be promptly delivered to the Subscriber without interest or deduction.

ARTICLE 4 - CLOSING

4.1 Closing

Delivery and sale of the Units and payment of the Subscription Amount will be completed (the “Closing”) at the offices of the Company’s counsel, Cassels Brock & Blackwell LLP in Toronto, Ontario at 10:00 a.m. (Toronto time) (the “Closing Time”) on January 18, 2007 or such other place, date or time as the Company and the Agents may agree (the “Closing Date”). If, prior to the Closing Time, the terms and conditions contained in this Subscription Agreement and the Agency Agreement have been complied with to the satisfaction of the Agents, or waived by the Agents, the Agents shall (i) deliver to the Company at the Closing Time all completed Subscription Agreements, including this Subscription Agreement; and (ii) deliver to the Company the aggregate Subscription Amount for the Units sold pursuant to the Agency Agreement against delivery by the Company of certificates representing the Common Shares and Warrants comprising the Units and such other documentation as may be required pursuant to the Subscription Agreement and the Agency Agreement.

If, prior to the Closing Time, the terms and conditions contained in this Subscription Agreement (other than delivery by the Company, as applicable, to the Subscriber of certificates representing the Common Shares and Warrants comprising the Units) and the Agency Agreement have not been complied with to the satisfaction of the Agents, or waived by the Agents, the Agents, the Company and the Subscriber will have no further obligations under this Subscription Agreement.

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4.2 Conditions of Closing

The Subscriber acknowledges and agrees that the obligations of the Company hereunder are conditional on the accuracy of the representations and warranties of the Subscriber contained in this Subscription Agreement as of the date of this Subscription Agreement, and as of the Closing Time as if made at and as of the Closing Time, and the fulfillment of the following additional conditions as soon as possible and in any event not later than the Closing Time:

(a) payment by the Subscriber of the Subscription Amount by certified cheque or bank draft in United States dollars payable to one of the Agents;

(b) the Subscriber having properly completed, signed and delivered this Subscription Agreement to:

Blackmont Capital Inc.

BCE Place, 181 Bay St.

Suite 900

Toronto, Ontario M5J 2T3

Attention: Chad Williams

Fax: (416) 864-9151

(c) the Subscriber having properly completed, signed and delivered Schedule “B” or Schedule “C” hereto, as applicable:

4.3 Authorization of the Agents

The Subscriber irrevocably authorizes the Agents in their discretion, to act as the Subscriber’s representative at the Closing, and hereby appoints the Agents, with full power of substitution, as its true and lawful attorney with full power and authority in the Subscriber’s place and stead:

(a) to receive certificates representing the Common Shares and Warrants comprising the Units, to execute in the Subscriber’s name and on its behalf all closing receipts and required documents, to complete and correct any errors or omissions in any form or document provided by the Subscriber, including this Subscription Agreement and the Schedules hereto, in connection with the subscription for the Units and to exercise any rights of termination contained in the Agency Agreement;

(b) to approve any opinion, certificate or other document addressed to the Subscriber;

(c) to extend such time periods and to waive, in whole or in part, any representations, warranties, covenants or conditions for the Subscriber’s benefit contained in this Subscription Agreement and the Agency Agreement or any ancillary or related document;

(d) to terminate this Subscription Agreement if any condition precedent is not satisfied, in such manner and on such terms and conditions as the Agents in their sole discretion may determine; and

(e) without limiting the generality of the foregoing, to negotiate, settle, execute, deliver and amend the Agency Agreement.

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ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF

THE COMPANY

5.1 Representations, Warranties and Covenants of the Company

The Subscriber shall have the benefit of the representations, warranties and covenants made by the Company to the Agents and set forth in the Agency Agreement. Such representations and warranties shall form an integral part of this Subscription Agreement and shall survive the closing of the purchase and sale of the Units and shall continue in full force and effect for the benefit of the Subscriber in accordance with the Agency Agreement.

The Company will file a Prospectus to qualify the Common Shares in Canada within 120 days of closing. The Company will file a resale Registration Statement and use its best efforts to have such registration statement declared effective by the SEC within 180 days of Closing to register the resale of the Common Shares and the Common Shares underlying the Warrants.

ARTICLE 6 - ACKNOWLEDGEMENTS, COVENANTS, REPRESENTATIONS AND WARRANTIES

OF THE SUBSCRIBER

6.1 Acknowledgements, Representations, Warranties and Covenants of the Subscriber

The Subscriber, on its own behalf and, if applicable, on behalf of others for whom it is acting hereunder, hereby represents and warrants to, and covenants with, the Company and the Agents as follows and acknowledges that the Company and the Agents are relying on such representations and warranties in connection with the transactions contemplated herein:

(a) The Subscriber certifies that it is resident in the jurisdiction set out on the face page of this Subscription Agreement. Such address was not created and is not used solely for the purpose of acquiring the Units and the Subscriber was solicited to purchase in such jurisdiction.

(b) If the Subscriber is not a person in the United States or a U.S. Person, or not purchasing the Units on behalf of a person in the United States or a U.S. Person:

(i) the Subscriber has properly completed, executed and delivered to the Company Schedule “B” hereto (dated as of the date hereof), as applicable and the information contained therein is true and correct;

(ii) the representations, warranties and covenants contained in Schedule “B” will be true and correct both as of the date of execution of this Subscription Agreement and as of the Closing Time;

(iii) neither the Subscriber nor any Disclosed Principal is a U.S. Person nor subscribing for the Units for the account of a U.S. Person or for resale in the United States and the Subscriber confirms that the Units have not been offered to the Subscriber in the United States and that this Subscription Agreement has not been signed in the United States;

(iv) the Subscriber acknowledges that the Common Shares and the Warrants comprising the Units and the Common Shares issuable upon the exercise of the Warrants have not been registered under the U.S. Securities Act and may not be offered or sold in the United States or to a U.S. Person unless the securities are registered under the U.S. Securities Act and all applicable State securities laws or an exemption from such registration requirements is available, and further agrees that hedging transactions involving such securities may not be conducted unless in compliance with the U.S. Securities Act;

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(v) the Subscriber and if applicable, the Disclosed Principal for whom the Subscriber is acting, understands that the Company is the seller of the Units and underlying securities and that, for purposes of Regulation S, a “distributor” is any underwriter, dealer or other person who participates, pursuant to a contractual arrangement in the distribution of securities sold in reliance on Regulation S and that an “affiliate” is any partner, officer, director or any person directly or indirectly controlling, controlled by or under common control with any person in question. Except as otherwise permitted by Regulation S, the Subscriber and if applicable, the Disclosed Principal for whom the Subscriber is acting, agrees that it will not, during a one year distribution compliance period, act as a distributor, either directly or through any affiliate, or sell, transfer, hypothecate or otherwise convey the Units or underlying securities other than to a non-U.S. Person;

(vi) the Subscriber and if applicable, the Disclosed Principal for whom the Subscriber is acting, acknowledges and understands that in the event the Units or underlying securities are offered, sold or otherwise transferred by the Subscriber or if applicable, the Disclosed Principal for whom the Subscriber is acting, to a non-U.S. Person prior to the expiration of a one year distribution compliance period, the purchaser or transferee must agree not to resell such securities except in accordance with the provisions of Regulation S, pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration; and must further agree not to engage in hedging transactions with regard to such securities unless in compliance with the U.S. Securities Act; and

(vii) neither the Subscriber nor any Disclosed Principal will offer, sell or otherwise dispose of the Common Shares and Warrants comprising the Units or the Warrant Shares in the United States or to a U.S. Person unless the Company has consented to such offer, sale or disposition and such offer, sale or disposition is made in accordance with an exemption from the registration requirements under the U.S. Securities Act and the securities laws of all applicable states of the United States or the SEC has declared effective a registration statement in respect of such securities.

(c) If the Subscriber is a person in the United States or a U.S. Person, or is purchasing the Units on behalf of a person in the United States or a U.S. Person, the Subscriber:

(i) or each beneficial purchaser as to which the Subscriber exercises sole investment discretion for whom it is purchasing, is acquiring the Units to be held for investment purposes only and not with a view to resale, distribution or other disposition of the Common Shares and Warrants comprising the Units, and the Warrant Shares, or any portion thereof, and without any present intention of selling, offering to sell or otherwise disposing of or distributing such securities, or any portion thereof, in any transaction other than a transaction complying with the registration requirements of the U.S. Securities Act and applicable Blue Sky Laws, or pursuant to an exemption therefrom;

(ii) is aware that the Common Shares and Warrants comprising the Units have not been registered under the U.S. Securities Act and the sale contemplated hereby

–8–

is being made in reliance on a private placement exemption to Institutional Accredited Investors; or each beneficial purchaser as to which the Subscriber exercises sole investment discretion for whom it is purchasing, satisfies one or more of the categories set out in Schedule “C” hereto;

(iii) acknowledges that the representations, warranties and covenants contained in Schedule “C” will be true and correct both as of the date of execution of this Subscription Agreement and as of the Closing Time;

(iv) is not purchasing the Units as a result of any “general solicitation or general advertising” (as such term is defined in Regulation D), including any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or any seminar or meeting where the attendees have been invited by general solicitation or general advertising;

(v) understands that, unless the Registration Statement has become effective, the Warrants comprising part of the Units may not be sold or transferred in the United States or by or on behalf of a U.S. Person unless an exemption is available from the registration requirements of the U.S. Securities Act and applicable state securities laws;

(vi) acknowledges that any person who exercises a Warrant will be required to provide to the Company one of the following:

(A) a written certification that the holder (1) at the time of exercise of the Warrant is not in the United States, (2) is not a U.S. Person and is not exercising the Warrant on behalf of a U.S. Person or a person in the United States, and (3) did not execute or deliver the exercise form for the Warrant in the United States;

(B) a written certification that the holder (1) purchased the Unit, from which the Warrant was converted, directly from the Company pursuant to a written Subscription Agreement for the purchase of the Units, (2) is exercising the Warrant solely for its own account and not on behalf of any other person, and (3) is an Institutional Accredited Investor, both on the date the Units were purchased by the Subscriber from the Company and on the date of the exercise of the Warrant; or

(C) a written opinion of counsel of recognized standing in form and substance satisfactory to the Company to the effect that an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is available for the issuance of the Warrant Shares;

and understands that unless the holder provides a written certification pursuant to paragraph (c)(vii)(A) above, the certificates representing the Warrant Shares issued upon exercise of the Warrants prior to the applicable Registration Statement becoming effective will bear a legend restricting transfer without registration under the U.S. Securities Act and applicable state securities laws unless an exemption from registration is available;

–9–

(vii) understands that if it decides to offer, sell, pledge or otherwise transfer the Units, and, prior to the applicable Registration Statement becoming effective, the Common Shares comprising the Units and the Warrant Shares, such securities may be offered, sold or otherwise transferred only: (A) to the Company; (B) in compliance with Rule 904 under Regulation S, (C) in accordance with Rule 144 or Rule 144A under the U.S. Securities Act, if available, and in compliance with applicable local laws and regulations, or (D) in a transaction that does not otherwise require registration under the U.S. Securities Act or any applicable state securities laws if an opinion of counsel, of recognized standing reasonably satisfactory to the Company, has been provided to the Company to that effect; and

(viii) consents to the Company making a notation on its records or giving instructions to any transfer agent of the Company in order to implement the restrictions on transfers set forth and described herein, and the Subscriber understands and acknowledges that the Company may instruct the registrar and transfer agent of the Company not to record a transfer without first being notified by the Company that it is satisfied that such transfer is exempt from or not subject to registration under the U.S. Securities Act.

(d) If the Subscriber or any Disclosed Principal is not a person described in paragraphs 6.1(b) or 6.1(c) above, the subscription for the Units by the Subscriber does not contravene any of the applicable securities legislation in the jurisdiction in which the Subscriber resides and does not give rise to any obligation of the Company or the Agents to prepare and file a prospectus or similar document or to register the Units or to be registered with, or to file any report or notice with, any governmental or regulatory authority.

(e) The execution and delivery of this Subscription Agreement, the performance and compliance with the terms hereof, the subscription for the Units and the completion of the transactions described herein by the Subscriber will not result in any material breach of, or be in conflict with, or constitute a material default under, or create a state of facts that, after notice or lapse of time, or both, would constitute a material default under any term or provision of the constating documents, by-laws or resolutions of the Subscriber, the Securities Laws or any other laws applicable to the Subscriber, any agreement to which the Subscriber is a party, or any judgment, decree, order, statute, rule or regulation applicable to the Subscriber.

(f) The Subscriber is subscribing for the Units as principal for its own account and not for the benefit of any other person (within the meaning of applicable Securities Laws). If it is subscribing as Agents for a Disclosed Principal, it has disclosed the name of the Disclosed Principal on the face page of this Subscription Agreement and acknowledges that the Company may be required by law to disclose to certain regulatory authorities the identity of each Disclosed Principal for whom the Subscriber is acting.

(g) In the case of a subscription for the Units by the Subscriber acting as trustee or Agents for a fully managed account or as Agents for a Disclosed Principal, the Subscriber is duly authorized to execute and deliver this Subscription Agreement and all other necessary documentation in connection with such subscription on behalf of the fully managed account or Disclosed Principal, as applicable and this Subscription Agreement has been duly authorized, executed and delivered by or on behalf of and constitutes a legal, valid and binding agreement of, the fully managed account or Disclosed Principal, as applicable.

–10–

(h) In the case of a subscription for the Units by the Subscriber acting as principal, this Subscription Agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of, the Subscriber. This Subscription Agreement is enforceable in accordance with its terms against the Subscriber.

(i) If the Subscriber is:

(i) a corporation, the Subscriber is duly incorporated and is validly subsisting under the laws of its jurisdiction of incorporation and has all requisite legal and corporate power and authority to execute and deliver this Subscription Agreement, to subscribe for the Units as contemplated herein and to carry out and perform its obligations under the terms of this Subscription Agreement;

(ii) a partnership, syndicate or other form of unincorporated organization, the Subscriber has the necessary legal capacity and authority to execute and deliver this Subscription Agreement and to observe and perform its covenants and obligations hereunder and has obtained all necessary approvals in respect thereof; or

(iii) an individual, the Subscriber is of the full age of majority and is legally competent to execute this Subscription Agreement and to observe and perform his or her covenants and obligations hereunder.

(j) Other than the Agents, there is no person acting or purporting to act in connection with the transactions contemplated herein who is entitled to any brokerage or finder’s fee. If any person establishes a claim that any fee or other compensation is payable in connection with this subscription for the Units, the Subscriber covenants to indemnify and hold harmless the Company and the Agents with respect thereto and with respect to all costs reasonably incurred in the defence thereof.

(k) The Subscriber is not, with respect to the Company or any of its affiliates, a “control person” as defined under the Securities Laws and the purchase of the Units hereunder and the exercise or deemed exercise of the Units will not result in the Subscriber becoming a control person.

(l) If required by applicable Securities Laws or the Company, the Subscriber will execute, deliver and file, or assist the Company in filing, such reports, undertakings and other documents with respect to the issue and/or sale of the Units as may be required by any securities commission, stock exchange or other regulatory authority.

(m) The Subscriber has been advised to consult its own legal advisors with respect to trading in the Common Shares and Warrants comprising the Units and the Warrant Shares and with respect to the resale restrictions imposed by the Securities Laws of the jurisdiction in which the Subscriber resides and other applicable securities laws, and acknowledges that no representation has been made respecting the applicable hold periods imposed by the Securities Laws or other resale restrictions applicable to such securities that restrict the ability of the Subscriber (or others for whom it is contracting hereunder) to resell such securities, that the Subscriber (or others for whom it is contracting hereunder) is solely responsible to find out what these restrictions are and the Subscriber is solely responsible (and neither the Company nor the Agents are in any way responsible) for compliance with applicable resale restrictions and the Subscriber is aware that it (or beneficial persons for whom it is contracting hereunder) may not be able to resell such securities except in accordance with limited exemptions under the Securities Laws and other applicable securities laws.

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(n) The Subscriber has not received or been provided with a prospectus, registration statement or offering memorandum, within the meaning of the Securities Laws, and the Subscriber’s decision to subscribe for the Units was not based upon, and the Subscriber has not relied upon, any verbal or written representations as to facts made by or on behalf of the Company or the Agents. The Subscriber has had access to and has reviewed, to the extent it deems necessary, the Public Record and the Subscriber’s decision to subscribe for the Units was based solely upon this Subscription Agreement, the Term Sheet attached hereto as Schedule “A” and the Public Record (any such information having been obtained by the Subscriber without independent investigation or verification by the Agents).

(o) The Subscriber is not purchasing Units with knowledge of material information concerning the Company that has not been generally disclosed.

(p) No person has made any written or oral representations:

(i) that any person will resell or repurchase the Common Shares, Warrants comprising the Units or the Warrant Shares;

(ii) that any person will refund the Subscription Amount; or

(iii) as to the future price or value of the Units or common shares in the capital of the Company.

(q) There are risks associated with the purchase of and investment in the Units and the Subscriber has such knowledge and experience that it is capable of evaluating the merits and risks of an investment in the Common Shares, Warrants and Warrant Shares and fully understands the restrictions on resale of the Common Shares, Warrants and Warrant Shares and is capable of bearing the economic risk of the investment.

(r) The funds representing the Subscription Amount that will be advanced by the Subscriber to the Company hereunder, as applicable, will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the “PCMLTFA”) and the Subscriber acknowledges that the Company may in the future be required by law to disclose the Subscriber’s name and other information relating to this Subscription Agreement and the Subscriber’s subscription hereunder, on a confidential basis, pursuant to the PCMLTFA. To the best of its knowledge (a) none of the Subscription Amount to be provided by the Subscriber (i) has been or will be derived from or related to any activity that is deemed criminal under the law of Canada, the United States of America, or any other jurisdiction, or (ii) is being tendered on behalf of a person or entity who has not been identified to the Subscriber, and (b) it shall promptly notify the Company if the Subscriber discovers that any of such representations ceases to be true, and to provide the Company with appropriate information in connection therewith.

6.2 Additional Acknowledgments and Covenants of the Subscriber

The Subscriber, on its own behalf and, if applicable, on behalf of others for whom it is acting hereunder, hereby acknowledges, covenants and agrees as follows:

–12–

(a) It has received and reviewed a copy of the Term Sheet setting out the principal terms of the Offering.

(b) No securities commission, agency, governmental authority, regulatory body, stock exchange or other regulatory body or similar regulatory authority has reviewed or passed on the merits of the Units, the Common Shares, Warrants, or Warrant Shares.

(c) The Units shall be subject to statutory resale restrictions under the securities laws of the jurisdiction in which the Subscriber resides and under other applicable securities laws, and the Subscriber covenants that it will not resell the Common Shares or Warrants comprising the Units except in compliance with such laws and the Subscriber acknowledges that it is solely responsible (and neither the Company nor the Agents are in any way responsible) for such compliance.

(d) The ability to transfer the Units is limited by, among other things, applicable Securities Laws and the Company shall refuse, and shall instruct its transfer agents to refuse, to register any transfer that does not comply with the Securities Laws.

(e) The certificates representing the Common Shares, Warrants and Warrant Shares, if issued prior to receipt of the Final Receipt, will bear a legend substantially in the following form and with the necessary information inserted:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND ONE DAY AFTER THE LATER OF (i) [THE CLOSING DATE]; AND (ii) THE DATE THAT THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”

The certificates representing the Common Shares, Warrants and Warrant Shares will bear a legend substantially in the following form:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND SUCH LAWS COVERING SUCH SECURITIES, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.”

(f) The Agents and/or their directors, officers, employees, agents and representatives assume no responsibility or liability of any nature whatsoever for the accuracy or adequacy of any such publicly available information concerning the Company or as to whether all information concerning the Company that is required to be disclosed or filed by the Company under the Securities Laws has been so disclosed or filed.

(g) The Company and the Agents are relying on the representations, warranties and covenants contained herein and in the applicable Schedules attached hereto to determine the Subscriber’s eligibility to subscribe for the Units under applicable

–13–

Securities Laws and the Subscriber agrees to indemnify the Company, the Agents and each of their directors, officers and agents against all losses, claims, costs, expenses, damages or liabilities that any of them may suffer or incur as a result of or arising from reliance thereon. The Subscriber undertakes to immediately notify the Company of any change in any statement or other information relating to the Subscriber set forth in such applicable Schedules which takes place prior to the Closing Time.

(h) The Company is relying on an exemption from the requirement to provide the Subscriber with a prospectus or registration statement under the Securities Laws and, as a consequence of acquiring the Units pursuant to such exemption, certain protections, rights and remedies provided by the Securities Laws, including statutory rights of rescission or damages, will not be available to the Subscriber.

(i) The Subscriber is responsible for obtaining such legal and tax advice as it considers appropriate in connection with the execution, delivery and performance of this Subscription Agreement and the transactions contemplated under this Subscription Agreement.

(j) There is no government guaranty or insurance covering the Warrants or Common Shares.

(k) There are risks associated with the purchase of the Units and the Subscriber may lose his, her or its entire investment.

(l) This Subscription Agreement and the schedules hereto require the Subscriber to provide certain personal information to the Company. Such information is being collected by the Company for the purposes of completing the Offering, which includes, without limitation, determining the Subscriber’s eligibility to purchase the Units under the Securities Laws and other applicable securities laws, preparing and registering certificates representing Units to be issued to the Subscriber and completing filings required by any stock exchange or securities regulatory authority. The Subscriber’s personal information may be disclosed by the Company, the Agents, and their respective advisors to: (a) stock exchanges or securities regulatory authorities, (b) the tax authorities, and (c) any of the other parties involved in the Offering, including legal counsel and may be included in record books in connection with the Offering. By executing this Subscription Agreement, the Subscriber is deemed to be consenting to the foregoing collection, use and disclosure of the Subscriber’s personal information. The Subscriber also consents to the filing of copies or originals of any of the Subscriber’s documents described in section 6.1(l) hereof as may be required to be filed with any stock exchange or securities regulatory authority in connection with the transactions contemplated hereby. The Subscriber represents and warrants that it has the authority to provide the consents and acknowledgements set out in this paragraph on behalf of each Disclosed Principal.

(m) If the Company obtains approval for the listing of the Common Shares on a Canadian stock exchange, prior to the effectiveness of the Registration Statement, such securities may trade on such Canadian stock exchange on a restricted basis. No Canadian broker-dealer would be permitted, under the U.S. Securities Act, to execute a transaction in those securities on a Canadian stock exchange if that member knows that the purchaser is in the United States or a U.S. Person or is acting for the account or benefit of a U.S. Person. Also, the Canadian broker-dealer must make reasonable efforts to ascertain whether a purchaser is in the United States or is a U.S. Person or is acting for the account or benefit of a U.S. Person and implement measures designed to assure reasonable compliance with this requirement.

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(n) If the Subscriber is resident in or otherwise subject to the Securities Laws applicable in the Province of Ontario, the information provided by the Subscriber on the face page of this Subscription Agreement identifying the name, address and telephone number of the Subscriber, the number of Units being purchased hereunder and the total purchase price as well as the Closing Date and the exemption that the Company is relying on in selling the Units to the Subscriber will be disclosed to the Ontario Securities Commission, and such information is being indirectly collected by the Ontario Securities Commission under the authority granted to it under securities legislation. This information is being collected for the purposes of the administration and enforcement of the securities legislation of the Province of Ontario. Each Subscriber (for certainty including each Disclosed Principal) hereby authorizes the indirect collection of such information by the Ontario Securities Commission. In the event the Subscriber has any questions with respect to the indirect collection of such information by the Ontario Securities Commission, the Subscriber should contact the Ontario Securities Commission, Administrative Assistant to the Director of Corporate Finance at (416) 593-8086 or in person or writing at Suite 1900, Box 55, 20 Queen Street West, Toronto, Ontario M5H 3S8.

ARTICLE 7 - SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

7.1 Survival of Representations, Warranties and Covenants of the Company

The representations, warranties and covenants of the Company contained in this Subscription Agreement shall survive the Closing and, notwithstanding such Closing or any investigation made by or on behalf of the Subscriber with respect thereto, shall continue in full force and effect for the benefit of the Subscriber and the Agents.

7.2 Survival of Representations, Warranties and Covenants of the Subscriber

The representations, warranties and covenants of the Subscriber contained in this Subscription Agreement shall survive the Closing and, notwithstanding such Closing or any investigation made by or on behalf of the Company or the Agents with respect thereto and notwithstanding any subsequent disposition by the Subscriber of any of the Common Shares and Warrants comprising the Units, or the Warrant Shares issuable upon exercise of the Warrants, and shall continue in full force and effect for the benefit of the Company and the Agents.

ARTICLE 8 - COMMISSION

8.1 Commission to the Agents

The Subscriber understands that, in connection with the issue and sale of the Units pursuant to the Offering, the Agents will receive from the Company on Closing, a cash commission equal to 7.0% of the gross proceeds from the Offering. The Company will also issue to the Agents compensation options (the “Compensation Options”) exercisable, without payment of additional consideration, to acquire Units in the amount that is equal to 7% of the number of Securities sold pursuant to the Offering. Each Compensation Option will entitle the holder to acquire one Unit for US$2.30 for a period of eighteen months following Closing.

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ARTICLE 9 - MISCELLANEOUS

9.1 Further Assurances

Each of the parties hereto upon the request of each of the other parties hereto, whether before or after the Closing Time, shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be necessary or desirable to complete the transactions contemplated herein.

9.2 Notices

(a) Any notice, direction or other instrument required or permitted to be given to any party hereto shall be in writing and shall be sufficiently given if delivered personally, or transmitted by facsimile tested prior to transmission to such party, as follows:

(i) in the case of the Company, to:

Sterling Mining Company 2201 Government Way

Suite E, Coeur d’Alene ID

83814 USA

Attention: Raymond De Motte

Fax: (208) 676-1629

with a copy to (which shall not constitute notice):

Cassels Brock & Blackwell LLP

2100 Scotia Plaza

40 King Street West

Toronto, Ontario M5H 3C2

Attention: David Poynton

Fax: (416) 644-9348

and to:

Parsons Behle & Latimer

201 South Main Street

Suite 1800

Salt Lake City, Utah 84111

Attention: Mark Lehman

Fax: (801) 536-6111

(ii) in the case of the Subscriber, at the address specified on the face page hereof, with a copy to the Agents at:

Blackmont Capital Inc.

BCE Place, 181 Bay St.

Suite 900

Toronto, Ontario M5J 2T3

Attention: Chad Williams

Fax: (416) 864-9151

–16–

with a copy to (which shall not constitute notice):

TD Securities Inc.

Toronto-Dominion Tower

66 Wellington Street W., 9^th Floor

Toronto, Ontario M5K 1A2

Attention: Gorden Glen

Fax: (416) 983-3176

and to:

Fraser Milner Casgrain LLP

1 First Canadian Place

39^th Floor

100 King Street West

Toronto, Ontario M5X 1B2

Attention: John Sabine

Fax: (416) 863-4374

and to:

Dorsey & Whitney LLP

Canada Trust Tower, BCE Place

Suite 4310

161 Bay Street

Toronto, ON M5J 2S1

Attention: Gil Cornblum

Fax: (416) 367-7371

(b) Any such notice, direction or other instrument, if delivered personally, shall be deemed to have been given and received on the day on which it was delivered, provided that if such day is not a Business Day then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day following such day and if transmitted by fax, shall be deemed to have been given and received on the day of its transmission, provided that if such day is not a Business Day or if it is transmitted or received after the end of normal business hours then the notice, direction or other instrument shall be deemed to have been given and received on the first Business Day following the day of such transmission.

(c) Any party hereto may change its address for service from time to time by notice given to each of the other parties hereto in accordance with the foregoing provisions.

9.3 Time of the Essence

Time shall be of the essence of this Subscription Agreement and every part hereof.

–17–

9.4 Costs and Expenses

All costs and expenses (including, without limitation, the fees and disbursements of legal counsel) incurred in connection with this Subscription Agreement and the transactions herein contemplated shall be paid and borne by the party incurring such costs and expenses.

9.5 Applicable Law

This Subscription Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the Province of Ontario and the laws of Canada applicable therein. Any and all disputes arising under this Subscription Agreement, whether as to interpretation, performance or otherwise, shall be subject to the non-exclusive jurisdiction of the courts of the Province of Ontario and each of the parties hereto hereby irrevocably attorns to the jurisdiction of the courts of such province.

9.6 Entire Agreement

This Subscription Agreement, including the Schedules hereto, constitutes the entire agreement between the parties with respect to the transactions contemplated herein and cancels and supersedes any prior understandings, agreements, negotiations and discussions between the parties. There are no representations, warranties, terms, conditions, undertakings or collateral agreements or understandings, express or implied, between the parties hereto other than those expressly set forth in this Subscription Agreement or in any such agreement, certificate, affidavit, statutory declaration or other document as aforesaid. This Subscription Agreement may not be amended or modified in any respect except by written instrument executed by each of the parties hereto.

9.7 Counterparts

This Subscription Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same Subscription Agreement. Counterparts may be delivered either in original or faxed form and the parties adopt any signature received by a receiving fax machine as original signatures of the parties.

9.8 Assignment

This Subscription Agreement may not be assigned by either party except with the prior written consent of the other parties hereto.

9.9 Enurement

This Subscription Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, successors (including any successor by reason of the amalgamation or merger of any party), administrators and permitted assigns.

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9.10 Language

It is the express wish of the Subscriber that the Subscription Agreement and any related documentation be drawn up in English. Il est de la volonté expressed du souscripteur que la convention de souscription ainsi que tout document connexe soient rédigés en langue anglaise.

The Company hereby accepts the subscription for Units as set forth on the face page of this Subscription Agreement on the terms and conditions contained in the Subscription Agreement (including all applicable schedules) this          day of                     , 2007.

STERLING MINING COMPANY
Per:
	Authorized Signing Officer

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SCHEDULE A – STERLING MINING COMPANY

UNIT TERM SHEET

Issuer:	Sterling Mining Company (“Sterling” or “Company”)
Offering:	3,.695,000 Units.Each Unit will consist of one Common Share and one Common Share purchase warrant.
Warrants:	Each Warrant is exercisable into one Common Share of the Company at US$4.25 for 24 months following Closing.
Price:	US$2.30 per unit
Amount:	US$8,498,500
Use of Proceeds:	The proceeds from the sale of the Units will be used to develop the Company’s Sunshine Mine in Idaho, working capital and general corporate purposes.
Type of Offering:	Best efforts private placement.
Minimum Subscription:	$10,000 or such other amount determined at the sole discretion of the Agent.
Selling Jurisdictions:	The Private Placement will be marketed to qualified investors in each of the Provinces of Ontario, Manitoba, Québec, Alberta, Nova Scotia, British Columbia and Saskatchewan and the Units only may also be offered in certain foreign jurisdictions under applicable exemptions and in the United States on a private placement basis to institutions that are “accredited investors” (as contemplated in Regulation D under the US Securities Act), as the Company and the Agent shall mutually agree . Subscribers in the various provinces of Canada must be “accredited investors” (as defined under applicable securities laws, rules or policies in such provinces).
Resale Restrictions:	The Company is not currently a reporting issuer in Canada and the four month seasoning period (pursuant to Multilateral Instrument 45-102) will not commence until the Company has become a reporting issuer in Ontario. Resales in the United States may be made pursuant to Rule 144. The Company has agreed to file one or more resale registration statements with respect to the Common Shares and the Common Shares underlying the Warrants.
Liquidity Incentive:	If the Company does not file a Non-Offering Prospectus to qualify the Common Shares in Canada and a resale Registration Statement to register the resale of the Common Shares and the Common Shares underlying the Warrants in the United States is not declared effective, within 180 days of Closing the Company shall pay each subscriber 1% of the total subscription amount paid by each subscriber to a maximum of 12%, on a pro-rata basis, payable quarterly.
Listing:	The Company is an SEC registrant and its Common Shares are quoted on the OTC Bulletin Board under the symbol “SRLM”. The Company shall make application to the TSX Exchange or the TSX Venture Exchange to list the Common Shares issuable hereunder on the TSX Exchange. The Warrants will not be listed on any exchange.

–20–

	The Company will file a Non-Offering Prospectus to qualify the Common Shares in Canada within 120 days of Closing. The Company will file a resale Registration Statement and use its best efforts to have such registration statement declared effective by the SEC within 180 days of Closing to register the resale of the Common Shares and the Common Shares underlying the Warrants.
Eligibility:	Counsel for the Company and the Agents have not expressed any opinion regarding the eligibility of the Units, however, investors are cautioned that the Units will probably not be eligible for RRSPs, RRIFs, RESPs, and DPSPs.
Commission:	Cash commission of 7% of the gross proceeds raised pursuant to the Private Placement. The Agent will also be granted non-transferable options (“Agents’ Compensation Options”) to acquire Units in the amount that is equal to 7% of the number of Securities sold pursuant to the Private Placement. Each Agents’ Compensation Option will entitle the holder to acquire one Unit at US$2.30 per Unit for a period of 18 months following Closing.
Closing:	On or about January 18, 2007
Lead Agents:	Blackmont Capital Inc., TD Securities Inc.

–21–

SCHEDULE “B”

ACCREDITED INVESTOR STATUS CERTIFICATE

TO BE COMPLETED BY BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO, NEWFOUNDLAND AND LABRADOR, NOVA SCOTIA, NEW BRUNSWICK AND PRINCE EDWARD ISLAND ACCREDITED INVESTORS

The categories listed herein contain certain specifically defined terms. If you are unsure as to the meanings of those terms, or are unsure as to the applicability of any category below, please contact your broker and/or legal advisor before completing this certificate.

TO: Sterling Mining Company (the “Company”)

In connection with the purchase by the undersigned Subscriber of the Units, the Subscriber, on its own behalf and on behalf of each Disclosed Principal for whom the Subscriber is acting (collectively, the “Subscriber”), hereby represents, warrants, covenants and certifies to the Company (and acknowledges that the Company and its counsel are relying thereon) that:

	(a)    the Subscriber is resident in or otherwise subject to the securities laws of one of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Newfoundland and Labrador, Nova Scotia, New Brunswick or Prince Edward Island;
	(b)    the Subscriber is purchasing the Units as principal for its own account and not for the benefit of any other person;
	(c)    the Subscriber is an “accredited investor” within the meaning of NI 45-106 on the basis that the undersigned fits within one of the categories of an “accredited investor” reproduced below beside which the undersigned has indicated the undersigned belongs to such category;
	(d)    the Subscriber was not created or used solely to purchase or hold securities as an accredited investor as described in paragraph (m) below; and
	(e)    upon execution of this Schedule B by the Subscriber, this Schedule B shall be incorporated into and form a part of the Subscription Agreement.
(PLEASE CHECK THE BOX OF THE APPLICABLE CATEGORY OF ACCREDITED INVESTOR)
¨	(a)    a Canadian financial institution, or a Schedule III bank;
¨	(b)    the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
¨	(c)    a subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
¨	(d)    a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);
¨	(e)    an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);
¨	(f)     the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;

–22–

¨ (g)    a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;

¨ (h)    any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;

¨ (i)     a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a jurisdiction of Canada;

¨ (j)     an individual who, either alone or with a spouse, beneficially owns, directly or indirectly, financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000;

¨ (k)    an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;

¨ (l)     an individual who, either alone or with a spouse, has net assets of at least $5,000,000;

¨ (m)   a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements;

¨ (n)    an investment fund that distributes or has distributed its securities only to (i) a person that is or was an accredited investor at the time of the distribution, (ii) a person that acquires or acquired securities in the circumstances referred to in sections 2.10 [Minimum amount investment] and 2.19 [Additional investment in investment funds] of NI 45-106, or (iii) a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 [Investment fund reinvestment] of NI 45-106;

¨ (o)    an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;

¨ (p)    a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;

¨ (q)    a person acting on behalf of a fully managed account managed by that person, if that person (i) is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction, and (ii) in Ontario, is purchasing a security that is not a security of an investment fund;

¨ (r)     a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;

¨ (s)    an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function;

¨ (t)     a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;

–23–

¨ (u)    an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser, or

¨ (v)    a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as (i) an accredited investor, or (ii) an exempt purchaser in Alberta or British Columbia.

For the purposes hereof, the following definitions are included for convenience:

(a) “Canadian financial institution” means (i) an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act, or (ii) a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

(b) “control person” has the same meaning as in securities legislation except in Manitoba, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island and Québec where control person means any person that holds or is one of a combination of persons that holds (i) a sufficient number of any of the securities of an issuer so as to affect materially the control of the issuer, or (ii) more than 20% of the outstanding voting securities of an issuer except where there is evidence showing that the holding of those securities does not affect materially the control of the issuer;

(c) “entity” means a company, syndicate, partnership, trust or unincorporated organization;

(d) “financial assets” means cash, securities, or any a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

(e) “founder” means, in respect of an issuer, a person who, (i) acting alone, in conjunction, or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the issuer, and (ii) at the time of the trade is actively involved in the business of the issuer;

(f) “fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

(g) “investment fund” means a mutual fund or a non-redeemable investment fund, and, for greater certainty in British Columbia, includes an employee venture capital corporation that does not have a restricted constitution, and is registered under Part 2 of the Employee Investment Act (British Columbia), R.S.B.C. 1996 c. 112, and whose business objective is making multiple investments and a venture capital corporation registered under Part 1 of the Small Business Venture Capital Act (British Columbia), R.S.B.C. 1996 c. 429 whose business objective is making multiple investments;

(h) “mutual fund” means an issuer whose primary purpose is to invest money provided by its security holders and whose securities entitle the holder to receive on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in part of the net assets, including a separate fund or trust account, of the issuer;

(i) “non-redeemable investment fund” means an issuer,

(A) whose primary purpose is to invest money provided by its securityholders,

(B) that does not invest,

(i) for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund, or

–24–

(ii) for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund, and

(C) that is not a mutual fund;

(j) “related liabilities” means liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets and liabilities that are secured by financial assets;

(k) “Schedule III bank” means an authorized foreign bank named in Schedule III of the Bank Act (Canada);

(l) “spouse” means an individual who (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual, (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta); and

(m) “subsidiary” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

In NI 45-106 a person or company is an affiliate of another person or company if one of them is a subsidiary of the other, or if each of them is controlled by the same person.

In NI 45-106 a person (first person) is considered to control another person (second person) if (a) the first person, directly or indirectly, beneficially owns or exercises control or direction over securities of the second person carrying votes which, if exercised, would entitle the first person to elect a majority of the directors of the second person, unless that first person holds the voting securities only to secure an obligation, (b) the second person is a partnership, other than a limited partnership, and the first person holds more than 50% of the interests of the partnership, or (c) the second person is a limited partnership and the general partner of the limited partnership is the first person.

The foregoing representations contained in this certificate are true and accurate as of the date of this certificate and will be true and accurate as of the Closing Time. If any such representations shall not be true and accurate prior to the Closing Time, the undersigned shall give immediate written notice of such fact to the Company prior to the Closing Time.

Dated:	Signed:
Witness (If Subscriber is an Individual)	Print the name of Subscriber
Print Name of Witness	If Subscriber is a corporation, print name and title of Authorized Signing Officer

–25–

SCHEDULE C

UNITED STATES INSTITUTIONAL ACCREDITED INVESTOR CERTIFICATE

TO: Sterling Mining Company (the “Company”)

CERTIFICATE

Capitalized terms not otherwise defined herein shall have the meanings attributed thereto in the Subscription Agreement to which this certificate was attached.

In connection with the purchase of Units (the “Units”) of Sterling Mining Company (the “Company”), the undersigned hereby represents, warrants and certifies that:

1. the Subscriber (or if the Subscriber is acting on behalf of a principal, then for the principal for whom the Subscriber is acting) satisfies one or more of the following categories of “accredited investor” as that term is defined in Rule 501(a) of the Securities Act of 1933, as amended (the “U.S. Securities Act”), by virtue of the Subscriber being:

[please check one]

Category 1.	Any bank as defined in Section 3(a)(2) of the U.S. Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934; any insurance company as defined in Section 2(a)(13) of the U.S. Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of US$5,000,000; or any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors
Category 2.	A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940
Category 3.	An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Units, with total assets in excess of US$5,000,000
Category 4.	A trust that: (a) has total assets in excess of US$5,000,000, (b) was not formed for the specific purpose of acquiring the Units, and (c) is directed in its purchases of securities by a person who has such knowledge and experience in financial and business matters that he/she is capable of evaluating the merits and risks of an investment in the Units
Category 5.	An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories

2. (a) if the undersigned is the Subscriber, he or she is making the above statement based on personal knowledge of his or her financial situation and has reviewed personal financial documentation with an accountant, financial advisor or other financial professional, if necessary, to determine that the above statement is true; or (b) if the undersigned is other than the Subscriber, he or she is making the above statement based on a review, if necessary, of the financial statements of the Subscriber for the most recently completed financial year and any interim financial statements prepared since the end of such financial year and has undertaken such other review and due diligence necessary to determine and certify that the Subscriber is an “accredited investor” as that term is defined in Rule 501(a) of the U.S. Securities Act; and

3. the Subscriber understands that the Company is relying on this certificate as evidence of the Subscriber’s status as an “accredited investor” in accordance with Rule 501(a) of the U.S. Securities Act.

The foregoing representations contained in this certificate are true and accurate as of the date of this certificate and will be true and accurate as of the Closing Time. If any such representations shall not be true and accurate prior to the Closing Time, the undersigned shall give immediate written notice of such fact to the Company prior to the Closing Time.

Dated:	Signed:
Witness (If Subscriber is an Individual)	Print the name of Subscriber
Print Name of Witness	If Subscriber is a corporation, print name and title of Authorized Signing Officer

–27–

EX-99.1

Exhibit 99.1

STERLING MINING COMPLETES US $8,498,500 OFFERING

Wallace, Idaho – January 18, 2007 – (BUSINESS WIRE) – Sterling Mining Company (OTCBB: SRLM) (the “Company”) announced today that it has closed a US$8,498,500 private placement offering consisting of 3,695,000 units (“Units”) at a price of US$2.30 per Unit (the “Offering”). Each Unit is comprised of one common share of the Company (“Common Shares”) and one common share purchase warrant (the “Warrants”). Each Warrant is exercisable for one Common Share at an exercise price of US$4.25 for 24 months following the closing date of the Offering. The Offering was completed on a best-efforts basis with Blackmont Capital Inc. and TD Securities Inc. of Toronto, Canada engaged as co-agents.

Proceeds from the private placement will be used to fund the ongoing rehabilitation and upgrade of the Sunshine Mine as part of Sterling’s mine plan to resume silver production there in early 2008 the purchase of a tailings pond, and for general working capital purposes.

In connection with the private placement, the Company paid a cash commission of 7% of the gross proceeds of the private placement, and issued non-transferable compensation options to purchase 258,650 of Units (equal to 7% of the Units sold under the private placement), exercisable at US$2.30 per unit for a period of 18 months after the closing date of the Offering.

The private placement was made in a transaction exempt from the registration requirements of the Securities Act of 1933. The shares of common stock sold have not been registered under the Securities Act of 1933, or any state securities laws, and unless so registered, may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933 and applicable state securities laws.

About Sterling Mining Company

Sterling Mining controls the Sunshine Mine and related exploration lands in the Silver Valley of North Idaho. The Company also holds several silver properties in Mexico, including the producing Barones Tailings Project in the Zacatecas Silver District. Shares of Sterling Mining Company trade on the OTC Bulletin Board under the symbol “SRLM” and also on the Frankfurt Stock Exchange under the trading symbol “SMX”.

FOR FURTHER INFORMATION, visit the Company’s website at www.SterlingMining.com or contact:

Sterling Mining Company	CHF Investor Relations
www.SterlingMining.com	www.chfir.com
Raymond De Motte, President	Cathy Hume, CEO
Tel: (208) 666-4070	Tel: (416) 868-1079 x231
	cathy@chfir.com

To receive Sterling news via email, please email julia@chfir.com and specify “SRLM news” in the subject line.

This press release does not constitute an offer to sell or a solicitation to buy securities, and contains forward looking statements regarding the Company within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements are based on assumptions that the Company believes are reasonable but that are subject to uncertainties and business

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risks. Actual results relating to any and all of these subjects may differ materially from expected results. Factors that could cause results to differ materially include economic and political events, the ability to raise capital in the financial markets, and other factors discussed in the Company’s periodic filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2005.

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