EX-1 3 ex1.htm ALAMOS GOLD INC FORM 40-F ANNUAL

Exhibit 1

ALAMOS GOLD INC.

ANNUAL INFORMATION FORM

MAY 12, 2004

ALAMOS GOLD INC.

ANNUAL INFORMATION FORM

TABLE OF CONTENTS

1.

PRELIMINARY NOTES

1

2.

CORPORATE STRUCTURE

6

2.1

Name and Incorporation

6

2.2

Intercorporate Relationships

8

3.

GENERAL DEVELOPMENT OF THE BUSINESS

9

3.1

Three Year History

9

3.2

Significant Acquisitions and Significant Dispositions

14

3.3

Trends

14

4.

Narrative Description of the Business

14

4.1

General

14

4.2

Issuers with Asset-Backed Securities Outstanding

17

4.3

Mineral Projects

17

4.4

Issuers with Oil & Gas Operations

36

5.

SELECTED FINANCIAL INFORMATION

36

5.1

Annual Information

36

5.2

Dividends

37

5.3

Foreign GAAP

37

6.

MANAGEMENT?S DISCUSSION AND ANALYSIS

37

6.1

General

37

6.2

Quarterly Information

39

6.3

Liquidity and Capital Resources

39

6.4

Results of Operations

40

7.

MARKET FOR SECURITIES

41

8.

DIRECTORS AND OFFICERS

42

8.1

Name, Address, Occupation and Security Holding

42

8.2

Corporate Cease Trade Orders or Bankruptcies

43

8.3

Penalties or Sanctions

43

8.4

Personal Bankruptcies

43

8.5

Conflicts of Interest

44

9.

ADDITIONAL INFORMATION

44

ANNUAL INFORMATION FORM

(the “AIF”)

ALAMOS GOLD INC.

(the “Company”)

1.

PRELIMINARY NOTES

Effective Date of Information

This AIF is dated May 12, 2004 and unless otherwise stated herein, the information contained in this AIF is current as of such date, other than certain financial information which is current as of December 31, 2003, being the date of the Company's most recently completed financial year.

Incorporation of Financial Statements, Management Discussion and Analysis, and Management Information Circular

The consolidated financial statements for the Company for the year ended December 31, 2003, together with the accompanying auditors’ report thereon and Management Discussion and Analysis and the most recent Management Information Circular of the Company dated May 12, 2004 are incorporated by reference and form part of this AIF.

Currency and Exchange Rates

All dollar amounts in this AIF are expressed in United States dollars, unless otherwise indicated. The following table sets forth the Canadian dollar expressed in United States dollars at the end of each year and the average, high and low exchange rates during the year indicated:

Canadian Dollars into US Dollars | 2003 | 2002 | 2001
Closing | $0.7710 | $0.6339 | $0.6278
Average | $0.7146 | $0.6368 | $0.6456
High | $0.7733 | $0.6654 | $0.6696
Low | $0.6382 | $0.6179 | $0.6237

The noon rate of exchange on May 12, 2004, as reported by the Bank of Canada of the conversion of Canadian dollars into United States dollars was Cdn.$1.00 equals US$1.3878.

All financial information in this AIF is prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). The material differences between Canadian and US GAAP and their effect on the Company’s consolidated financial information are summarized in Note 15 of the notes to the consolidated financial statements of the Company for the fiscal year ended December 31, 2003.

Metric Equivalents

For ease of reference, the following factors for converting metric measurements into imperial equivalents are provided:

To Convert From Metric | To Imperial | Multiply by
Hectares | Acres | 2.471
Metres | Feet (ft.) | 3.281
Kilometres (km.) | Miles | 0.621
Tonnes | Tons (2000 pounds) | 1.102
Grams/tonne | Ounces (troy/ton) | 0.029

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Forward-Looking Statements

This Annual Information Form contains forward-looking statements concerning the Company’s plans for its properties and other matters. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

Statements concerning reserves and mineral resource estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the mineralization that will be encountered if the property is developed, and in the case of mineral reserves, such statements reflect the conclusion based on certain assumptions that the mineral deposit can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be “forward-looking statements.” Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements.

Some of the important risks and uncertainties that could affect forward looking statements are described in this Annual Information Form under Item 4.1 - “General” as well as under Management’s Discussion and Analysis incorporated by reference into this Annual Information Form. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Investors are cautioned against attributing undue certainty to forward-looking statements.

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Glossary

In this AIF, unless there is something in the subject matter or context inconsistent therewith, the following capitalized terms have the meanings set forth herein:

“Ag” | Silver.
“Au” | Gold.
“Alamos Minerals” | Alamos Minerals Ltd., a company which amalgamated with National Gold on February 21, 2003 to form the Company.
“Asset Purchase Agreement” | The asset purchase agreement dated December 21, 2000, as amended, among National Gold, Minas de Oro Nacional and Minera San Augusto pursuant to which National Gold acquired the Salamandra Property.
“basalt” | A basic extrusive (volcanic) rock dominated by plagioclase feldspar, pyroxene and or olivine.
“Bienvenidos” | Minera Bienvenidos, S.A. de C.V., a Mexican corporation which is a wholly-owned subsidiary of the Company.
“clastic” | Consisting of fragments of minerals, rocks, or organic structures that have been moved individually from their places of origin.
“Company” | Alamos Gold Inc.
“dacite” | The extrusive (volcanic) equivalent of quartz diorite.
“dome” | An uplift or anticlinal structure, either circular or elliptical in outline, in which the rocks dip gently away in all directions.
“Durango” | Durango Fern Mines, S.A. de C.V., a Mexican corporation which is a wholly-owned subsidiary of the Company.
“GAAP” | Canadian generally accepted accounting principles.
“grade” | Term used to indicate the concentration of an economically desirable mineral or element in its host rock as a function of their relative mass. With gold, this may be expressed as grams per tonne (g/t) or ounces per tonne (opt).
“HQ diameter” | 2.4 inches drill hole diameter.
“Indicated Mineral Resource” | That part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
“Inferred Mineral Resource” | That part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
“Joint Venture Agreement” | The joint venture and option agreement dated October 17, 2001, as amended and restated, among Alamos Minerals, National Gold, Bienvenidos and Minas de Oro Nacional pursuant to which Alamos Minerals acquired an option to earn up to a 50% interest in the Salamandra Property.

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“Kennecott” | Kennecott Minerals Company.
“km” | Kilometres.
“La Fortuna” | Minas La Fortuna, S.A. de C.V., a Mexican corporation which is a wholly-owned subsidiary of the Compan
“leaching” | The separation, selective removal or dissolving-out of soluble constituents from a rock or ore body by the natural actions of percolating water.
“m” | Metres.
“Minas de Oro Nacional” | Minas de Oro Nacional, S.A. de C.V. (formerly, O.N.C. de Mexico, S.A. de C.V.), a Mexican corporation which is a wholly-owned subsidiary of the Company.
“Minera San Augusto” | Minera San Augusto, S.A. de C.V., owned as to 70% by Placer Dome and 30% by Kennecott, and the original vendor of the Salamandra Property.
“Measured Mineral Resource” | That part of a Mineral Resource for which quantity, grade or quality, densities, shape, physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
“Mineral Resource” | A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects from economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge.
“National Gold” | National Gold Corporation, a British Columbia company which amalgamated with Alamos Minerals on February 21, 2003 to form the Company.
“NI 43-101” | National Instrument 43-101 – Standards of Disclosure for Mineral Projects. A rule developed by the Canadian Securities Administrators (an umbrella group of Canada’s provincial and territorial securities regulators) that governs public disclosure by mining and mineral exploration issuers. The rule establishes certain standards for all public disclosure of scientific and technical information concerning mineral projects.
“NQ diameter” | 1.75 inches drill hole diameter.
“ore” | A natural aggregate of one or more minerals which, at a specified time and place, may be mined and sold at a profit, or from which some part may be profitably separated.
“ounces” | A measure of weight in gold and other precious metals, correctly troy ounces, which weigh 31.2 grams as distinct from imperial ounces which weigh 28.4 grams.
“Placer Dome” | Placer Dome Inc.
“ppm” | parts per million.
“Predecessor Companies” | Alamos Minerals and National Gold.

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“Preliminary Feasibility Study” | A comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established, and which, if an effective method of mineral processing has been determined, included a financial analysis based on reasonable assumptions of technical, engineering, operating, economic factors and the evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral resource may be classified as a mineral reserve.
“RQD” | Rock quality data.
“QA/QC” | Quality assurance/quality control.
“Qualified Person” | Conforms to that definition under NI 43-101 for an individual: (a) to be an engineer or geoscientist with at least five years’ experience in mineral exploration, mine development or operation or mineral project assessment, or any combination of these; (b) with experience relevant to the subject matter of the mineral project and the technical report; and (c) is a member in good standing of a professional association that, among other things, is self-regulatory, has been given authority by statute, admits members based on their qualifications and experience, requires compliance with professional standards of competence and ethics and has disciplinary powers to suspend or expel a member.
“Salamandra Property” | A mineral exploration property consisting of various mineral concessions held by the Company’s Mexican subsidiary, Minas de Oro Nacional, comprising approximately 16,082.50 hectares located in the State of Sonora, Mexico, which comprises the principal mineral property of the Company.
“Tenedoramex” | Tenedoramex S.A. de C.V., a wholly-owned subsidiary of Placer Dome and a 70% owner of Minera San Augusto.
“TSXV” | The TSX Venture Exchange.

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2.

CORPORATE STRUCTURE

2.1

Name and Incorporation

(1)

The name of the Company is “Alamos Gold Inc.” The Company’s principal place of business is located at 1503 – 110 Yonge St., Toronto, Ontario, Canada M5C 1T4, telephone: (416) 368-9932, facsimile: (416) 368-2934. The Company has administration offices in Mexico. The registered and records office of the Company is located at Suite 3350, Four Bentall Centre, 1055 Dunsmuir Street, P.O. Box 4922, Vancouver, British Columbia, Canada V7X 1J1.

(2)

The Company was formed by the amalgamation of Alamos Minerals, a company incorporated under the laws of the Province of British Columbia, and National Gold, a company incorporated under the laws of the Province of Alberta and continued into the Province of British Columbia under the Company Act (British Columbia) on February 21, 2003 (the “Amalgamation”) with the resulting amalgamated Company continuing under the name “Alamos Gold Inc.” The Amalgamation received shareholder approval of both Alamos Minerals and National Gold on January 24, 2003 and approval of the Supreme Court of British Columbia on February 4, 2003. Pursuant to the Amalgamation, 39,703,264 common shares of Alamos Minerals were exchanged on a share exchange basis of two common shares of Alamos Minerals for one common share of the Company and 31,453,980 common shares of National Gold were exchanged on a share exchange basis of 2.352 common shares of National Gold for one common share of the Company.

The new British Columbia Business Corporations Act (the “New Act”) came into force on March 29, 2004 and replaced the British Columbia Company Act (the “Former Act”). On April 16, 2004, the Board of Directors of the Company approved the transition of the Company under the New Act and the filing of the transition application containing a notice of articles (the “Notice of Articles”), which will replace the existing memorandum of the Company.

The Board of Directors have determined that it is in the best interests of the Company to adopt new articles (the “New Articles”) to replace its existing articles (the “Existing Articles”) to take advantage of certain business flexibilities available under the New Act. The Board of Directors have also determined that it is in the best interests of the Company to amend the Notice of Articles by changing the authorized capital of the Company from 1,000,000,000 common shares without par value to an unlimited number of common shares without par value pursuant to the New Act. The New Articles and the Notice of Alteration of the Notice of Articles will be presented for shareholder approval at the Company’s annual general meeting of shareholders scheduled to be held on June 21, 2004.

Set out below is a discussion of the changes proposed under the New Articles. These proposed changes to the New Articles include a discussion of substantive changes included in the New Articles and changes included that are as a result of changes under the New Act. The New Articles incorporate a number of non-substantive changes, including the use of the new terminology adopted under the New Act. For example, “members” are now “shareholders” and “register of members” is now “central securities register” under the New Act. Many of these terminology and wording changes are not discussed in detail here, as they reflect statutory requirements that the Company cannot alter or amend.

Borrowing Powers

Under the Existing Articles, the Company may borrow money, issue debt and mortgage, pledge, or give security on the undertaking, or on the whole or any part of the property and assets, of the Company (both present and future). However, under the New Act, companies are now also permitted, without restriction, to guarantee repayment of money by any other person or the performance of any obligation of any other person. This change reflects the modernization of corporate legislation to effectively respond to increasingly complex financial transactions that companies may enter into in the course of their business. As a result, the New Articles propose that the Company also be able to guarantee the repayment of money by any other person or the performance of any obligation of any other person. Management believes that it is in the best interests of the Company to allow for such a guarantee to permit the Company the maximum flexibility in possible future financial transactions, recognizing the duties directors have to ensure that the guarantee must always be in the best interest of the Company and its shareholders.

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Directors Authority to Set Auditor’s Remuneration

Under the New Act, the Company is, subject to shareholder approval, permitted to include in the New Articles authorization for the directors to set the remuneration paid to the auditors of the Company. The Former Act required the shareholders to set the remuneration or the shareholders to authorize, on an annual basis, the directors to set the remuneration. Historically, shareholders of the Company have always authorized the directors to appoint the auditors and to set the auditor’s remuneration. As a result, the inclusion of the authority for directors to set the auditor’s remuneration in the New Articles merely codifies existing practice. More importantly, however, this change also codifies new corporate governance rules and regulations relating to audit committees and the appointment and remuneration of auditors.

Special Majority for Resolutions

Under the Former Act, the majority of votes required to pass a special resolution at a general meeting was three-quarters of the votes cast on a resolution. Under the New Act, the Company is authorized to determine whether a special resolution requires two-thirds or three-quarters of the votes cast on a resolution. The Existing Articles did not state what the majority was for a special resolution, as this matter was dealt with under the Former Act. The New Articles propose that a special resolution require a majority of two-thirds of the votes cast on a resolution.

Share Issuances

Under the Former Act, the maximum discount or commission payable on the issuance of a share of the Company was 25%. Under the New Act the Company is, subject to shareholder approval, now permitted to avoid setting a numerical maximum for a discount or commission payable on the issuance of a share but rather limit any discount or commission by a test of reasonableness. The New Articles provide that the Company be permitted to pay or offer the commission or discount as permitted in the New Act. Management of the Company believes that the 25% maximum limit should not be set out in the New Articles as such a limit does not consider factual circumstances nor apply a test of reasonableness. By limiting the discount or commission amounts payable by the test of reasonableness, exercised by directors with a duty to act in the best interest of the Company, the Company is provided greater flexibility in possible future transactions. In addition, since the Company is a public company, it is subject to the rules and policies of applicable stock exchanges on which its shares are listed, which requirements are often more restrictive than Former Act provisions.

The following are changes to the provisions contained in the New Act which have an effect on provisions contained in the Existing Articles:

Officers

Under the Existing Articles, the Company was required to have at least a President and Secretary as officers, and there had to be separate individuals holding those positions. In addition, the President was required to be director of the Company. These were requirements under the Former Act. However, under the New Act, those requirements no longer exist, and as a result, it is proposed that the New Articles remove these requirements. Management and the Board of Directors believe that by removing these restrictions the Company is better able to meet its corporate governance obligations as to membership of the Board of Directors.

Publication of Advance Notice of Meeting

Under the Existing Articles, the Company was required to publish an advance notice of a general meeting of shareholders at which directors were to be elected in the manner required under the Former Act. Under the New Act, the Company is no longer required to publish an advance notice of general meetings of shareholders at which directors are to be elected. As a result, it is proposed that the New Articles remove the requirement to publish advance notice of the meeting.

Share Certificates

Under the Existing Articles, a shareholder is entitled to a share certificate representing the number of shares of the Company he or she holds. Under the New Act, a shareholder is now entitled to a share certificate representing the number of shares of the Company he or she holds or a written acknowledgement of the shareholder’s right to obtain such a share certificate. As a result, the New Articles have been amended to provide for this additional right. The addition of the ability to issue a written acknowledgement is very useful for public companies such as the Company, since it permits flexibility in corporate and securities transactions.

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Disclosure of Interest of Directors

Under the New Act, the provisions relating to the disclosure of interests by directors have been revised and updated. As directors of the Company are bound by these provisions, the New Articles have deleted reference to the old disclosure of interest provisions and refer to the provisions contained in the New Act.

Indemnity Provision

Under the Former Act, the Company could only indemnify directors where it obtained prior court approval, except in certain limited circumstances. The Existing Articles provided for the Company to indemnify directors, subject to the requirements of the Former Act. Under the New Act, the Company is now permitted to indemnify a past or present director or officer of the Company without obtaining prior court approval in respect of an “eligible proceeding”. An “eligible proceeding” includes any legal proceeding relating to the activities of the individual as a director or officer of the Company. However, under the New Act, the Company will be prohibited from paying an indemnity if:

(i)

the party did not act honestly and in good faith with a view to the best interests of the Company;

(ii)

the proceeding was not a civil proceeding and the party did not have reasonable grounds for believing that his or her conduct was lawful; and

(iii)

the proceeding is brought against the party by the Company or an associated corporation.

As a result, the New Articles propose to allow the Company to indemnify directors, officers, employees and agents, subject to the limits imposed under the New Act. Management believes that it is in the best interests of the Company to allow the indemnification of directors, officers, employees and agents, subject to the limits and conditions of the New Act.

Holding of Annual General Meetings

Under the Former Act, annual general meetings were required to be held within 13 months of the last annual general meeting. The New Act allows for annual general meetings to be held once in each calendar year and not more than 15 months after the last annual general meeting and accordingly, the Company’s New Articles reflect this provision.

Location of Annual General Meetings

Under the Former Act, annual general meetings were required to be held in British Columbia, unless the Registrar of Companies (the “Registrar”) approved a location outside British Columbia. The New Act allows for annual general meetings to be held outside British Columbia without the need to obtain the Registrar’s approval, if the articles of a company so provide. The Company’s New Articles reflect this provision.

2.2

Intercorporate Relationships

Corporate Structure

As of the date of this AIF, the following diagram sets forth the Company’s inter-corporate relationships with its active and inactive subsidiaries including the jurisdiction of incorporation or organization and the Company’s respective percentage ownership of each subsidiary.

(1)

One of the 50,000 outstanding shares of Minera Bienvenidos, S.A. de C.V. is held in the name of John McCluskey, for the benefit of the Company.

(2)

One of the 50,000 outstanding shares of Minas de Oro Nacional S.A. de C.V. is held in the name of John McCluskey for the benefit of the Company.

AIF - 8

3.

GENERAL DEVELOPMENT OF THE BUSINESS

3.1

Three Year History

The Company is involved in mineral exploration and development in Mexico. The Company’s primary focus is on exploration and development of its Salamandra Property in the State of Sonora, Mexico. See Item 4.3 “Mineral Projects” for further details on the Salamandra Property. Below is a description of the principal activities of the Company and the Predecessor Companies over the past three years.

National Gold – Operations and Activities, 2000 - 2003

National Gold signed an option agreement dated November 15, 1999 with Sedex Mining Corporation to acquire an interest in the McNeil mineral exploration property in British Columbia. Under the terms of the agreement, National Gold was to receive a 50% interest in the property in consideration for Cdn.$30,000, the issuance of 100,000 common shares of National Gold to Sedex Mining Corporation over a three year period and the incurring of Cdn.$1,000,000 in exploration expenses on the property over four years. An additional 10% interest in the McNeil property could have been earned on completion of a feasibility study. In November 2002, National Gold terminated this option agreement.

In September 2000, National Gold acquired an option from Craig Kennedy and Peter Klewchuk to earn a 100% interest in the Zinger property covering 22 claim units located in the Purcell Basin of southeastern British Columbia about 20 kilometres southwest of Kimberly, British Columbia. Under the terms of the option agreement, National Gold could have earned a 100% interest in the property by expending Cdn.$750,000 on exploration work and issuing 550,000 shares of National Gold to Craig Kennedy and Peter Klewchuk over a four-year period. In November 2002, National Gold terminated this option agreement.

In September 2000, National Gold also acquired an option to earn a 100% interest from Glen Rodgers in the Soc. Hoard 2 and 3 claims located in North-eastern British Columbia which claims were contiguous to the Zinger property. In November 2002, National Gold terminated this option agreement.

In November 2000, National Gold acquired an option to earn a 100% interest in the Jacleg and Tac properties from Super Group Holdings Ltd., which properties consisted of 21 claims (114 Units) covering approximately 2,850 hectares in the Fort Steele Mining Division of south-eastern British Columbia. National Gold could have earned a 100% interest in the properties by expending Cdn.$750,000 on exploration work, issuing 225,000 shares of National Gold to Super Group Holdings over a four year period and paying Cdn.$10,000. In November 2002, National Gold terminated this option agreement.

Pursuant to the Asset Purchase Agreement, as amended March 23, 2001 and August 21, 2001, among National Gold, Minas de Oro Nacional (then known as O.N.C. de Mexico S.A. de C.V.) and Minera San Augusto, a Mexican company controlled by Placer Dome and Kennecott, National Gold, through Minas de Oro Nacional, acquired a 100% interest in the Salamandra Property located in the State of Sonora, Mexico, which is now the principal property of the Company. Minera San Augusto, Kennecott, Tenedoramex, Minas de Oro Nacional (then known as O.N.C. de Mexico S.A. de C.V.) and National Gold subsequently entered into an Amended and Restated Assignment and Assumption Agreement effective March 23, 2001 pursuant to which Minera San Augusto assigned all of its right, interest and title under the Asset Purchase Agreement and the RTE Agreement (as defined below) to Tenedoramex and Kennecott.

Under the Asset Purchase Agreement, as amended, consideration for the acquisition of the Salamandra Property was the payment of Cdn.$11,725,014 in acquisition costs and assigned expenses, which was originally payable by National Gold as follows:

(a)

the payment of Cdn.$250,000 in cash up front;

(b)

the assumption of non-interest bearing promissory notes (the “Promissory Notes”) aggregating Cdn.$2,750,000:

(i)

payment of Cdn.$1,000,000 due on the earlier of 60 days after the 6-month trailing average gold price equals or exceeds US$300 per ounce or December 31, 2008. This amount became due on August 23, 2002 and was paid by the Predecessor Companies; and

(ii)

payment of Cdn.$1,750,000 due on the earlier of 60 days after the 9-month trailing average gold price equals or exceeds US$300 per ounce or December 31, 2008. This amount became due on October 17, 2002 and was paid by the Predecessor Companies;

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(c)

the assumption of two non-interest bearing debentures (the “Debentures”) for an aggregate principal of Cdn.$7,500,000 due and payable on the earlier of 90 days after the 9-month trailing average gold price equals or exceeds US$325 per ounce (the “Trigger Price”) or December 31, 2010. The Debentures were triggered in the fall of 2002 and paid in full in January 2003;

(d)

the assumption and payment of US$420,000 in liabilities; and

(e)

payment of all applicable taxes, fees, commitments and other payments required to be paid to maintain the Salamandra Property in good standing.

The consideration for the acquisition of the Salamandra Property has been paid in full.

The Salamandra Property is subject to a Royalty for Technical Expertise Agreement dated March 23, 2001 between Minas de Oro Nacional and Minera San Augusto (the “RTE Agreement”). Pursuant to the RTE Agreement, the Company is obliged to pay to Tenedoramex and Kennecott, as assignees, the following royalty from the date of Commencement of Commercial Production (as defined in the RTE Agreement) until such time as the first 2,000,000 ounces of gold have been mined, processed and sold (or deemed sold) from the Salamandra Property:

(a)

2% of the Net Smelter Returns (as defined in the RTE Agreement) in respect of all Products (as defined in the RTE Agreement) mined and sold (or deemed sold) by Minas de Oro Nacional from the Salamandra Property; and

(b)

the additional applicable percentage based upon the Gold Price (as defined in the RTE Agreement) as published in the Wall Street Journal for the calendar quarter in which the royalty is payable of the Net Smelter Returns in respect of all Silver and Gold Products (as defined in the RTE Agreement) mined and sold (or deemed sold) by Minas de Oro Nacional from the Salamandra Property as follows:

Gold Price Range | Net Smelter Return Royalty 100% Basis
US$0.00/oz to US$299.99/oz | 1.0%
US$300.00/oz to US$324.99/oz | 1.5%
US$325.00/oz to US$349.99/oz | 2.0%
US$350.00/oz to US$374.99/oz | 3.0%
US$375.00/oz to US$399.99/oz | 4.0%
US$400.00/oz or higher | 5.0%

Sliding scale minimum quarterly advance royalty payments (the “Royalty Reserve”) of Cdn.$25,000 were due when the price of gold was equal to or less than US$275 per ounce, rising to Cdn.$150,000 per quarter if the price of gold exceeds US$375 per ounce. As all of the financial obligations of Minas de Oro Nacional and National Gold pursuant to the Asset Purchase Agreement, the Promissory Notes and the Debentures have been satisfied in full, the obligation to make the Royalty Reserve payments has ceased.

Alamos Minerals, National Gold, Bienvenidos and Minas de Oro Nacional entered into the Joint Venture Agreement, as amended and restated, pursuant to which Alamos Minerals acquired an option to earn up to a 50% interest in the Salamandra Property in consideration for:

(a)

paying the financial obligations of National Gold as they came due after the date of the Joint Venture Agreement under the Asset Purchase Agreement and all taxes or costs in connection with the Salamandra Property that came due after the date of the Joint Venture Agreement until Cdn.$875,000 has been paid in the aggregate, which amount included Cdn.$100,000 previously advanced by Alamos Minerals to National Gold;

(b)

using reasonable best efforts to obtain certain leach permits from the Mexican authorities not later than December 15, 2002;

(c)

incurring an aggregate of Cdn.$1,500,000 in connection with a pre-production program (the “Pre production Program”) within the later of 18 months from the date (the “Registered Operator Date”) that Alamos Minerals or a wholly-owned Mexican subsidiary thereof became the registered operator in connection with the Salamandra Property and June 14, 2004;

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(d)

completing the Pre-production Program with the purpose of obtaining sufficient information to demonstrate the economic feasibility of the Salamandra Property, within the later of 18 months from the Registered Operator Date and June 14, 2004;

(e)

paying to National Gold Cdn.$2,000,000 on or before the later of 48 months from the Registered Operator Date and June 14, 2004; and

(f)

assuming on a joint and several basis all further obligations in connection with the Asset Purchase Agreement and providing all security interests, charges and liens required to be provided to Tenedoramex and Kennecott.

On October 17, 2002, Alamos Minerals and National Gold entered into a letter agreement (the “October 2002 Letter Agreement”) pursuant to which Alamos Minerals agreed to provide a Cdn.$675,000 convertible loan (the “Convertible Loan”) to National Gold in order for National Gold to satisfy its obligation to contribute its proportionate share of a Cdn.$1,525,000 payment for direct acquisition costs due to Tenedoramex and Kennecott as of the date of the Letter Agreement in connection with the Joint Venture Agreement. As consideration for the Convertible Loan, National Gold issued a convertible note to Alamos Minerals convertible into 2,327,586 National Gold Shares for a period of 12 months. As additional consideration for the Convertible Loan, Alamos Minerals and National Gold agreed as follows:

(a)

Alamos Minerals was deemed to have completed its Cdn.$1,500,000 expenditure obligation on the Salamandra Property pursuant to the Joint Venture Agreement;

(b)

Alamos Minerals was deemed to have completed the Pre-production Program;

(c)

Alamos Minerals was entitled, at its sole discretion and control, to administer thereafter all programs referred to in the definition of “Social Costs” under the Joint Venture Agreement;

(d)

Alamos Minerals, and not National Gold, was entitled to charge the applicable 2.5% management fee in respect of such payments for “Social Costs” and would receive a credit against its required expenditures in the Joint Venture Agreement for such management fee;

(e)

National Gold was to provide Alamos Minerals with National Gold’s portion of all “Social Costs” to be paid; and

(f)

Alamos Minerals and National Gold agreed to a merger of the two companies.

On October 23, 2002, National Gold and Alamos Minerals entered into a letter agreement pursuant to which the parties agreed to merge to form the Company. Pursuant to the terms of letter agreement, every two outstanding common shares of Alamos Minerals were to be exchanged for one common share of the Company, and every 2.352 outstanding common shares of National Gold were to be exchanged for one common share of the Company. National Gold and Alamos Minerals subsequently entered into an Amalgamation Agreement dated December 16, 2002 that superseded the October 23, 2002 letter agreement.

On January 30, 2003, National Gold entered into a guarantee with H. Morgan & Company pursuant to which National Gold guaranteed (the “Guarantee”) the repayment of a Cdn.$5.7 million loan to Alamos Minerals, which loan proceeds were used to prepay in full the Debentures under the Asset Purchase Agreement. National Gold also entered into a general security agreement with H. Morgan & Company dated January 30, 2003 granting a security interest in its personal property as security for the Guarantee. As additional security, National Gold entered into a Share Pledge Agreement dated January 30, 2003 with H. Morgan & Company pursuant to which National Gold agreed to pledge its common shares of Minas de Oro Nacional to H. Morgan & Company. Albert Matter, a former President, CEO and director National Gold, entered into a Share Pledge Agreement dated January 30, 2003 pursuant to which Mr. Matter agreed to pledge the one common share of Minas de Oro Nacional held in his name for the benefit of National Gold as further additional security. Following the Amalgamation, this one share of Minas de Oro National was assigned to Chester Millar, a former director of the Company until November 14, 2003. Following the resignation of Mr. Millar from the board of the Company, this one share of Minas de Oro National was assigned from Chester Millar to John McCluskey, the President and CEO of the Company. The terms of the loan from H. Morgan & Company to Alamos Minerals are described under “Alamos Minerals – Operations and Activities, 2002 – 2003” below.

On February 21, 2003, National Gold and Alamos Minerals amalgamated to form the Company.

AIF - 11

Alamos Minerals – Operations and Activities, 2000 - 2003

During the last three years, Alamos Minerals was involved primarily in mineral exploration projects in Mexico.

In June, 1999 Alamos Minerals acquired an option to earn up to a 70% interest in the San Antonio Property in the State of Sonora, Mexico from, and in consideration for Alamos Minerals subscribing for 2,100,000 shares of, Laminco Resources Inc. (now known as Zaruma Resources Inc.), a publicly traded company listed on the Toronto Stock Exchange. Alamos Minerals was to earn its interest in the San Antonio Property by successfully completing a production scale metallurgical test on the property and incurring US$4,000,000 on exploration and development on the property over a 4½ year period.

During the summer months of 1999, Alamos Minerals drilled 50 short holes in one of the outcropping mineralized zones with the view to checking earlier drilling results, as well as accurately determining the stripping ratio for an open pit capable of producing 30,000 tonnes. Alamos Minerals then submitted permit applications for a bulk mining-leaching test program to the Mexican authorities at the end of 1999.

In the first quarter of 2000, Alamos Minerals established a 20,000 tonne leaching facility at the San Antonio project and by the end of the third quarter of 2000, had spent US$709,000 on the project.

Alamos Minerals experienced a problem with poor percolation in the heap and, with less than expected tonnages and grades amenable to open pit mining, Alamos Minerals subsequently decided to terminate its interest in the San Antonio project. All deferred costs were written off as of December 31, 2000. Alamos Minerals received an aggregate of US$69,504 in 2000 and US$146,474 in 2001 from the sale of gold obtained from the test leaching operations conducted on the San Antonio Property.

Alamos Minerals also had a 34.4% interest in certain other properties in Peru and Mexico which were written off in 2000.

Alamos Minerals then began seeking suitable exploration opportunities in Mexico, and in July, 2001, Alamos Minerals entered into a Letter of Intent with National Gold whereby the two corporations indicated their interest to merge. In October of 2001, Alamos Minerals and National Gold, terminated their merger plans, as the Directors of Alamos Minerals considered the proposed merger terms not be beneficial to Alamos Minerals at the time. The parties instead entered into the Joint Venture Agreement in respect of the Salamandra Property as more fully disclosed above under “Business Overview – National Gold Corporation – Operations and Activities, 2000 – 2003”.

In late 2001 and early 2002, Alamos Minerals conducted a small drilling program on the Mulatos deposit on the Salamandra Property designed to find and accurately identify a suitable quantity of near-surface ore that could be used for the an initial bulk mining leach test. Results indicated little near-surface mineralization.

On October 17, 2002, Alamos Minerals and National Gold entered into the October 2002 Letter Agreement pursuant to which Alamos Minerals agreed to provide a Convertible Loan (Cdn.$675,000) to National Gold in order for National Gold to satisfy its obligation to contribute its proportionate share of a Cdn.$1,525,000 payment for direct acquisition costs due to Tenedoramex and Kennecott in connection with the Joint Venture Agreement. Please refer to the section above entitled “National Gold – Operations and Activities, 2000 – 2003” for additional information regarding the October 2002 Letter Agreement.

On October 23, 2002, National Gold and Alamos Minerals entered into the letter agreement pursuant to which the parties agreed to merge to form the Company. Pursuant to the terms of the letter agreement, every two outstanding common shares of Alamos Minerals were to be exchanged for one common share of the Company, and every 2.352 outstanding common shares of National Gold were to be exchanged for one common share of the Company. National Gold and Alamos Minerals subsequently entered into the Amalgamation Agreement dated December 16, 2002 that superseded the October 23, 2002 letter agreement.

On January 31, 2003, Alamos Minerals borrowed Cdn.$5,701,000 from H. Morgan & Company (the “Loan”), which Loan is repayable in full on February 28, 2008. Interest is payable on the Loan at a rate of 12% per annum, and Alamos Minerals had the right to prepay up to 50% of the Loan on 30 days’ prior written notice. Alamos Minerals can prepay any amount of the principal of the Loan after January 30, 2005. The proceeds of the Loan were used to repay the Debentures issued pursuant to the Asset Purchase Agreement relating to the Salamandra Property. Alamos Minerals entered into a general security agreement with H. Morgan & Company dated January 30, 2003 granting a security interest in its personal property as security for the Loan. As additional security for the Loan, Alamos Minerals entered into a Share Pledge Agreement dated January 30, 2003 with H. Morgan & Company pursuant to which Alamos Minerals agreed to pledge its common shares of Bienvenidos to H. Morgan & Company. Chester Millar, the Chairman and President of the Company, entered into a Share Pledge Agreement dated January 30, 2003 pursuant to which Mr. Millar agreed to pledge the one common share of Bienvenidos held in his name for the benefit of Alamos Minerals as additional security for the Loan. Following the resignation of Mr. Millar from the board of the Company, this one share of Bienvenidos was assigned from Mr. Millar to John McCluskey, the President and CEO of the Company. Following the amalgamation of the Predecessor Companies, the Loan is now an obligation of the Company, as described under subsection “The Company – Activities Since February 21, 2003.”

On February 21, 2003, National Gold and Alamos Minerals amalgamated to form the Company.

AIF - 12

The Company – Activities Since February 21, 2003

On July 25, 2003 the Company engaged M3 Engineering and Technology Corporation (“M3 Engineering”) to complete an independent feasibility study at an approximate cost of US$500,000 to determine the feasibility of developing a mine capable of sustaining a rate of production of 100,000 ounces per year on the Salamandra Property and the Mulatos deposit thereon. The material information relating to the Salamandra Property is disclosed under Item 4.3 “Mineral Projects”. Although the Company hopes to complete the feasibility study in the first half of 2004, the timing of these activities are subject to, among other things, typical environmental and regulatory permits as well as the scheduling of third party consultants and contractors. As a result, the Company cannot say with certainty when the feasibility study will be completed. The design and costing of various components were underway and the mineable quantities of ore and waste were being calculated under various possible working conditions. A technical report dated May 19, 2004 has been completed by M3 Engineering entitled “Technical Report – The Estrella Pit Resource & Reserves, Mulatos Sonora Mexico and is referred to in this AIF. See Item 4.3 “Mineral Projects”.

On August 21, 2003 the Company completed a private placement of 8.5 million units of the Company at a price of Cdn.$1.45 per unit each unit consisting of one common share and one half of one share purchase warrant with each whole warrant exercisable at a price of Cdn. $1.75 to purchase one additional common share of the Company. The Company received net proceeds of approximately Cdn.$11,460,000 from the sale of the units.

The Company holds surface rights required for the development of the Mulatos, Escondida and El Victor deposits pursuant to the terms of the 1995 Surface Agreement, which contained a provision that permitted the Company to reduce the surface area leased and the annual lease payments to the Ejido Mulatos from approximately US$330,000 to US$53,000 with proper notice. The Company attempted to reduce the annual lease payment by providing notice to the president of the Ejido Mulatos and the notice was rejected. In August 2003, the Ejido Mulatos obtained a judgment from an Agrarian Court in Mexico in respect of a legal action in Hermosillo, Mexico disputing the annual surface rights lease payments due to them in respect of the Salamandra Property. The court ruled that the Ejido were entitled to be paid US $336,972 in the year 2002 and US $334,375 in the year 2003. The court denied their claim to void the 1995 Surface Agreement. The Company has appealed the decision and is of the view that it is entitled to reduce the leased area and yearly payments by providing proper notice. The appeal is still pending but further communications are underway with the Ejido to try to resolve the dispute.

Following the amalgamation of the Predecessor Companies, the Loan from H. Morgan & Company is now an obligation of the Company. Interest is payable on the Loan at 12% per annum. During the quarter ended September 30, 2003, the Company repaid 50% of the Loan and accrued interest and is entitled to prepay any amount up to the total amount of the principal of the Loan after January 30, 2005.

The Company has conducted approximately US$150,000 of exploration work during the last calendar quarter of 2003 on the Salamandra Property and up to a US$500,000 exploration program designed to quantify the amount of high-grade gold within the Mulatos deposit mineral resource (located on the Salamandra Property). As of December 31, 2003, the 15 hole drilling program was completed on the Estrella Zone of Mulatos and additional drilling is planned to commence on other significant targets of the Salamandra Property in 2004. The results of the 15 hole drilling program demonstrated significant intercepts of gold mineralization higher than the average grade of the deposit. See Item 4.3 “Mineral Projects” for further information on the drill hole composite results. The Company also plans to systematically test the entire Salamandra Property over a number of years.

On November 18, 2003, the Company received a letter from the British Columbia Securities Commission (“BCSC”), following a continuous disclosure review of the Company’s public disclosure documents. The Company has rectified the continuous disclosure deficiencies raised by the BCSC and has agreed to file a feasibility study or new technical report on its Salamandra Property in compliance with NI 43-101 following completion of the feasibility study by M3 Engineering and Technology Corporation. While the Company anticipates the feasibility study to be completed in the second quarter of 2004, the technical report on the Estrella Pit Resource and Reserves within the Mulatos Deposit of the Salamandra Property by M3 Engineering and Technology Corporation was completed on May 19, 2004 and has been filed on SEDAR.

On April 13, 2004, the Company completed a private placement of 10.0 million units at Cdn.$3.00 per unit, each unit consisting of one common share and one-half share purchase warrant, each whole warrant exercisable to purchase one additional common share at Cdn.$3.50 per share for a period of two years. The Company received net proceeds of approximately Cdn.$28,200,000 in connection with the private placement.

AIF - 13

3.2

Significant Acquisitions and Significant Dispositions

The Company was formed by the Amalgamation of Alamos Minerals and National Gold under the Company Act (British Columbia) (the “Company Act”) on February 21, 2003 with the resulting amalgamated company continuing under the name Alamos Gold Inc. The Amalgamation received shareholder approval of both Alamos Minerals and National Gold on January 24, 2003 and approval of the Supreme Court of British Columbia on February 4, 2003. Pursuant to the Amalgamation, 39,703,264 common shares of Alamos Minerals were exchanged on a two common shares of Alamos Minerals for one common share of the Company basis and 31,453,980 common shares of National Gold were exchanged on a 2.352 common shares of National Gold for one common share of the Company basis. A total of 33,224,923 common shares of the Company were issued under the Amalgamation.

As a result, the Company acquired all of the outstanding shares of National Gold by the issue of 13,467,795 shares of the Company valued at $8,000,000. The acquisition was accounted for by the purchase method of accounting as a purchase of National Gold by the Company. The operating results of National Gold are included in the consolidated statement of operations of the Company from February 21, 2003, the effective date of the acquisition.

The details of the assets and liabilities of National Gold acquired by the Company are set out under note 10 of the Company’s annual audited consolidated financial statements for the fiscal year ended December 31, 2003.

Alamos Minerals and National Gold have obtained a fairness opinion, the author of which has concluded that the Amalgamation was fair, from a financial point of view, to the shareholders of Alamos Minerals and National Gold. Neither Alamos Minerals nor National Gold have obtained any valuation opinion required under Canadian securities legislation or directives of a Canadian securities regulatory authority or a requirement of a Canadian stock exchange or other Canadian market to support the value of the consideration paid by Alamos Minerals for the shares of National Gold.

3.3

Trends

The Company is in the business of acquiring and exploring mineral properties. As of the date of this AIF, the Company’s main focus is on its Salamandra Property in the State of Sonora, Mexico, as described under Item 4.3 “Mineral Projects”. The Company may continue to negotiate and acquire additional mineral properties which may be located in Mexico and elsewhere. Also, depending upon the Company’s ability to continue to obtain necessary funding to conduct exploration activities on its mineral properties and results from its exploration activities, it may consider farming-out, disposing or abandoning any of these properties.

The financing and exploration and development of any of the Company’s properties is subject to a number of factors including the price of gold, laws and regulations, political conditions, currency fluctuations and hiring qualified people and obtaining necessary services in jurisdictions where the Company operates. The current trends relating to these factors are favourable but could change at any time and negatively affect the company’s operations and business. Please refer to Item 4 “Narrative Description of the Business” for risk factors affecting the Company.

Other than as disclosed herein, the Company is not aware of any trends, uncertainties, demands, commitments or events which are reasonably likely to have a material effect on the Company’s business, financial condition or results of operations.

4.

Narrative Description of the Business

4.1

General

The Company is in the business of acquiring, exploring and developing mineral resource properties principally in Mexico. The economics of developing mineral properties are effected by many factors, including the cost of operations, variations of grade of ore discovered, fluctuations in metal prices, goods and services, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting goods and services and environmental regulations. Depending on the price of minerals discovered and potentially mined, the Company may determine it is neither profitable nor competitive to acquire or develop properties, or commence or continue commercial production.

As of December 31, 2003, the Company had three full time employees: one full time employee in Vancouver who was the Chief Financial Officer of the Company (replaced by Jon Morda, the new Chief Financial Officer on February 12, 2004, who is located in Toronto), one full time employee in Toronto who was the President and Chief Executive Officer of the Company and one full time employee in Mexico, who was the Chief Operating Officer and Vice President. The Company employs additional full-time or part-time employees or consultants over the year to assist with the ongoing exploratory work at the Salamandra Property in Mexico.

The following is a brief discussion of those distinctive or special characteristics of the Company’s operations and industry which may have a material impact on, or constitute risk factors in respect of the Company’s future financial performance:

AIF - 14

The Company’s properties are located in Mexico and are subject to changes in political conditions and regulations in that country

The Salamandra Property, the Company’s principal project, is located in Mexico. In the past, Mexico has been subject to political instability, changes and uncertainties, which may cause changes to existing governmental regulations affecting mineral exploration and mining activities. The Company’s operations and properties are subject to a variety of governmental regulations including, among others: regulations promulgated by SEMARNAP, Mexico’s environmental protection agency; the Mexican Mining Law; and the regulations of the Comisión National del Aqua with respect to water rights. Mexican regulators have broad authority to shut down and/or levy fines against facilities that do not comply with regulations or standards. The Company’ mineral exploration and mining activities in Mexico may be adversely affected in varying degrees by changing government regulations relating to the mining industry or shifts in political conditions that increase the costs related to the Company activities or maintaining its properties. Operations may also be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety. Mexico’s status as a developing country may make it more difficult for the Company to obtain any required financing for its projects.

The business of exploration for minerals and mining involves a high degree of risk, as few properties that are explored are ultimately developed into producing mines

At present, the Company has not yet completed a feasibility study on the Salamandra Property and the Mulatos Deposit thereon. Unusual or unexpected formations, formation pressures, fires, power outages, labour disruptions, flooding, explorations, cave-ins, landslides and the inability to obtain suitable adequate machinery, equipment or labour are other risks involved in the operation of mines and the conduct of exploration programs. The Company has relied on and may continue to rely upon consultants and others for exploration and development expertise. Substantial expenditures are required to establish ore reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining. Although substantial benefits may be derived from the discovery of a major mineral deposit, minerals may not be discovered in sufficient quantities to justify commercial operations or sufficient funds required for development may not be obtained on a timely basis. The economics of developing gold, copper and other mineral properties is affected by many factors including the cost of operations, variations in the grade of ore mined, fluctuations in metal markets, costs of processing equipment and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection. The Company does not have producing mines at this time. Properties on which mineral reserves are not found will have to be discarded causing the Company to write each respective property off thus sustaining a loss.

Mexico is a developing country and obtaining financing or finding or hiring qualified people or obtaining all necessary services for the Company’s operations in Mexico may be difficult

The Company’s principal project is in Mexico which is a developing country and it may be difficult for the Company to obtain necessary financing for its planned exploration or development activities in Mexico. The Company also plans to hire some of its employees or consultants in Mexico to assist the Company conduct its operations in accordance with local laws in Mexico. The Company also plans to purchase certain supplies and retain the services of various companies in Mexico to meet its future business plans. It may be difficult to find or hire qualified people in the mining industry who are situated in Mexico or to obtain all of the necessary services or expertise in Mexico or to conduct operations on its projects at reasonable rates. If qualified people and services or expertise cannot be obtained in Mexico, the Company may need to seek and obtain those services from people located outside of Mexico which will require work permits and compliance with applicable laws and could result in delays and higher costs to the Company to conduct its operations in Mexico.

The Company is involved in ongoing legal action regarding annual lease payments related to its Salamandra Property

The Company holds surface rights pursuant to the terms of the 1995 Surface Agreement, which contained provisions that permitted the Company to reduce the surface area leased and the annual lease payments to the Ejido Mulatos from approximately US$330,000 to US$53,000 with proper notice. The Company attempted to reduce the annual lease payment by providing notice to the president of the Ejido Mulatos and the notice was rejected. The Ejido Mulatos commenced a legal action in Hermosillo, Mexico disputing the annual surface rights lease payments due to them in respect of the Salamandra Property and have made a claim to void the 1995 Surface Agreement. A decision was rendered in August, 2003 by the Agrarian Court in Mexico in favour of the Ejido on the payment issue on the basis that the Ejido were not correctly notified of the area and price reductions and ruled the Ejido were entitled to be paid annual lease payments of US$336,972 in 2002 and US$334,375 in 2003. The court denied the claim to void the 1995 Surface Agreement. The Company is of the view that it is entitled to reduce the lease area under the terms of the 1995 Surface Agreement by providing proper notice to the Ejido and reduce its annual lease payments to US$53,000. The Company is appealing the court’s decision regarding the payment award to the Ejido. The Company has paid the judgement amounts into court pending resolution of this matter. If the Company is unsuccessful in its appeal of this action, the funds paid into court will be released to the Ejido and the Company may be required to pay higher annual lease payments to maintain the surface rights to the Salamandra Property.

AIF - 15

If the Company is not able to comply with all Mexican laws and regulations, this could negatively impact current or planned exploration and development activities on its Salamandra Property

The Company's exploration activities are subject to extensive laws and regulations governing health and worker safety, employment standards, waste disposal, protection of historic and archaeological sites, mine development and protection of endangered and protected species and other matters. Specifically, the Company activities related to its Salamandra Property are subject to regulation by SEMARNAP, the environmental protection agency of Mexico, Comisión National del Aqua (“CAN”), which regulates water rights, and the Mexican Mining Law. A number of other approvals, licenses and permits are required for various aspects of mine development. The most significant permits for the development of the Salamandra Property, other than SEMARNAP approval, are permits to extract water from the Rio Mulatos and a blasting permit, issued by the Mexican Army, to purchase, store and use explosives. Obtaining and maintaining the necessary permits are critical to the Company’s business. Although the Company has obtained the blasting permit and the approval by the CAN of an agreement to acquire surface water rights, the Company is uncertain if all necessary permits will be maintained on acceptable terms or in a timely manner. Future changes in applicable laws and regulations or changes in their enforcement or regulatory interpretation could negatively impact current or planned exploration and development activities on its Salamandra Property or in any other projects that the Company becomes involved. Any failure to comply with applicable laws and regulations or failure to obtain or maintain permits, even if inadvertent, could result in the interruption of exploration and development operations or material fines, penalties or other liabilities.

The Company’s activities on the Salamandra Property are subject to environmental regulations

The operations of the Company are subject to environmental regulations promulgated by government agencies from time to time. Specifically, the Company activities related to its Salamandra Property are subject to regulation by SEMARNAP, the environmental protection agency of Mexico. Regulations require that an environmental impact statement, known in Mexico as a Manifesto Impacto Ambiental, be prepared by a third-party contractor for submittal to SEMARNAP. Studies required to support the Manifesto Impacto Ambiental include a detailed analysis of the following areas: soil, water, vegetation, wildlife, cultural resources and socio-economic impacts. The Company must also provide proof of local community support for a project to gain final Manifesto Impacto Ambiental approval. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards, and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.

The volatility of the price of gold could have a negative impact on the Company’s future operations

The commercial feasibility of the Company’s properties and its ability to raise funding to conduct its planned exploration projects is dependent on the price of gold and other precious metals. The price of gold may also have a significant influence on the market price of the Company’s common shares and the value of the Company’s properties. A reduction in the price of gold may prevent the Company’s properties from being economically mined or result in the write-off of assets whose value is impaired as a result of low gold prices.

The price of gold is affected by numerous factors beyond the Company’s control, such as the level of inflation, fluctuation of the United States Dollar and foreign currencies, global and regional demand, sale of gold by central banks and the political and economic conditions of major gold producing countries throughout the world. Recently the price of gold has partially recovered from a 20 year low. As of December 31, 2003, the closing price for gold was US$415.45 per ounce. The following table sets forth the average of the daily closing price for gold during the calendar periods indicated as reported by the London Metal Exchange:

| Year ended December 31
| 2003 | 2002 | 2001
Gold (US$ per ounce) | $364 | $310 | $271

AIF - 16

The Company is in competition with other mining companies that have greater resources and experience

The Company’s business is intensely competitive, and the Company competes with other mining companies, many of which have greater resources and experience. Competition in the precious metals mining industry is primarily for mineral rich properties which can be developed and produced economically; the technical expertise to find, develop, and produce such properties; the labour to operate the properties; and the capital for the purpose of financing development of such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a world- wide basis and some of these companies have much greater financial and technical resources than the Company. Such competition may result in the Company being unable to acquire desired properties, recruit or retain qualified employees or acquire the capital necessary to fund its operations and develop its properties. The Company’s inability to compete with other mining companies for these mineral deposits could have a material adverse effect on the Company’s results of operation and business.

The Company is subject to currency fluctuations that may adversely affect the financial position of the Company

The Company’s functional currency is the United States dollar, which has been subject to recent fluctuations. The Company operations are located in Mexico and many of its obligations are in pesos. The Company maintains its principal office in Canada, maintains cash accounts in U.S. dollars and Canadian dollars and has obligations in both U.S. and Canadian dollars. The currency exchange rate between U.S. dollars and Canadian dollars fluctuated between US$0.6197 to US$0.7342 for one Canadian dollar in 2003 and US$0.6200 (high) to US$0.6619 (low) for one Canadian dollar in 2002. As such, the Company’s results of operations are subject to foreign currency fluctuation risks and such fluctuations may adversely affect the financial position and results of the Company.

The Company is dependent on key personnel and the absence of any of these individuals could result in a significantly negative effect on the Company

The Company strongly depends on the business and technical expertise of its management and key personnel. There is little possibility that this dependence will decrease in the near term. As the Company’s operations expand, additional general management resources will be required, especially since the Company encounters risks that are inherent in doing business in several countries. The Company is dependent, in particular, on its President and Chief Executive Officer, John McCluskey and its Chief of Operations, John Van De Beuken. The Company has no written employment and/or consulting contracts with its President and Chief Executive Officer, John McCluskey or its Chief of Operations, John Van De Beuken but is in the process of negotiating employment or consulting agreements for each of these officers. Key man life insurance is not in place on Messrs. McCluskey or Van De Beuken. If the services of the Company’s management and key personnel were lost, it could have a material adverse effect on future operations.

There has been no bankruptcy, receivership or similar proceedings against the Company, or any voluntary bankruptcy, receivership or similar proceedings by the Company or the Predecessor Companies within the three years ended December 31, 2003 and from January 1, 2004 to the date of this AIF.

4.2

Issuers with Asset-Backed Securities Outstanding

Not applicable.

4.3

Mineral Projects

The Company is an “exploration stage company”, as all of the Company’s properties are currently in the exploratory stage of development. In order to determine if a commercially viable mineral deposit exists in any of the Company’s properties further geological work will need to be done and a final evaluation based upon the results obtained to conclude economic and legal feasibility.

The Company’s primary focus is on the Salamandra Property in the State of Sonora, Mexico.

Salamandra Property

The following information on the Salamandra Property has been extracted from a report (the “M3 Technical Report”) prepared for the Company by M3 Engineering and Technology Corporation (“M3 Engineering”) and entitled “Technical Report – The Estrella Pit Resource & Reserves Mulatos Sonora Mexico” dated May 19, 2004:

AIF - 17

Description and Location

Location

The Salamandra Property, which encompasses a total of approximately 12,834 hectares licensed for exploitation, 4,220 hectares licensed for exploration and 2,212 hectares for which an exploration license has been applied for, is located in the Sierra Madre Occidental mountain range in the east central portion of the State of Sonora, Mexico. The property is located approximately 220 km by air east of the city of Hermosillo, and 300-km south of the border with the United States of America.

Claims

The following list provides the name of the lot, the name of the holder, file, title, date of issuance of the title, the area of the concession and the date of the expiry of title that form part of the Mulatos Project. In the table below “Mon” refers to Minas de Oro Nacional.

Lot Name | Holder | File | Title | Date of Title | Expiration Date | Area in Has.
Poryecto Mulatos, Sahuaripa son. Exploitation Concession |  |  |  |  |  |
Alejandra | MON | 4/1.3/1632 | 217765 | 13-Ago-02 | 12-Ago-52 | 405.6606
Betty | MON | 321.1/4-700 | 191273 | 19-Dic-92 | 18-Dic-41 | 453.7237
Capulin 2 | MON | 4/2.4/01996 | 217556 | 16-Jul-52 | 15-Jul-52 | 12.0000
Carolina | MON | 321.1/4-701 | 191272 | 19-Dic-91 | 18-Dic-41 | 347.0000
Cont. De Virgencita | OCAÑA | 321.1/4-632 | 190634 | 29-Abr-91 | 28-Abr-41 | 100.0000
Cristina | MON | 321.1/4-704 | 191271 | 19-Dic-91 | 18-Dec-41 | 290.0000
El Jaspe | MON | 4/1.3/1611 | 209714 | 03-Ago-99 | 02-Ago-49 | 78.0000
El Marrano | MON | 4/1.3/2004 | 217518 | 16-Jul-02 | 15-Jul-52 | 434.0000
El Victor De Mulatos | MON | 82/6061 | 196110 | 23-Sep-92 | 22-Sep-42 | 18.0000
La Central | MON | 82/7157 | 196111 | 23-Sep-92 | 22-Sep-42 | 96.0000
La Central No. 1 | MON | 82/2310 | 196108 | 23-Sep-92 | 22-Sep-42 | 81.2560
Mirtha | MON | 4/1.3/1471 | 206755 | 12-Mar-98 | 11-Mar-48 | 470.3190
Nuevo Mulatos | MON | 82/0891 | 180600 | 13- Jul -87 | 12-Jul-37 | 30.0000
Salamandra Fraccion 1 | MON | 45/2.4/01966 | 212185 | 30-Ago-96 | 29-Ago-46 | 8,072.6559
Salamandra Fraccion 2 | MON | 4/2.4/01966 | 212186 | 30-Ago-96 | 29-Ago-46 | 1,161.5005
Salamandra Fraccion 3 | MON | 4/2.4/01966 | 212187 | 30-Ago-96 | 29-Ago-46 | 604.000
San Carlos | MON | 82/2289 | 196112 | 23-Sep-92 | 22-Sep-42 | 9.0000
San Lorenzo | MON | 4/1.3/1633 | 210493 | 08-Oct-99 | 09-Oct-49 | 60.0000
San Lorenzo | MON | 4/1.3/1739 | 211573 | 26-Jun-00 | 15-Jun-50 | 15.6160
San Miguel 2 | MON | 321.1/4-703 | 195438 | 14-Sep-92 | 13-Sep-42 | 20.2516
San Miguel 1 | MON | 321.1/4-702 | 191139 | 29-Abr-91 | 28-Abr-41 | 16.7056
Tequila | MON | 4/1.3/1470 | 206724 | 12-Mar-98 | 11-Mar-48 | 18.7440
La Estrella | MON | 4/1.3/1919 | 217206 | 25-Jul-02 | 24-Jul-52 | 40.0000
|  |  |  |  |  | 12,834.4329
Exploration Concessión |  |  |  |  |  |
El Carricito | MON | 82/19625 | 206895 | 03-Apr-98 | 02-Apr-04 | 2,176.8440
El Carricito 2 | MON | 82/26288 | 212507 | 31-Oct-00 | 30-Oct-06 | 100.0000
Cerro Pelon | MON | 82/26815 | 213670 | 08-Jun-01 | 07-Jun-07 | 500.0000
Cerro Pelon 2 | MON | 82/26914 | 214866 | 04-Dec-01 | 03-Dec-07 | 500.0000
Los Compadres | MON | 82/28236 | 218820 | 21-Jan-03 | 20-Jan-09 | 10.0000
Corboneras | MON | 82/28557 | 220715 | 30-Sep-03 | 29-Sep-09 | 801.3822
Corboneras 2 | MON | 82/28680 | 221518 | 19-Feb-04 | 18-Feb-10 | 132.0000
Ostimuri 1 | MON | 82/28803 | 2221082 | 7-May-04 | 6-May-10 | 482.6515
Corboneras 3 | MON | 82/28841 | In Process | In Process | In Process | 1,729.4533
Cerro Pelon 3 | MON | 82/27376 | 216744 | 28-May-02 | 27-May-08 | 368.0000
|  |  |  |  |  | 6,800.3312

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Nature and Extent

The mineral rights claims were issued by the Mexican Department of Economy, Direcion General of Mines (“SEMARNAP”).

Surface rights in the exploitation area are held privately and by the Mexican Government through the “Ejido Mulatos”. Ejidos are Agrarian land grants to a group of people. The Ejido residents may use or lease the land but they cannot sell it, only the Mexican Government Agrarian courts can do that.

The Company holds surface rights pursuant to the terms of an agreement (the “1995 Surface Agreement”) between Minera San Augusto and the Ejido Mulatos, which contained provisions that permitted the Company to reduce the surface area leased and the annual lease payments to the Ejido Mulatos from approximately US$330,000 to US$53,000 with proper notice. The Company attempted to reduce the annual lease payment by providing notice to the president of the Ejido Mulatos and the notice was rejected. The Ejido Mulatos commenced a legal action in Hermosillo, Mexico disputing the annual surface rights lease payments due to them in respect of the Salamandra Property and have made a claim to void the 1995 Surface Agreement. A decision was rendered in August, 2003 by the Agrarian Court in Mexico in favour of the Ejido on the payment issue on the basis that the Ejido were not correctly notified of the area and price reductions and ruled the Ejido were entitled to be paid annual lease payments of US$336,972 in 2002 and US$334,375 in 2003. The Company is of the view that it is entitled to reduce the lease area under the terms of the 1995 Surface Agreement by providing proper notice to the Ejido and reduce its annual lease payments to US$53,000. The court denied the claim to void the 1995 Surface Agreement. The Company is appealing the court’s decision regarding the payment award to the Ejido. The Company has posted a letter of credit into court pending resolution of the appeal.

The Company has hired an experienced Mexican company to see if the Ejido will agree to a “friendly expropriation” by the Mexican Agrarian court.

Besides the Ejido surface lease agreement, the Company is negotiating with private citizens and Ejido residents for private property rights. In the case of Ejido residents, their private property consists of constructed items such as houses, barns, etc.

The Placer Dome/Kennecott consortium (Minera San Augusto and Minas de Oro Nacional (then known as O.N.C. de Mexico S.A. de C.V.)) holds a net smelter royalty (N.S.R.) on the first 2,000,000 ounces of gold. The royalty starts at 3% up to $299 gold and increases to 3.5% at $300 to $324, 4% at $325 to $349, 5% at $350 to $374, 6% at $375 to $399, and 7% at $400 or higher.

The expiration date of each claim is listed in the table under subsection “Claims” above.

Environmental Liabilities

As described in subsection “History” below, the area was first discovered by European Jesuit priests in 1635. Considerable small and medium scale underground and placer mining occurred up to the Mexican revolution in 1917. Since then a number of companies have done exploration work.

The Mulatos River flows northward 1 ½ km. east of the Estrella pit eastern boundary. The pit eastern boundary is the high point of land and so the pit and mine dump area does not drain directly into the Mulatos River they drain naturally into the Mulatos wash. The Mulatos wash (Arroyo) does not flow continuously. It discharges into the Mulatos River several kilometers north of the mine. There is evidence in the Mulatos wash, which will form the pit northwest boundary of some acid drainage. About 70% of the Estrella pit is sulfide ore. Means have been established to contain acid water. These means include capping the waste dump during and after mining and dams and a 48” storm water bypass pipe through the area which will be disturbed. This pipe will bypass the upstream Mulatos wash storm water through the mining area.

The Ejido village of Mulatos lies on the west side of Mulatos wash ½ km. northwest of the Estrella pit. The village was established to serve the Mina Vieja Deposit; two portals of which are clearly in view from the village. The Mina Vieja outcrop was to be mined in the Placer Dome feasibility study. It is not in this Resource and Reserve Estimation and will serve as buffer to the village, being between the village and pit.

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Permit Lists

Required Construction and Operating Permits and Approvals

Permit/Approval Name | Approving Authority | Approval Status
Pre-Construction Period |  |
Land Use Agreement | Ejido Mulatos | Completed
Manifesto Impacto Ambiental | SEMARNAP - INE | Approved
Construction Water Well | Comision National del Agua (CNA) | Approved
Surface Use Change | SEMARNAP | Pending
Access Road | SEMARNAP - INE | Approved
Land for Mulatos Town Relocation | Ejido Mulatos, Municipality of Sahuaripa | In-progress
Mulatos Town Relocation | SEMARNAP - INE | Approved
Mulatos Town Access Road | SEMARNAP - INE | Approved
Transmission Line Right-of-Way | Local Landowners | In-progress
Power Transmission Line | INI, CFE | In-progress
Sand and Gravel Barrow Pit | Comision National del Agua | Approved
Clay Barrow Pit | SEMARNAP - INE | Approved
Access Road Right-of-Way | Local Landowners | In-progress
Access Road Construction Water Supply | Comision National del Agua Town of Yecora | Partial Approval
Equipment Importation Permit | Hacienda | In-progress
Pre-Operations Period |  |
Operations Water Supply | SIUE | Yes
Garbage Dump | SIUE | No
Camp Sewage Treatment Plant | Comision National del Agua (CNA) | No
Camp Water Supply | Comision National del Agua (CNA) | Approved
Air Quality Permit | SEMARNAP | No
Explosives Permit – Mine | SEDENA | Yes
Explosives Permit – Road Construction | SEDENA | Pending
Operations Period |  |
Closure Plan | SEMARNAP | No

Accessibility, Climate, Local Resources, Infrastructure and Physiography

Topography, Elevation and Vegetation

The project is located in rugged mountains in east central Sonora Mexico, just west of the Chihuahua border. The low project elevation is 950 meters at the Mulatos River, 1 ½ km. east of the Estrella Pit. Average project elevation is 1,400 meters with peaks rising to 1,700 meters. The higher elevations host ponderosa pine, the lower elevations shrubs and cactus.

The Means of Access to the Property

It is now 8 hours (380 kilometers) by road from Hermosillo Sonora the state capital. Road construction projects incorporated in this project will shorten the driving time to 6 ½ hours.

Highway #16 is narrow but paved from Hermosillo which passes south of the project. From the highway to Mulatos dirt roads are being improved.

Various small unpaved airstrips exist in the area. The nearest serviceable airstrip is 15 km. to the east at Matarachi.

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Proximity of Property to Population Center and Nature of Transport

The village is located ½ km. north east of the Estrella Pit. It was located close to and shielded somewhat from the Estrella Pit, by the Mina Vieja outcrop which was mined by underground means. The village has approximately 100 structures and a population of 300.

Matarchi is a slightly larger town with an airstrip located 15 km northeast.

The larger towns in the area are Yecora, population 10,000 4 hours drive, to the south and Sahuara population 7,000 3hours drive to the north. Both towns are within 100 km. of site but take approximately 3 hours to drive to.

Transport in the area is largely by “pickup truck”. The mine will have buses and accommodations for 50% of the workforce at a time. The other 50% will be on “offshift” or living in one of the surrounding communities.

Climate and Length Of Operating Season

From July to September, the air is humid and hot, typically 35°C. In this period called the “monsoon” over half of the average rainfall of 0.8 meters falls. The winter months are cooler and an occasional frost of -2°C occurs. None of this restricts the mining activities.

Sufficiency and Surface Rights

See subsection “Nature and Extent” above for a surface rights discussion. The problem is to find a flat enough surface to locate the heap leach pad area, as the terrain is mostly up and down. So the heap leach pad is located 2 km from the pit in a relatively flat area. The ponds and A.D.R. plant are located at the south end of the leach pad. Later an area on the north side of the phase I pad will be constructed.

Power will likely be produced on site by 5- 1000 KW diesel generators. Quotations have been obtained from the national government owned utility “C.F.E.” for a 115 kV line to Mulatos or in conjunction with other developing mines in the area. This approach is too expensive initially, but may be installed later.

The Company has purchased water rights. The water will come from the nearby Mulatos River and small local impoundments.

Skilled miners are available in Sonora. A minimum of expatriate supervisors are allowed for.

Mine waste pile disposal is centered on Mulatos wash. A continuous 2 km. long 48 inch pipe under the waste pile and damns bypasses runoff water from upstream undisturbed areas. The mine plans to resurface finished dump areas on a continuous basis, to minimize acid generation.

History

The Prior Ownership of the Property and Ownership Changes

Mulatos was first discovered in 1635 by Jesuit priests. The area saw considerable activity by various groups throughout the 1800’s and 1900’s. The owner of the first registered claim was Thomas Suza, in 1806. Succeeding owners include: N.Y. Ancheta and Ramon Bringas in 1821 and Mr. Ortese in 1863. In 1869, the property was bought by the Aguayo brothers. In 1887, they sold it to Hobart and Hayward of San Francisco, California. After a long lawsuit in 1980, the property was given to the Rey del Oro Mining Company and later transferred to Greene Gold Silver Company, which worked the claim until the Mexican Revolution in 1910.

Companies that have been interested in the district since 1960 include: Phillips Petroleum in 1962, Theodore A. Dodge in 1963, Cannon Hicks Associates in 1972, Tormex Developers in 1973, Explomin S.A. de C.V. in 1974 (formerly part of Minera Real de Angles), Homestake Mining Company in 1975, British Petroleum in 1982, Papanton Minas in 1984, and Kennecott in 1990.

Kennecott conducted exploration activities on the ground surrounding the Nuevo Mulatos and Tequila claims for many years. Their efforts focused on the El Victor- San Carlos area as well as the area immediately surrounding the Nuevo Mulatos claim.

Minera Real de Angles (“MRA”) acquired the Nuevo Mulatos claim in 1986 and carried out extensive exploration activities. MRA culminated their efforts with a pre-feasibility study in 1990. As part of that study, MRA calculated a lognormally kriged mineral resource of 15.5 Mt grading 1.83 g/t Au at a cut-off grade of 1.0 g/t Au.

Placer Dome acquired full ownership of the claims from MRA in 1993. Subsequently, Placer and Kennecott entered into a joint venture agreement covering the Mulatos deposit and 34,000 ha of surrounding land. Placer functioned as the developer and potential operator with a 70% interest.

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Empressa Minera Can-Mex, S.A. de C.V. (“Can-Mex”), a subsidiary of Placer International Exploration, Inc., undertook exploration work on the property from 1993 to 1999.

In 2001 National Gold, through its Mexican subsidiary Minas de Oro Nacional acquired a 100% interest in the Salamandra Property from Minera San Augusto, a Placer subsidiary, for cash and a sliding scale Net Smelter Royalty in favor of Minera San Augusto on the first two million ounces of gold. Alamos Minerals optioned 50% of the assets by being responsible for exploration and other expenditures.

In 2003, Alamos Minerals and National Gold merged to form the Company. The Company through its wholly owned Mexican subsidiary Minera de Oro Nacional owns 100% interest in the Salamadra Property.

The Salamandra Property consists of the Mulatos deposit and six satellite gold systems known as El Halcon, La Yaqui, Los Bajios, El Jaspe, La Dura and El Carricito.

This initial development is in the southern end of the Mulatos deposit called the Estrella pit. Immediately north and east of Estrella are the Viejo, Escondido, Gap and Victor Potential Pits.

Type, Amount, Quality and Results of Exploration

Within the area of the geologic model, 360 reverse circulation drill holes have been drilled to date. These include 119 holes by MRA, 69 holes by Kennecott and 172 holes by Placer Dome.

One hundred thirty four core holes have been drilled within the area of the geologic model. MRA drilled 11 core holes and Placer Dome drilled 110 core holes. The 110 holes by Placer Dome include 21 holes drilled for metallurgical test work, eight in 1994 and 13 in 1996. Seventeen of the Placer Dome core holes were logged for geotechnical information. The location of the core drill holes within the deposit area can be seen in the M3 Technical Report on Figure 13.2.

The Company has drilled 13 core holes from existing adits.

Type, Amount, Quality and Results of Exploitation

No accurate records are available for historic gold production from the Estrella pit area. MRA constructed two declines in the mid to late 1980’s in it.

Acquisition of the Salamandra Property

The information on the vendor of the Salamandra Property and consideration paid for the Salamandra Property by National Gold is disclosed under Item 3.1, subsection “National Gold – Operations and Activities, 2000-2003.”

Geologic Setting

General descriptions of regional and local geology were previously provided in the MRA pre-feasibility and the Placer Dome feasibility study. However, since that time major revisions have been made to the understanding of local geology and deposit genesis. Some of the first attempts to unravel details of the local geologic sequence was made by consulting geologist J. I. Lyons and is described in his report "Geology of the Mulatos Prospect, Sonora" dated March 8, 1993. More detailed investigations were made by J.M. Staude during the course of a University of Arizona Ph.D. thesis in 1994. Placer Dome Exploration (“PDX”) geologists made extensive revisions during the geological modeling process for the 1997 feasibility study, followed by a new geologic model resulting from geologic and exploration work completed in late 1997 and 1998. The geologic model resulting from the 1997 and 1998 revisions is believed to be the most accurate and current, and is being used for the 2004 Estimate.

Regional Geology

The Sierra Madre Occidental volcanic province is composed of two distinct packages of volcanic rocks, a lower early Oligocene (28 to 36 Ma.) group of predominantly andesitic volcanic rocks, and a younger Miocene (18 to 24 Ma.) group of bimodal rhyolitic to basaltic volcanic rocks. Paleozoic to Cretaceous-age sedimentary rocks and early Tertiary sediments are inferred to underlie the volcanic rocks at depth in the project area, but are not exposed at any location within the district. The sub-volcanic sedimentary package is well exposed along the road between the towns of Arivechi and Tarachi, however. Several large intrusive bodies of presumed mid-Tertiary age are present within the area, one near Matarachi and the other about 10 km north of Mulatos along the Rio Mulatos.

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Local Geology

The Mulatos deposit is a large epithermal, high sulfidation or acid sulfate, disseminated gold deposit hosted within a mid-Tertiary dacitic to rhyodacitic volcanic dome complex. Gold mineralization is closely associated with silicic and advanced argillic alteration occurring near the upper contact of a rhyodacite porphyry and in overlying dacite flows and volcaniclastic rocks. The deposit is located within a large area of hydrothermal alteration approximately three square kilometers in extent. Significant concealed mineralization was discovered below barren post-mineral rocks, however, suggesting the limits of the mineralized system may be greater than previously assumed.

Lithology

Volcanic rocks in the Mulatos project area consist of dacitic to rhyodacitic porphyry flows, volcaniclastic rocks, lithic to lithic crystal tuffs, and basalt flows. Significant changes have been made in the understanding of the stratigraphy of the volcanic succession hosting the Mulatos deposit since completion of the 1996 Placer Dome feasibility study, particularly involving the units in the northern portion of the deposit. Volcanic stratigraphy was previously assumed to be a normal stratigraphic sequence consisting of dacitic to rhyodacitic flows deposited in a volcanic dome complex overlain by post-mineral tuffs. A large intrusive hydrothermal breccia was believed to crosscut the dome complex rocks.

The breccia complex is now believed to be volcaniclastic material derived from partial erosion and destruction of the dome complex prior to deposition of the post-mineral volcanic units. The lower volcanic flow units are largely unchanged from the Placer Dome feasibility study interpretation and descriptions, but the upper units were found to be lateral equivalents of the same unit. One of the units previously thought to be post-mineral was also found to be one of the primary host rocks. The stratigraphy of the post-mineral volcanic rocks was also defined in an attempt to determine structural offset along faults, and predict depth to mineralization.

The lowest unit hosting mineralization in the deposit is a dacite porphyry (Tdf4), a composite unit of several lava flows and some volcanic sediment, with one or two minor pyroclastic intervals. It is overlain by a medium to coarse grained rhyodacite porphyry (Trf), one of two main host rocks for gold mineralization. The rhyodacite appears to be comprised of several distinct flows, with texture and mineralogy varying slightly between flows. It is largely intact in the southern portion of the deposit, but is thin to absent in the northern portion due to partial erosion and destruction of the dome complex. The rhyodacite porphyry is overlain by a another dacite porphyry unit (Tdf3) very similar in composition and texture to the lower dacite porphyry and only distinguishable on the basis of stratigraphic position. It is absent from the central deposit area due to erosion during subaerial exposure of the dome complex, but hosts significant mineralization in the southern portion of the deposit.

The dome complex appears to have been subject to a long period of erosion and possibly explosive destruction following deposition of the dacitic and rhyodacitic flow units. Host rocks for the northern portion of the deposit are comprised of fragmental volcaniclastic sedimentary rocks derived from erosion and partial destruction of earlier dome complex units (Tdf4, Trf, Tdf3). The fragmental rocks unconformably overly the dacitic and rhyodacitic flows, with over 300m of relief on the basal unconformity surface. Fragmental rocks are comprised of two predominant facies, a coarse-grained clast supported conglomeratic facies (Tpcg), and coarse to fine grained volcaniclastic sandstone (Tpqz). Gold mineralization is generally confined to the coarse grained facies. The fragmental rocks were previously interpreted as a breccia pipe, but textures within the breccia are frequently stratified, and no breccia roots are indicated by deep drill holes.

Table 9.1 is a summary of the main lithologic units present in the Mulatos deposit (youngest at the top of the table and oldest at the bottom).

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Table 9.1

Main Lithologic Units

Age | Unit | Name | Description | Mineralization
| | | | O L D E R | | | | | | \/ | Tvu | Undefined volcanic rocks | Comprised of felsic pyroclastic rocks and basalt flows located west of the Mulatos fault and north of the Estrella deposit; overly the Escondida zone. | Unmineralized
Tplt | Post Mineral Rhyolite tuff | Comprised of a rhyolite crystal tuff (rich in biotite) that unconformably overlies the altered and mineralized dome complex. | Unmineralized
Tpcg, Tpqz, Ttq | Volcaniclastic Fragmental Unit | Comprised of fine to coarse grained volcaniclastic fragmental rocks derived from erosion and partial destruction of the earlier dome complex rocks (Tdf4, Trf, Tdf3). Maximum thickness of this unit is 300m, in the northern portion of the deposit. | Major host of gold mineralization in the northern portion of the Mulatos deposit.
Tdf3 | Dacite Porphyry Flow | Similar to Trf, distinction is quartz is rare to absent. Up to 90m thick in the southern portion and removed by an erosional event in the central and northern area. | Significant gold mineralization in the Estrella is in the basal portion of Tdf3
Trf | Rhyodacite porphyry | Comprised of lava flows or dome-flow complexes, between 100 to 150m thick in the southern portion (Estrella) portion of the deposit. The unit includes an abundance of large di-pyramidal Quartz phenocrysts (<= 10mm) and is the only dome complex flow containing appreciable quartz. | Gold mineralization in the Estrella is predominately located along the upper contact of the Trf
Tdf4 | Dacite Porphyry | Lowest dacite flow, medium grained, Composite of several lava flows and some volcanic sediment with one or two minor pyroclastic intervals. | Minor gold mineralization
Ts | Andesitic Tuff | Sequence of stratified andesitic lithic lapilli tuffs | Locally copper rich

Structural Geology

Tilting and post-mineral normal faulting associated with late Tertiary extensional tectonics have affected both the mineralized flow dome complex and overlying volcanic rocks. Faults have been defined by surface and underground mapping as well as sectional interpretation. Three dominant structural trends are present in the project area. Primary mineralized structures are northwest trending in the Estrella deposit area, with high-angle southwest dips. Mineralized structures north and south of the Estrella portion of the deposit are northeast-oriented, with high angle to near-vertical dips. Post-mineral faults are dominated by the high-angle, north-south trending Mulatos normal fault and associated parallel structures, which down-drop stratigraphy and mineralization to the west. Other significant post-mineral structures include the northeast trending Escondida fault, which offsets the Mina Vieja mineralization, and the northwest trending San Francisco fault. Post-mineral faults result in the Mulatos deposit being down-dropped to the north in stair-step fashion.

Alteration

All lithologic units of the dome complex are intensely altered. Alteration assemblages are typical of high sulfidation deposits, and show zonation patterns from distal propylitic alteration to illite to kaolinite to dickite/pyrophyllite to pervasive and vuggy silica alteration. Gold is predominantly hosted within silicic alteration. Two periods of alteration and perhaps gold mineralization are suggested, as the fragmental unit contains clasts of varying alteration assemblages, plus is overprinted by strong silicic and/or argillic alteration.

Gold mineralization controls are both structural and stratigraphic. A series of northwest trending, en echelon structural zones is the primary control of silica alteration and higher-grade gold concentrations in the Cerro Estrella portion of the deposit, with important secondary stratigraphic control along flow boundaries and within coarse grained volcaniclastic fragmental rocks.

The altered and mineralized units are locally overlain by a thick section of unaltered volcanic rocks that are believed to be post-mineral in nature. Although the basal unit is locally argillized, clay mineralogy is low temperature, and altered intervals are barren of gold concentrations. The post-mineral units form a relatively thick sequence on to the northeast of the Mulatos deposit, and extend from Puerto del Aire to the El Victor area. Maximum thickness is 200m, but in general range from 0-150 m.

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Exploration

The area saw considerable activity by various groups throughout the 1800's and 1900's, with the majority of historic production attributable to Greene Consolidated Gold and Silver Mining Company in the late 1800’s. Gold production largely ceased during the Mexican Revolution in 1910.

Kennecott conducted extensive exploration activities on ground surrounding the Nuevo Mulatos and Tequila claims from 1991 through 1993. Their efforts focused on the El Victor/San Carlos area as well as the area immediately surrounding the Nuevo Mulatos claim.

MRA acquired the Nuevo Mulatos claim in 1986 and carried out extensive exploration activity thereafter, culminating their efforts with a pre-feasibility study in 1990.

Placer Dome acquired full ownership of the claims from MRA in 1993. Subsequently, Placer Dome and Kennecott reached a 70/30 joint venture agreement, covering the Mulatos deposit and 35,000 hectares of surrounding land, with Placer Dome as operator. Exploration work was conducted by PDX, a subsidiary of Placer Dome, and Can-Mex, a subsidiary of PDX. PDX conducted extensive exploration in the deposit area and reconnaissance exploration with limited drilling on the remainder of the land position from 1993 through 1996, which resulted in a feasibility study and a positive mine construction decision in 1997. Additional exploration work undertaken in late 1997 and 1998 resulted in the discovery of the Escondida deposit to the northeast of Mulatos, and additional mineralization between Escondida and the El Victor areas. Placer Dome suspended all exploration and development activities in the district in the second quarter of 1999.

In 2001 National Gold, through its Mexican subsidiary Minas de Oro Nacional acquired a 100 % interest in the Salamandra Property from Minera San Augusto, a Placer Dome subsidiary. In 2003 Alamos Minerals and National Gold merged to form the Company. The Company, through its wholly owned Mexican subsidiary Minas de Oro Nacional owns 100% interest in the Salamandra Property.

The Company drilled 13 underground core holes in the Estrella area in 2003 as part of its continued exploration activities on the Salamandra Property. The collection of geologic information continues in the Mulatos deposit and many of the satellite gold systems.

The resource model area of Mulatos has been explored using surface and underground geologic mapping, core and reverse circulation drilling, channel sampling and assaying of bulk samples taken during underground excavation. Table 12.1 summarizes the drilling information collected through the end of 2003.

Table 12.1

Drilling Summary

Company | Reverse Circulation Holes | Core Holes (Surface and Underground) | Other Drilling & Sampling
Assay & Logged | Metallurgical Sample | Geotechnical Logged
Minera Real de Angeles (MRA) | 119 | 11 | 0 | 0 | 0
Kennecott | 69 | 0 | 0 | 0 | 0
Placer Dome | 172 | 110 | 21 | 17 | 61
Alamos Gold Inc. | 0 | 13 | 0 | 0 | 0
Total | 360 | 134 | 21 | 17 | 61

Drilling

The Mulatos deposit has been drilled using both core and reverse circulation techniques. Table 12.1 summarized the drilling by type and company.

Data collection began with the geologists logging the drill holes on site. Reverse circulation holes were logged from chip trays containing representative samples collected from each sample interval. Geologists logged onto paper sheets. Logging included the notation of various aspects of lithology, alteration, and mineralization. Core drill holes were also logged onto paper sheets. Core hole logging was more detailed and included core recovery, RQD, lithology, structure, alteration, and mineralization.

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Drill hole geologic data from MRA's project is available as both basic graphic and descriptive logs, the majority of which have been translated into the Geology format. Kennecott logs are available as paper copies depicting graphic and descriptive information, and as digital Geology files. The majority of Kennecott and MRA reverse circulation sample chip trays are still available and are stored at the project site. They have been re-logged to conform to the currently understood stratigraphy and mineralization.

Prior to 1996, information from drill hole logs was compiled and entered into the Paradox database, then transformed into Geology type files. In 1996, drill hole geology and other information were input directly to Geology type files. As part of the re-modeling exercise, all holes were re-logged for rock types, alteration, and oxidation in the spring of 1996.

Additional information collected from the drilling included specific gravity samples and geotechnical logging. Density determinations were completed by Placer Dome on approximately 2,800 core samples. These samples were collected from a variety of rock, alteration, and oxidation types. Geotechnical data was collected under the guidance of Golder Associates Inc. during the 1994 and 1996 core drilling program. Geotechnical drill holes were treated the same as all other core holes with respect to geological logging and sampling. Additional geotechnical data as prescribed by Golder Associates Inc. was also collected.

Thirteen underground core holes were drilled by the Company from the Nopal, Cantil, and Nopalito adits during the fall of 2003. All core was logged on site with paper logs and entered as digital Geology files. The drill core was photographed using a digital camera and then cut and sampled on site. A one-half split for all core is archived on site.

Sampling Method and Approach

The drill holes and other sample collection have been done by four different exploration companies during the recent history of the Mulatos project, utilizing at least four different drilling contractors. Summarized below is the current understanding of the sampling protocol used for each company’s drilling and sample collection of information used to generate the resource and reserve estimate contained in the M3 Technical Report.

Minera Real de Angeles

The following is a brief synopsis of MRA's sample collection techniques as described in the MRA pre-feasibility report which was obtained from the June 1997 feasibility study of the Mulatos Project prepared by Placer Dome and M3 Engineering for National Gold.

Reverse circulation drilling was accomplished using a Drill Systems MPD-1000 truck-mounted rig. Samples were collected on 3 m intervals. In most cases holes were drilled dry down to a depth of 120 m. Below 120 m, water was injected to obtain a wet slurry sample. The entire 3 m sample weighting approximately 80 kg was collected in the cyclone on the drill. It was passed directly from the cyclone on the drill into a Jones type splitter. The sample volume was reduced by multiple passes through the splitter to ultimately obtain two samples weighing approximately 10 kg each. One sample was sent for assay analysis, while the second sample was retained and stored as an archive sample.

Core drill holes were sampled on 3 m intervals. In the early stages of MRA's core drilling program, the entire drill core was bagged and shipped for assay analysis. Later, the core was split; half was sent for assay, and the other half was retained for archive storage.

Kennecott

Other than sample length, specific techniques, procedures, and methodologies used by Kennecott are unknown. The reverse circulation cuttings from holes drilled by Kennecott were sampled on 5 ft (1.52 m) intervals.

Placer Dome

Drilling Techniques

Two different drilling contractors were used for reverse circulation drilling by Placer Dome during 1993-1994: Dateline Drilling of Landusky, Montana; and Drilling Services Inc., of Hermosillo, Sonora, Mexico. Both companies are U.S. based and used American drillers.

Dateline used a track-mounted type reverse circulation rig. This unit operated with a 900 cfm/350 psi compressor. Drill rods were 10 ft in length, and hole diameter was 4.5 inches. At various times Dateline had difficulties obtaining an adequate sample recovery volume. Also, they were unable to drill many of the strongly silicified zones, and geologists sometimes had to stop the hole short of planned depth. Ultimately, Dateline's contract was terminated in March 1994 due to problems with recovery and an inability to drill strongly silicified zones.

AIF - 26

Drilling Services Inc. used a Cyclone Model TH-100A truck-mounted rig utilizing a 750 cfm/250 psi compressor. Drill rods were 20 ft in length and hole diameter was 5.5 inches. Drilling Services was usually able to recover samples of adequate volume. They did have difficulty drilling some of the strongly silicified zones, particularly in the Buena Vista breccia. Several holes were stopped short of planned depths because of an inability to penetrate these zones.

Major Drilling Inc. and Layne de Mexico were contracted for diamond core drilling. Holes were collared with HQ diameter core, and, only if necessary due to hole conditions, were they reduced to NQ diameter.

Three drilling companies were involved in the 1996 drilling program. Reverse circulation holes were completed by Layne of Mexico (formerly “Drilling Services Inc.”) and Boytec Sondajes de Mexico. Both companies used Cyclone Model TH-100A truck-mounted rigs utilizing a 750 cfm-250 psi compressor. Core drilling was contracted to Major Drilling Inc. Holes were collared with HQ diameter core and were reduced to NQ diameter if necessary due to hole conditions.

Layne de Mexico conducted both core and reverse circulation drilling during the 1998 exploration programs. Core was drilled with HQ diameter size.

Sample Collection – Reverse Circulation Drilling (RC)

Reverse circulation cuttings from holes drilled by Placer Dome were sampled on 5 ft (1.52 m) intervals and handled using the following protocol:

*

In almost all instances holes were naturally dry, but water was injected during drilling to obtain a wet slurry.

*

The entire 5 ft sample was collected in the cyclone on the drill.

*

The entire wet sample was passed directly from the cyclone on the drill through a rotary splitter reducing volume to obtain a sample of approximately 10 to 15 kg. Sample cuttings and water passed directly from the rotary splitter into 5 gallon buckets. Afterwards, polymer was added, the sample was set aside, and allowed to settle for approximately 2 days. Clear water was then decanted. The remaining sample cuttings were bagged and shipped to Hermosillo for analysis.

The primary laboratory used for assaying of Placer Dome reverse circulation samples during 1993 and 1994 was SGS-XRAL Laboratories (“SGS-XRAL”) in Hermosillo. Check assays during this period were performed by Bondar Clegg in Vancouver, British Columbia, and Rocky Mountain Geochemical in Salt Lake City, Utah. During 1996, the primary laboratory used for assaying was Barringer Laboratory in Reno, Nevada, with check assays sent to the Placer Dome Research Center in Vancouver, British Columbia.

Sample Collection – Core Drilling

Core drilled by Placer Dome was logged and sampled at site. After completion of geological logging, measurement of core recovery, and collection of RQD information, geologists defined and labeled the intervals to be sampled. Core holes were consistently sampled on 5 ft (1.52 m) intervals with the exception of tops and bottoms of holes and intervals adjacent to missing samples. Skeleton core samples approximately 4 cm long were collected and saved for each 10 ft (3.05 m) interval down the hole. Skeleton core is stored at the project's core storage facility. Most of the core boxes were photographed prior to sampling; pictures are stored in Hermosillo, with copies available at the project site.

Core drilled prior to 1997 was not split. The entire core, minus skeleton core samples, was bagged by sample interval and shipped to the SGS-XRAL laboratory in Hermosillo for analysis. All core was cut on site during the 1997 and 1998 exploration programs, with one half split used for sampling, and the other split saved on site. Prior to April 1994, check assays were performed by Bondar Clegg laboratories in Vancouver, British Columbia. Beginning in April 1994, Rocky Mountain Geochemical, in Salt Lake City, Utah also performed check assays.

Core logging and sampling procedures in1996 were similar to those used in 1994, except that sampling intervals were based on geological contacts (rock types, alteration, and/or oxidation states), with 5 foot intervals as a standard sample length in rock types presenting similar characteristics. The entire core was bagged and shipped to the Placer Dome Research Center in Vancouver, British Columbia, for sample preparation, analysis, and metallurgical testing. Check assays and QA/QC procedures were performed internally by the Placer Dome Research Center.

Core logging and sampling procedures in 1997 and 1998 also involved sampling to geologic contacts, with five foot (1.5m) sample intervals being the standard length. A one-half split was sent to Barringer Laboratory in Reno, Nevada after the core was cut with a diamond saw.

AIF - 27

Sample Collection – Metallurgical Drill Holes

Metallurgical drill holes were processed at site in a similar manner to other core drill holes. Geologic logging, sample interval definition, measurement of core recovery and collection of RQD information collection was completed by geologists. All samples were bagged and shipped to Hermosillo. Samples were then loaded into 55-gallon barrels and shipped to the Placer Dome Research Center, in Vancouver, British Columbia.

Core samples from the 1994 campaign were sawed in half. One half was crushed and a split was analyzed for gold, silver, and 26 other elements. The rejects and the other half-core were then utilized for metallurgical test work. In 1996 the samples were first crushed to 1/2 inch, and then spilt using a Jones Riffle splitter in two halves. The first half was further reduced to minus 10 mesh and assayed for gold, silver, and copper. The second half was used for metallurgical test.

Sample Collection – Underground Channel Samples

Metallurgical samples were collected from three underground audits: El Nopal, El Cantil, and Buena Vista II. Channel samples were cut from the rib of the workings using pneumatic equipment. All sample intervals were 5 ft (1.52 m) in length. The work was contracted to COMYCSA, of Hermosillo, and was supervised by Can-Mex geologists. Sample intervals were described by geologists using a format similar to the drill hole logging techniques. Samples were bagged and shipped to Hermosillo, loaded into 55 gallon drums, and shipped to the Placer Dome Research Center, in Vancouver, British Columbia.

In 1996 additional channel samples were collected from the El Nopal, Nopalito, Cantil, Buena Vista I, Buena Vista II, San Francisco, El Salto, Escondida, and Hule underground workings. Channel samples were cut from the rib of the workings using pneumatic equipment. All sample intervals were 1.5 m in length. The work was contracted to Construcciones Tres Hermanos of Sahuaripa, Sonora, and was supervised by Can-Mex geologists. Sample intervals were merged with the Geology files created from the 1996 underground re-mapping exercise. Samples were bagged and shipped to Barringer in Hermosillo for sample preparation. Each entire sample (20-40 kg) was crushed to minus 10 mesh. A 1-kg split was fine crushed to minus 150 mesh before assay on a 30-g aliquot was performed (Au, Ag and Cu). Assaying was performed by Barringer Laboratory in Reno, Nevada.

The Company

Drilling Techniques

Underground core drilling was conducted in the fall of 2003 by Layne de Mexico, located in Hermosillo, Sonora. A Hagby Electric Short Feed Frame underground drill was used, with NQ size core. No hole reductions were necessary. A combination of Canadian and Mexican national drillers were used.

Sample Collection – Core Drilling

Core was logged and sampled at site. After completion of geological logging, measurement of core recovery, and collection of RQD information, geologists defined and labeled the intervals to be sampled. Core holes were consistently sampled on 5 ft (1.52 m) intervals with the exception of tops and bottoms of holes and intervals adjacent to missing samples. All core was cut on site with a diamond saw, with one half split used for sampling, and the other split saved on site. All core was digitally photographed prior to sampling.

The split core was bagged by sample interval and shipped to the BSI Inspectorate sample prep lab in Durango, Mexico, and with pulps being sent to Reno, Nevada for analysis. The Company’s QA/QC protocol included the submission of standards and blanks every 20th sample, and utilized the same standards and procedures as used for the Placer Dome 1996-1998 drilling programs.

Sample Preparation, Analyses and Security

The methods used to collect the samples on the property are discussed in subsection “Sampling Method and Approach” above. This section presents the assay laboratory protocol.

Laboratory protocols and analytical methods used by SGS-XRAL (Hermosillo) and Barringer (Reno) Laboratories are outlined below.

In March and April 1994, a review of SGS-XRAL laboratory procedures was undertaken by various Placer Dome people as well as a consulting chemist. Based upon recommendations from those people, SGS-XRAL laboratory procedures were changed in May 1994. The following sections describe the procedures prior to and after May 1994, as well as 1996 Barringer Laboratory procedures.

AIF - 28

Prior to May 1994, SGS-XRAL prepared samples according to the following protocol:

*

Samples were sorted, and then dried at 110°C.

*

The entire sample was jaw crushed to minus 1/4 inch.

*

The resulting sample was riffle split until a 1-kg sample was retained. The remaining sample was saved as a coarse reject.

*

The 1-kg sample was pulverized to minus 200 mesh using a mixer-mill pulverizing/homogenizing bowl and puck system. This sample was assayed as described below under Analytical Methods.

*

Every tenth 1-kg sample was riffle split to form a second pulp, which was assayed as a duplicate assay.

Beginning in May 1994, SGS-XRAL prepared samples in the following fashion:

*

Samples were sorted, and then dried at 110°C.

*

Samples were then jaw crushed to minus 1/4 inch. In the case of core, samples were further disc ground to minus 10 mesh.

*

The resulting sample was riffle split and a 1.5-kg sample was retained. The remainder of the sample was saved as a coarse reject.

*

The 1.5-kg sample was pulverized to minus 200 mesh.

*

This 1.5-kg pulp sample was riffle split. One half of the sample was bagged and used for SGS-XRAL assays. The second half was riffle split four ways and then bagged to form four separate pulp samples. The four extra samples were either stored as spare duplicates at the Can-Mex warehouse facility or used for check assays.

All 1996 reverse circulation and underground channel samples were sent to Barringer Laboratories. Sample preparation of channel samples sent to Barringer is described above and will not be repeated here.

*

Samples were sorted, and then thoroughly dried at 110°C.

*

Samples were then crushed using combination of jaw and roll mill to 70% passing minus 40 mesh.

*

The resulting sample was riffle split and a 0.3-kg sample was retained. The remainder of the sample was saved as a coarse reject.

*

The 0.3-kg sample was pulverized to minus 150 mesh with a ring and puck pulverizer. Clean sand was employed between each sample to clean the pulverizer.

*

This 0.3-kg pulp sample was sent to Barringer Laboratory in Reno, Nevada for assaying. The rejects were returned to Can-Mex and stored as spare samples at the Can-Mex warehouse facility.

As part of the sulfide sulfur modeling program, a total of 6,068 sulfur analyses were performed. Samples consisted of pulp composites from contiguous sample intervals (drill holes or channel samples). Original pulps were sent to Barringer for compositing and assaying. The compositing procedures were as follows:

*

Individual original pulps were first homogenized by rolling;

*

Approximately 10 g of material was split from each individual pulp sample;

*

Four different interval splits forming the composite were mixed together and homogenized; and

*

An aliquot was collected from the composite sample for assaying.

SGS-XRAL performed gold fire assays with an atomic absorption finish for all samples. For most samples a 50-g aliquot was used. Prior to May 1994, for all samples with a resulting assay equal to or greater than 10 g/t Au, a second aliquot of pulp was taken to produce a fire assay with a gravimetric finish. Beginning in May 1994, the threshold for a re-assay with gravimetric finish was changed to 5.0 g/t Au.

AIF - 29

Samples with gold assays greater than 0.50 ppm were assayed for cyanide soluble gold and copper (CNSAu and CNSCu) using the following methodology:

*

Twenty grams of sample pulp was leached with 40 ml of 2.0% NaCN solution;

*

The solution/slurry was shaken manually every 20 minutes during a 2 hour leach period;

*

pH of the solution was monitored and adjusted to remain within the range of 9.5 to 10.5;Gold concentration in the cyanide solution was determined by atomic absorption spectroscopy with a detection limit of 0.05 ppm; and

*

Copper concentration was determined by atomic absorption spectroscopy of the same solution with a detection limit of 5 ppm.

In 1995 an extra set of 1403 samples were sent to Min-En to complete the CNSAu and CNSCu database. The procedures were identical to SGS-XRAL except for the shaking occurred continuous during the 2 hour leach period.

Total copper and silver analyses were performed by SGS-XRAL using perchloric acid and nitric acid digestion of a 0.2-g sample. The acid solution was diluted with de-ionized water and mixed. The concentration of metal ions was determined by atomic absorption spectroscopy. Copper and silver were determined using an air acetylene flame.

All 1996 samples were assayed by Barringer. Fire assays with an atomic absorption finish was the standard assaying procedure for gold and silver. For all samples a one assay-ton aliquot was used. All samples with a resulting assay equal to or greater than 3 g/t Au were re-assayed using a fire assay with a gravimetric finish. Barringer carried a systematic QA/QC procedure on all batches of samples sent to their Reno, Nevada laboratories. Every tenth sample was repeated and for every 20 samples run, a standard or blank was also analyzed. Total QA/QC samples represented approximately 15% of all samples assayed.

Total copper analyses were performed by Barringer using multi-acid digestion of 1 g of pulp sample. The acid solution was diluted with de-ionized water and mixed. The concentration of metal ions was determined by atomic absorption spectroscopy.

Sulfide sulfur analyses were performed by Barringer using an induction type furnace made by LECO, a type of sulfur analyzer. Two analyses are conducted to get the three results of total, sulfide, and sulfate sulfur analyses. Sulfur is first volatilized at 3000°F with Fe and W compounds used as accelerator . The volatilized sulfur is carried by a stream of O2 into an IR detector to measure the amount of sulfur by voltage reading. Calibration is done using a standard between every sample string (usually 20 samples). The second analysis starts by roasting the sample at 1400°F to burn off the sulfide sulfur leaving only the sulfate sulfur. The roasted sample is again put in the LECO furnace. The new result is subtracted from the first to get the sulfide sulfur. Approximately 10% of the samples run though the LECO represented QA/QC samples.

Data Verification

A study of check assay data was completed by FSSI International Consultants Inc. (“FSSI”). The following is summarized from that study.

Prior to May 1994, 10% of the samples were sent to Bondar Clegg for check assays. Beginning in May 1994, 20% of the samples were sent to Bondar Clegg and to Rocky Mountain Geochemical for check assays. A total of 2,949 pulp samples were sent to Bondar Clegg and a total of 2,147 pulp samples were sent to Rocky Mountain Geochemical.

In July 1994, FSSI performed a preliminary check assay study making recommendations for further work. FSSI's study revealed that the SGS-XRAL assays made prior to May 1994 were 5 to 10% higher than the Bondar Clegg check assays. These assays were called the "Phase 1" assays. The study also showed that samples in the range below 0.5 g/t Au were as much as 20% higher than the Bondar Clegg check assays. FSSI also determined that the SGS-XRAL assays from May 1994 onward agreed favorably with check assays from Bondar Clegg and Rocky Mountain Geochemical laboratories. FSSI also pointed out that there were insufficient gravimetric check assays for higher grade samples to make good statistical comparisons. FSSI recommended that all samples analyzed gravimetrically by SGS-XRAL prior to May 1994 be sent for re-assay.

As a result of FSSI's recommendations, Can-Mex sent 790 sample pulps (all samples from SGS-XRAL with assays greater than or equal to 4.0 g/t) for check assaying by Bondar Clegg and Rocky Mountain Geochemical. In October 1994, FSSI reviewed these higher grade check assay results statistically and determined that there were no significant discrepancies among the three laboratories for samples in this grade range.

In 1996, further studies were completed on the Phase 1 assays and a major re-assay program was completed.

AIF - 30

MRA Check Assays

Check assays for the MRA assays were done at four assay labs in 1988; Comision de Fomento Minero (“CFM”) in Hermosillo, Sonora; Skyline Labs in Tucson, Arizona; Cortez Mines in Nevada; and the Placer Dome Research Center in Vancouver, British Columbia. A summary of the 1988 laboratory results for the MRA check assays is presented in Table 16.1.

Table 16.1
Comparison of 1988 MRA Check Assay Results

Laboratory | Number of Assays | Correl. Coef. | Regression Equation
CFM - CFM | 84 | 0.98 | Cfm=(0.96*cfm)+0.02
CFM - Skyline | 105 | 0.79 | Sky=(0.64*cfm)+0.53
CFM - Cortez1 | 108 | 0.82 | Ctz1=(0.62*cfm)+0.49
CFM - Cortez2 | 100 | 0.81 | Ctz2=(0.62*cfm)+0.51
CFM - Placer | 104 | 0.81 | Pdi=(0.69*cfm)+0.48

Although the CFM check assays appear to be acceptable, the assays from the other labs show a systematic bias of 15% to 20% lower than the original CFM assay. The assay protocol for the 1988 check assays is not known.

In 1989, an additional 306 samples were sent to the Placer Dome Research Center for check analyses. Although the regression analysis performed in 1989 showed that "a high degree of confidence" could be placed in the assays, the relative difference plot in Figure 16.1 of the M3 Technical Report shows a systematic bias between 5 and 10% for the data corresponding to the inner quartile range. It should be noted, however, that the Placer Dome assays consisted of two fire assays of the minus 150 mesh fraction. The average of the two was used. Thus, the Placer Dome assays do not include the plus 150 mesh gold fraction. Studying the MRA lab data sheets indicated that an average of 8.0% of the MRA gold assay came from the plus 150 mesh fraction (the assay protocol is discussed further below). Taken in this context, it is probable that the 1989 check assays done by Placer Dome are biased low by only 2%, a level that is acceptable.

Kennecott Check Assays

Check and duplicate assay data for some of the Kennecott drill holes was reviewed. These data came only from the work completed by Kennecott in 1993. Earlier check assay data was not available. A total of 90 check assays and 401 duplicate assays comprise the data. The original Kennecott assays were completed at Rocky Mountain labs in Salt Lake City, Utah, and the check assays were done at Skyline Labs in Tucson, Arizona.

The check assays show good agreement with a correlation coefficient of 0.99. The mean and median of the check assays are -3.5% and -2.1% of the original assay, respectively, but the relative difference plot does not show any systematic bias. Duplicate assays also show good agreement with a correlation coefficient of 0.92 and percentage differences at the mean and median of 1.87% and 4.0%. The relative difference plot for the duplicate assays shows local high grade bias to the duplicates. Although there appears to be a slight bias for the duplicate assays, the check assays compare well. Thus, the 1993 Kennecott data is of acceptable quality.

1996 Drilling Quality Control and Check Assays

During the 1996 northern extension drilling program, blind standard and blank samples prepared by the project staff were included with each sample shipment to Barringer Labs. If the standard assay was higher than one standard deviation of the expected value of the standard, the sample batch was sent for re-assay. Thirteen sample batches required new assaying.

In addition to the standards and blanks, 213 pulps from the new drilling (approximately 5% of the samples) were sent to the Placer Dome Research Center for check assays. The assays compare well with a correlation coefficient of 0.99 and percent difference at the mean and median of 2.2% and 2.0%, respectively. These statistics and the relative difference plot show that the check assays of Placer Dome Research Center are systematically higher grade than the original Barringer assay by approximately 2%. This difference is insignificant and the assays from the 1996 drilling should be considered good quality.

2003 Drilling by the Company

The Company drilled 13 underground holes in 2003. A discussion of the collection of the samples, security, sample preparation and check assays is presented here.

AIF - 31

Core was collected daily from the underground drill site by the site geologist and brought to the secure core logging and storage area. All core storage facilities are locked when not being used by geologic personnel. Core was logged on site, using paper logs with later entry into digital Geology format. Logging included descriptions of lithology, alteration, and oxidation type as well as core recovery, RQD, and fracture orientation. After completion of geological logging, geologists defined and labeled the intervals to be sampled, along with marking cut lines on the core. Core holes were consistently sampled on 5 ft (1.52 m) intervals with the exception of tops and bottoms of holes and intervals adjacent to missing samples. All core was digitally photographed prior to sampling, and then cut on site with a diamond saw. One half split was used for the sample, and the other split returned to the box and archived on site. Plastic sample bags were sealed after filling, and then placed in large sealed plastic bags for transport to Hermosillo. Samples awaiting shipment were kept in a locked facility.

Core samples were driven to Hermosillo by company personnel and shipped to the BSI Inspectorate sample prep lab in Durango, Mexico. The BSI Durango lab crushed, split, and pulverized the sample prior to sending a representative pulp to their Reno, Nevada facilities. The Company’s QA/QC protocol included the submission of standards and blanks every 20th sample, and utilized the same standards and procedures as used for the Placer Dome 1996-1998 drilling programs. Assay results were received electronically and by certified hard copy assay certificate. Rejects are currently in the BSI Durango facility, whereas the split core is stored on site in a secure facility.

The resource model for this report was constructed by an independent consultant, Resource Modeling Inc. (“RMI”). The discussion of the drill data transfer and additional checking completed by RMI are included in section “Mineral Resource and Reserve Estimate” below.

Mineral Resource and Mineral Reserve Estimates

The resource model for the Estrella area of Mulatos was developed by RMI (specifically, by Mike Lechner, R.G.). The drill hole, geologic and topographic information was provided to RMI by the Company for the resource estimate. RMI did many checks on the data prior to making a resource estimate.

The Mulatos drill hole database contains information that was collected by four companies: MRA, Kennecott, Placer Dome , and the Company. Approximately 60 percent of the drill hole data were collected by Placer Dome during their involvement with the project from 1993 to 2000. Most of the MRA data are located within the main Mulatos deposit while a significant number of the Kennecott drill holes are located in the El Victor area northeast of the main Mulatos deposit.

In addition to drill hole assay data, other key information such as topography, density, geotechnical, and metallurgical information were collected by Placer Dome and used in this study. Placer Dome’s last geologic interpretation of lithology, alteration, and oxidation were used in developing a resource model. These geologic units were used primarily for specific gravity and ore type assignments.

About 30 percent of the drill hole database consists of diamond drill core data and around 60 percent of the database is comprised of reverse circulation drilling data (see Table 12.1). The air track drill holes and underground muck samples were not used to estimate gold, silver, or copper grades. The underground channel samples only represent about two percent of the data that were used to estimate mineral resources.

RMI reviewed the assay check work and analysis completed by Placer Dome and its consultant FSSI. RMI came to the conclusion that some of the assays in the database needed to be adjusted. Assays from a portion of the 1988 MRA and 1996 Placer Dome – Phase 1 program were adjusted based on a statistical review of check assays that were completed for those drilling programs. Assays from 78 drillholes totaling about 6,300 m of drilling were factored downward. The mean grade for this data was reduced by about 8 percent. Table 19.17 summarizes the results.

AIF - 32

The Estrella deposit contains five ore types defined as oxide, mixed and sulfide with the mixed and sulfide ore types further sub-divided into silicified and non-silicified. Each ore type has different gold recovery and different leaching costs, thus there is a different gold cutoff grade for each ore type. A ‘net of process’ value was calculated for each mineralized block in the resource to simplify both the evaluation of the economically recoverable portion of the resource and the reporting of the reserve. The net of process value is: (gold grade x gold recovery x gold price) – (process fixed costs + lime consumption x price + cyanide consumption x price + G&A costs). Table 19.39 presents the economic parameters used for defining the Estrella pit limits. Table 19.40 shows the gold recovery by ore type used to defined the mineable reserves and Table 19.42A shows how the processing costs vary by ore type.

Table 19.39

Economic Parameters for the Estrella Pit Definition

Mining Cost per Total Tonne | $0.80 plus lift cost
Additional Mining Cost for Haulage below 1302 Bench
| $0.005 per bench
Fixed Process Costs: Oxide and Mixed ore types Sulfide ore types | $1.67/tonne processed $1.87/tonne processed
Liner Cost | $0.49/tonne processed
G&A Cost | $0.71/tonne processed
Cyanide Unit Cost Lime Unit Cost | $1.40/kg $0.075/kg
Cyanide and Lime Consumption Rates | Variable by ore type
Gold Recovery | Variable by ore type
Royalties | None
Gold Price, base case Sensitivities | $350/oz $100/oz to $400/oz
Silver Price, silver not included in pit definition economics
| $0.00
Overall slope angle | 45 degrees

Table 19.40

Gold Recoveries

Ore Type | Overall Recovery
Oxide | (0.988 – (0.027/gold grade))
Mixed, silicified and non-silicified | (0.909 – (0.131/gold grade))
Sulfide, silicified and non-silicified | (0.734 – (0.098/gold grade))
Sulfide in north zones | (0.634-(0.098/gold grade))
High Copper ore type | No gold recovery assigned

Table 19.42A

Process Costs by Ore Type

Ore Type | Fixed Process $/t | Liner Cost, $/t | Cyanide | Lime | Total Cost, $/t
Consume Kg/t | Cost $/t | Consume Kg/t | Cost $/t
| Oxide | 1.67 | 0.49 | 0.15 | 0.21 | 6.0 | 0.45 | 2.82
| Mixed, non-silicified | 1.67 | 0.49 | 0.20 | 0.28 | 6.0 | 0.45 | 2.89
| Mixed, silicified | 1.67 | 0.49 | 0.18 | 0.25 | 6.0 | 0.45 | 2.86
| Sulfide, non-silicified | 1.97 | 0.49 | 0.31 | 0.44 | 7.0 | 0.52 | 3.42
| Sulfide, silicified | 1.97 | 0.49 | .015 | 0.21 | 7.0 | 0.52 | 3.19

AIF - 34

An open pit was designed from the floating cone geometry based on $350/oz gold and the economic parameters presented in Table 19.39. The final pit is designed using 6m bench heights. The pit is approximately 800 meters north-south and 475 meters east-west. The maximum wall height is 264 meters and the pit bottom elevation is 1098. Table 19.47 shows the open pit reserves at the internal cutoff grade using the net of process variable. The internal cutoff grade is that grade that covers the process and general and administrative costs and recovery losses. The range of this cutoff on a gold cutoff basis at $350/oz gold and the assumed costs and recoveries range from a low of 0.34 g/t gold for the oxide oretype of the reserve to a high of 0.63 g/t gold in the silicified sulfide oretype.

Table 19.47
Summary of Estrella Pit Reserve
(at Internal Cutoff Grade)

| Proven | Probable | Proven + Probable
Ore Type | KT | Au (g/t) | KT | Au (g/t) | KT | Au (g/t)
Oxide | 357 | 1.13 | 2,658 | 1.07 | 3,015 | 1.08
Mixed, Non-silicified | 192 | 1.66 | 1,071 | 1.51 | 1,263 | 1.53
Mixed, Silicified | 1,911 | 1.82 | 6,126 | 1.56 | 8,037 | 1.62
Sulfide, Non-silicified | 1,536 | 1.56 | 7,307 | 1.42 | 8,843 | 1.44
Sulfide, Silicified | 3,489 | 1.98 | 12,871 | 1.74 | 16,360 | 1.79
Total | 7,485 | 1.80 | 30,033 | 1.56 | 37,518 | 1.61
Total Pit Tonnage = 87,937 KT

The mineral resource estimate can be affected by many issues including, without limitation, the following:

1.

The price of gold has been and is unstable. The estimate used in the M3 Technical Report was based on the gold price of U.S.$350 per ounce.

2.

The amount of gold that can be extracted and refined depends on accuracy of drilling results and the estimated metallurgical recovery. This deposit is characterized as about 70% Sulfide type ore, which is typically more difficult to get good metallurgical recovery from.

3.

The surface rights are on lease from the Ejido Mulatos. A “Ejido” is a cooperative group of people which have received a land grant from the Federal Mexican Government. Ejido’s are difficult to deal with. The Company is endeavoring to have the Mexican Government carry out a “Friendly Expropriation” of land and then to sell it to the Company.

4.

The ore contains sulfides which can produce Acid Mine Drainage (A.M.D.). The Company will take measures to minimize the amount of acidic water produced. However some acid water is already being produced from old workings in the area.

5.

The Ejido village is ½ kilometer from the planned pit. Although the Company has obtained all necessary permits, there is still a risk the town is too near.

Planned Exploration on the Salamandra Property

M3 Engineering recommends completion of a feasibility study which may result in a development decision now for the Estrella Pit portion of the Mulatos Deposit at an ore production rate of 10,000 metric tones per day.

M3 Engineering also recommends that a drilling program for the rest of the Mulatos deposit and the most promising of the seven surrounding deposits should be planned, to fill in the more promising areas. If additional reserves are developed, they can be mined and processed by the facilities recommended for the Estrella Pit, after its reserves are exhausted.

AIF - 35

Other Properties of the Company

The Company, through its subsidiaries Durango and La Fortuna, also owns a 100% interest in the La Fortuna property in the State of Durango, Mexico, which is comprised of three mineral concessions and covers approximately 606 hectares. Alamos Minerals did not conduct any exploration work on this property after 1998, and during its fiscal year ended December 31, 2000, Alamos Minerals reduced the size of its property interest in the La Fortuna property to its current size of 606 hectares allowing certain mining claims to lapse. Accordingly, Alamos Minerals wrote down the La Fortuna property to US$1 million. The Company has no current intention to conduct further exploration work on this property.

4.4

Issuers with Oil & Gas Operations

Not applicable.

5.

SELECTED FINANCIAL INFORMATION

5.1

Annual Information

The following table sets forth selected consolidated financial information of the Company and the Predecessor Companies as of the end of each of the last three fiscal years in the period ended December 31, 2003. The selected consolidated financial information should be read in conjunction with the consolidated financial statements of the Company and the Predecessor Companies for the respective periods. The Predecessor Companies’ consolidated audited financial statements for the two years ended December 31, 2002 and 2001 are incorporated by reference in this AIF.

Summary Financial Data | 2003 $ | 2002 $ | 2001 $
Net Revenues | nil | nil | nil
Net Income/(Loss) | (1,933,873) | (440,205) | (367,300)
Basic and Diluted Income/Loss Per Share | (.05) | (.06) | (.05)
Total Assets | 28,422,921 | 6,021,616 | 1,914,274
Total long term debt | 2,198,612 | 1,769,565 | nil
Cash dividends paid | nil | nil | nil

On February 21, 2003, Alamos Minerals completed an amalgamation with National Gold with the resulting amalgamated company continuing under the name “Alamos Gold Inc.”, which the Company accounted for as an acquisition. This transaction resulted in a consolidation of ownership of the Salamandra Property, located in Sonora, Mexico. Prior to the Amalgamation, the Company had entered into the Joint Venture Agreement with National Gold (described under Item 3.1 “Three Year History”) for the development of the Salamandra Property. In August 2003, the Company completed the placement of 8.5 million units at a price of CDN$1.45 per unit for net proceeds of CDN$8,150,019, after related issue costs. Each unit consisted of one common share in the capital of the Company and one-half of a transferable share purchase warrant.

The availability of equity funding to the Company depends, in part, upon investor interest in the gold sector. Management believes the gold price has benefited from a weakening of the United States dollar against other major currencies, a reduction in hedging of future production by major gold producers, and an increase in positions held by speculators. The price of gold improved from $278 per ounce at December 2001, to $347 per ounce at December 2002, to $417 at December 2003 and was $397 on April 20, 2004. At these levels, the price of gold should have a positive impact on the feasibility study for the Salamandra Property. However, it is not possible to forecast future gold price trends, their impact on the feasibility study for the Salamandra Property, or future results from operations.

On April 13, 2004, the Company completed a private placement of 10.0 million units at Cdn.$3.00 per unit, each unit consisting of one common share and one-half share purchase warrant, each whole warrant exercisable to purchase one additional common share at Cdn.$3.50 per share for a period of two years. The Company received net proceeds of approximately Cdn.$28,200,000 in connection with the private placement.

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Changes in Accounting Policy

The Company adopted in 2003 the transitional provisions of Canadian Institute of Chartered Accountants’ Handbook Section 3870 on stock-based compensation on a prospective basis. The Company accounts for the derived value of stock-based compensation to all employees and consultants.

5.2

Dividends

The Company has not paid any dividends since the date of the Amalgamation and has no present intention of paying dividends on its common shares. The Company anticipates that all available funds will be invested to finance the growth of its business.

5.3

Foreign GAAP

Not applicable.

6.

MANAGEMENT’S DISCUSSION AND ANALYSIS

The selected financial information set out below and certain of the comments which follow are based on and derived from the financial statements of the Company.

6.1

General

The following discussion and analysis is for the year ended December 31, 2003 compared with the year ended December 31, 2002. All funds are expressed in United States dollars, except where noted. Information is current to April 20, 2004.

Introduction

The following discussion and analysis of the operating results and financial position of the Company should be read in conjunction with the consolidated financial statements of the Company for the fiscal year ended December 31, 2003 and related Notes (the “Financial Statements”), which have been prepared in accordance with Canadian GAAP (see Note 2 “Summary of Significant Accounting Policies” to the Financial Statements) in United States dollars. These principles differ in certain material respects from the United States GAAP. Differences between Canadian GAAP and U.S. GAAP applicable to the Company are described in Note 15 to the Financial Statements. This discussion and analysis may contain forward-looking statements about the Company’s future prospects, and the Company provides no assurance that actual results will meet management’s expectations.

Note to U.S. Investors

The terms “mineral resource”, “measured mineral resource”, “indicated mineral resource”, and “inferred mineral resource” are recognized and required by Canadian securities legislation; they are not defined terms under standards in the United States. As such, information contained in this report concerning descriptions of mineralization and resources under Canadian standards may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements of the U.S. Securities and Exchange Commission. “Indicated mineral resource” and “inferred mineral resource” have a great amount of uncertainty as to their existence and a great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “indicated mineral resource” or “inferred mineral resource” will ever be upgraded to a higher category. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. The Company has not completed a feasibility study on any of its properties at this time.

Amalgamation

As a result of the Amalgamation of the Predecessor Companies, the shareholders of Alamos Minerals received one common share of the Company for each two shares of Alamos Minerals held, and National shareholders received one common share of the Company for each 2.352 shares of National held. The Company accounted for the Amalgamation as an acquisition of National. The Company assumed all the assets and liabilities of the Predecessor Companies, effective February 2003 and continued to carry on the business of the Predecessor Companies. The composition of the Board of Directors and management of the Company included nominations from the Predecessor Companies.

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Fourth Quarter

Certain management and board changes occurred in the fourth quarter of the year. Chester Millar resigned as director and President of the Company on November 25, 2003 and Stephen Stine resigned as a director and the Chief Operating Officer of the Company on November 12, 2003. On November 14, 2003, John McCluskey was appointed President of the Company and John Van De Beuken was appointed as Vice President and Chief of Operations. On November 27, 2003 Leonard Harris was appointed as a director of the Company. The changes were a result of differences with respect to the future development plans for the Mulatos deposit.

Risks and Uncertainties

Except for historical information contained in this discussion and analysis, disclosure statements contained herein are forward-looking, as defined in the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those in such forward-looking statements.

The Company is a mineral exploration and development company and is exposed to a number of risks and uncertainties that are common to other companies in the same business; some of these risks have been discussed elsewhere in this Annual Information Form.

The Company's financial success is subject to general market conditions which affect mining and exploration companies. The value of the Company’s mineral resources and future operating profit and loss is affected by fluctuations in gold prices, over which the Company has no control, although it may choose to hedge some of its future production. The cost of exploration and future capital and operating costs are affected by foreign exchange rates for the Canadian dollar and Mexican peso. The Company can mitigate the effects of these rate fluctuations, to some extent, through forward purchases. The Company’s ability to lock in gold prices or future foreign exchange rates is affected by its creditworthiness. Because of its limited operating record and history of losses, the Company may not be able to hedge future risk to the extent it feels is appropriate. The Company also competes with other mining companies which are larger and have more economic resources to acquire prospective exploration properties or producing mines.

The Company also faces certain risks and uncertainties specific to its circumstances. The Company’s ability to obtain financing to explore for mineral deposits and to continue and complete the development of those properties it has classified as assets is not assured; nor is there assurance that the expenditure of funds will result in the discovery of an economic mineral deposit. The Company has not completed a feasibility study on any of its deposits to determine if it hosts a mineral resource that can be economically developed and profitably mined. Consequently, its actual mineral resources may differ from those outlined in a feasibility study in both tonnage and grade from that predicted from sampling, drilling and statistical procedures used to estimate ore tonnage, grade and waste. While the Company has used its best efforts to ensure title to all its properties and secured access to surface rights, these titles or rights may be disputed. Should the Company elect to place the Salamandra Property into production, it is exposed to potential for cost overruns from those predicted in a feasibility study due to adverse prices of commodities or labour due to shortages or inflation, or that processes may take longer than budgeted. Future operating profit from a mining operation may not be as predicted in a feasibility study due to variances in tonnage and grade of ore, unanticipated operating costs due to unavailability of materials or labour, inflation, mining conditions relating to rock mechanics and environmental conditions.

Changes in Accounting Policy

The Company adopted in 2003 the transitional provisions of Canadian Institute of Chartered Accountants’ Handbook Section 3870 on stock-based compensation on a prospective basis. The Company accounts for the derived value of stock-based compensation to all employees and consultants.

Financial and Other Instruments

The Company’s financial assets and liabilities consist of cash and cash equivalents, receivables, accounts payable and accrued liabilities, and a loan payable, some of which are denominated in Canadian dollars or Mexican pesos. These accounts are recorded at their fair market value in United States dollars. The Company is at risk to financial gain or loss as a result of foreign exchange movements against the United States dollar. In 2003, the Company recorded a loss of $158,031, while in 2002 a gain of $15,496 was recorded. The loss was mainly attributed to a translation loss on the CDN$5.7 million loan from H. Morgan & Company, which Alamos Minerals arranged on January 31, 2003 and which matures in February of 2009, bearing interest at 12% per annum and repayable in full after February 2005, or 50% thereof at anytime (the “Loan”). The transaction loss resulted because the Loan is denominated in Canadian dollars and the Canadian dollar strengthened 20% during the year against the United States dollar. The loss on the Loan was partially offset by a gain on the Company’s cash holdings in Canadian dollars.

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The Company minimizes its foreign exchange risk by maintaining low account balances in Canadian dollars and Mexican pesos, to the extent possible. The Company does not have major commitments to acquire assets in foreign currencies at this time, but does expect that certain significant expenditures in developing a mine at Salamandra Property will be denominated in pesos. Once mine development costs are known and purchase commitments are made, the Company may acquire pesos directly or through derivative positions, to lock-in these costs in United States funds, if it believes it prudent to do so.

The Company has placed its cash and cash equivalents in liquid bank deposits which provide a variable rate of interest.

6.2

Quarterly Information

Net loss by quarter |  | Qu1 | Qu2 | Qu3 | Qu4 | Total
|  | $ | $ | $ | $ | $
2003 |  | 116,342 | 316,255 | 520,575 | 980,701 | 1,933,873
Per share |  | 0.01 | 0.01 | 0.01 | 0.02 | 0.05
2002 |  | 72,383 | 81,985 | 65,086 | 220,751 | 440,205
Per share |  | 0.01 | 0.01 | 0.00 | 0.02 | 0.04

As the Company is still in the exploration and development stage, variances in its quarterly losses are not affected by sales or production-related factors. Year over year increased costs are generally attributed to the Amalgamation of Alamos Minerals and National Gold on February 21, 2003 and increase in funding for corporate purposes. As the Company accounted for the Amalgamation as an acquisition of National Gold, National Gold’s comparative accounts are not reflected in the Financial Statements. However, for reference purposes, National Gold had recorded a loss of CDN $3.0 million in 2002.

Variances by quarter reflect overall corporate activity and are also caused by factors which are not recurring each quarter. Non-cash compensation in the amount of CDN $403,989, reflecting the value of the grant of stock options to certain personnel, was recorded in the fourth quarter of 2003. The Company expects to record approximately CDN $300,000 in quarterly corporate operating costs in 2004, exclusive of interest expense and foreign exchange adjustments.

6.3

Liquidity and Capital Resources

The Company’s financial condition improved significantly in 2003. As at December 31, 2003, the Company had working capital of $6.3 million (after taking into account the current portion of the Loan), an increase from a working capital deficiency of $0.9 million on December 31, 2002. The most significant component of the change in working capital was the increase in cash and short-term investments by $8.5 million over 2002, exclusive of restricted cash in the amount of $0.7 million relating to letters of credit (see Note 13(b) of the Financial Statements). Payables increased from $123,393 in 2002 to $536,069 in 2003 in response to increased exploration activities.

The increase in cash and short-term investments resulted primarily from funds received from the August 2003 brokered placement of 8.5 million units at a price of CDN$1.45 per unit resulting in gross proceeds of approximately CDN $8,150,000. Each unit consisted of one common share in the capital of the Company and one-half of a transferable share purchase warrant. Each full warrant entitles the holder thereof to purchase one additional share of the Company at a price of CDN$1.75 for a one-year period following closing. The shares, warrants and any shares issuable on exercise of the warrants were subject to a hold period, which expired on December 22, 2003. In addition, the Company received $4.6 million upon the exercise of 7,269,895 share purchase warrants. In 2003, prior to the Amalgamation , Alamos Minerals had received $1.1 million from the exercise of 7,078,617 share purchase warrants. Almost $1 million was raised in 2003 from the exercise of 1,075,383 share purchase options (as compared to $nil in 2002).

The Company completed a debt financing with H. Morgan & Company, whereby the Loan for a total of CDN$5.7 million was issued to the Company for a term of 61 months, subject to prepayment terms. These funds were used to prepay the outstanding debentures issued by National Gold pursuant to the asset purchase agreement among National Gold and the Company’s Mexican subsidiaries, Minas de Oro Nacional and Minera San Augusto pursuant to which National Gold acquired the Salamandra Property. Prepayment of the debentures reduced the amount due under the debentures (CDN$7.5 million) by CDN$1.9 million. Interest is payable on the Loan at 12% per annum. During the quarter ended September 30, 2003, the Company repaid 50% of the Loan and is entitled to prepay any amount up to the total amount of the principal of the Loan after January 30, 2005.

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The Company is adequately funded to carry out further development work at the Salamandra Property in anticipation of a positive result from its feasibility study. Current work plans are incorporated into a $3 million budget for additional exploration in and around the Salamandra Property. The Company has committed to acquiring a crushing and conveying unit for the Salamandra Property for $1 million. It is currently reviewing opportunities to acquire refurbished haulers, loaders and related mining equipment, as well as a previously owned gold recovery plant. With the price of gold near a 15-year high, and continued interest from new investors and lending institutions, the Company believes it is well-positioned to secure the remaining capital required to undertake construction of the Salamandra Property. The Company will seek to secure debt financing for part of the Salamandra Property construction costs, if it can be obtained at reasonable cost and terms.

Commitments for Capital Expenditures

The Company’s commitments for capital expenditures as of December 31, 2003 are set out in the following table:

Commitments Table (by period) ($)

Year: | 2004 | 2005-7 | 2008+
Land lease payments(1) | 52,000 | 155,000 | 52,000 pa
Water rights | 310,000 |  |
Land tax | 225,000 | 675,000 | 225,000 pa
Legal services | 300,000 |  |
Equipment purchases(2) | 1,000,000 |  |

(1)

Based on current land use requirements

(2)

The Company is seeking additional equipment and will make purchase commitments in line with the requirements of a feasibility study expected to be concluded in the first half of 2004. It is not known at this time what the total future capital costs will be.

6.4

Results of Operations

The Company recorded net loss for 2003 of $1.9 million ($.05 per share), compared with $440,205 in 2002 ($0.04 per share). Net losses were affected by higher legal and accounting charges, office and administration, and interest expense, which were partly offset by higher interest income earned on cash balances and a gain on foreign exchange. Increased costs relate, in part, to the acquisition of National Gold in February 2003.

Increased costs reflect the merger of operations of the Company and National Gold in February 2003, and the availability of additional funds for corporate purposes following the private placement issue in August 2003. Administration costs increased from $42,254 in 2002 to $242,081 in 2003 (2001 - $29,759) due to the addition of executive staff upon completion of the Amalgamation. The Company also incurred higher accounting and legal costs, increasing on a combined basis to $381,249 from $196,840 in 2002 to comply with increased regulatory requirements. The Company continued with the SEC registration processes formerly undertaken by National Gold, with the expectation of obtaining a U.S. exchange listing in the future. Travel and accommodation increased from $13,105 to $86,892 due to increased travel to Mexico as the exploration activities increased during the year, and travel relating to investor presentations as a consequence of the Amalgamation. Shareholder communications costs also increased from $26,667 to $49,333 as a consequence of Amalgamation-related interest from investors.

Non-cash compensation expenses of $403,989 (as compared to $nil in 2002) were recorded as a consequence of the Company adopting a new accounting policy in 2002 relating to stock-based compensation. An additional amount of $303,694 was recorded as an expenditure on unproven properties, as that grant of options was to exploration personnel whose compensations are capitalized to the relevant mineral project. Accounting guidelines require that the Company record as compensation the determined fair value of stock options issued to non-employees during the term of the options, with a corresponding credit to its contributed surplus account. No cash is exchanged at the time of the grant. The Company receives the full option price at such time, if any, that the stock option is exercised. In valuing options, management used a standard option pricing model, which required it to make certain subjective assumptions as to future interest rates and stock price volatility (see Note 9 to the Financial Statements). While management has used its best efforts to assess these future values, the determined fair value of options is highly subjective and meaningful only if the valuation input factors are realized.

Interest expense of $362,180, net of interest income of $24,645, (net $337,535) reflected charges on the Loan, of which CDN$5.6 million was used to discharge the CDN$7,500,000 of debentures issued by National Gold to acquire the Salamandra Property, while in the comparable prior years, the Company earned interest income of $4,163 in 2002 and $13,734 in 2001 on cash balances.

AIF - 40

Net expenditures on mineral properties increased during the year to $13.5 million from $3.5 million in 2002. The increased activity reflects the Company’s acquisition of the Salamandra Property in the amount of $10.7 million pursuant to the acquisition of National Gold. The Salamandra Property is an advanced-stage exploration project in northern Mexico. During 2003, the Company conducted extensive sampling and drilling on the main zone and adjacent structures in order to determine the size and grade of the deposit. Expenditures on field work and supplies increased from $415,963 to $846,334, due to increased drilling and site work. Also, geological work, including consulting geologists fees, increased to $666,342 from $178,333, which includes a $303,694 charge for stock-based compensation, due to additional work leading to an interim resource model for a feasibility study. An updated resource model was provided by the Company in January, 2004. A feasibility study was commissioned to assess the economic potential of the Salamandra Property, at a cost to date of $254,989. The feasibility study will determine what portion of this resource can be economically mined. The Company also incurred property taxes and surface rights payments in the amount of $471,920 in 2003, the first year it held title to the property following the Amalgamation.

Work on the Salamandra feasibility study is expected to be completed in the first half of 2004. Future development of the Salamandra Property may be dependent upon obtaining adequate financing. In April 2004, the Company completed a brokered CDN $30 million private placement of 10.0 million units at Cdn.$3.00 per unit, each unit consisting of one common share and one-half share purchase warrant, each whole warrant exercisable to purchase one additional common share at Cdn.$3.50 per share for a period of two years to fund ongoing development of the Salamandra Property. With the required mining permits already obtained, the Company expects to direct its efforts toward equipment and material procurement, project management and construction. The ongoing feasibility study contemplates a standard open pit heap leach mining project.

Management has conducted an extensive review of its mineral property accounts. The Company’s La Fortuna project is currently carried at $1 million, and the Company has determined that the carrying value is appropriate based on its assessment of realizable value.

As the Company does not yet have any resource properties that qualify for capitalization under US GAAP, the primary effect of the US GAAP reconciliation of its financial statements is to increase the net loss and deficit for 2003, 2002 and 2001 by the amounts of the exploration expenditures capitalized less write-offs under Canadian GAAP, in each of those years. For the purposes of US GAAP, these expenditures have been charged to the statement of loss and deficit in the period incurred (see Note 15 to the Financial Statements).

7.

MARKET FOR SECURITIES

The Company’s common shares are listed for trading on the TSX Venture under the classification of a Tier 1 resource issuer, under the trading symbol "AGI".

AIF - 41

8.

DIRECTORS AND OFFICERS

8.1

Name, Address, Occupation and Security Holding

The name and municipality of residence, positions held with the Company and principal occupation of each director and executive officer of the Company within the five preceding years as at the date of this AIF are as follows:

Name, Position and Municipality of Residence(1) | Principal Occupation and Principal Occupations During the Past 5 Years(1) | Previous Service as a Director or Officer(2) | Number of Shares(3)
JOHN A. McCLUSKEY President and Chief Executive Officer and Director Toronto, Ontario | Chief Executive Officer of the Company since 2003 to present; President and Chief Executive Officer of Grayd Resource Corporation from 1996 to 2003; Vice-President, Finance, and director of Inca Pacific Resources from 1995 to 2002. | Since February 21, 2003 | 873,809(7)
RICHARD W. HUGHES(4)(6) Director Sechelt, British Columbia | President of Hastings Management Corp. from 1994 to present. | Since February 21, 2003 | 42,517
JAMES M. MCDONALD(4)(6) Director Calgary, Alberta | President of Makwa Exploration Ltd., a private company owned by Mr. McDonald, from 1991 to present. | Since February 21, 2003 | 468,496(5)
LEONARD HARRIS(4) Director Stamford, Connecticut United States | Consultant and a director of several mining companies since 1994 to present. Previously, Vice President and General Manager, Newmont, Latin America and President and General Manager, Newmont Peru from December 1994 to May 1995; General Manager, Minera Yanacocha from July 1992 to December 1994; Vice President of R&D, Newmont Mining Corp. from May 1978 to January 1989. | Since November 27, 2003 | 10,000
JOHN VAN DE BEUKEN Vice President and Chief of Operations Globe, Arizona United States | Vice President, Mongolian Projects for Ivanhoe Mines from April 2002 to February 2003; Vice President of Operations for the MIM, Rio Algom and North’s joint venture from October 1997 to July 2000; Vice President of Operations and Director of Engineering for Kennecott Corporation from December 1994 to April 1997. | Since November 14, 2003 | 197,000(8)
JON MORDA Chief Financial Officer Toronto, Ontario | Chief Financial Officer of Minefinders Corporation Ltd. from April 2002 to April 2004; Chief Financial Officer of Geomaque Exploration Ltd. from November 1995 to August 2001; and Manager, Tax of Lac Minerals Ltd. from April 1987 to October 1993. | Since February 12, 2004 | 1,200
ALAN RICHARD HILL Director Toronto, Ontario | President of ARH Mining Consultants Inc. from September 2003 to present; Executive Vice President Development of Barrick Gold Corporation from 1998 to September 2003. | Since April 28, 2004 | Nil

(1)

The information as to municipality of residence and principal occupation, not being within the knowledge of the Company, has been furnished by the respective directors and executive officers individually.

(2)

February 21, 2003 was the effective date of the amalgamation of Alamos Minerals Ltd. and National Gold Corporation.

(3)

The information as to shares beneficially owned or over which a director or executive officer exercises control or direction, not being within the knowledge of the Company, has been furnished by the respective directors and executive officers individually.

(4)

Denotes member of Audit Committee.

(5)

Of this amount, 244,040 common shares are held by Makwa Exploration Ltd., a corporation controlled by Mr. McDonald and 224,456 common shares are directly held by Mr. McDonald.

(6)

Denotes member of Compensation Committee.

(7)

Of this amount, 350,941 common shares are held by Daniele McCluskey, Mr. McCluskey’s wife, 279,368 common shares are held by Sail View Ventures Ltd., a corporation wholly-owned by Mr. McCluskey and his wife, and a total of 243,500 common shares are held directly by Mr. McCluskey.

(8)

Of this amount, 50,000 common shares are held by Elizabeth Van de Beuken, Mr. Van de Beuken’s wife and a total of 147,000 common shares are jointly held by Mr. and Mrs. Van de Beuken.

AIF - 42

The Company does not currently have an Executive Committee.

The term of office of each of the present directors expires at the annual general meeting of shareholders.

As at the date of this AIF the Company’s directors and executive officers, as a group, beneficially own, directly or indirectly, or exercise control or direction over a total of 1,593,022 common shares, directly or indirectly, representing approximately 2.58% of the Company’s issued common shares.

8.2

Corporate Cease Trade Orders or Bankruptcies

Except as described below, no director or officer of the Company or a shareholder holding a sufficient number of common shares of the Company to affect materially the control of the Company is, or has been within the past ten (10) years before the date of this AIF, a director or officer of another corporation which:

(a)

during such individual’s tenure, was the subject of a cease trade or similar order that denied that issuer access to any statutory exemptions for a period exceeding thirty (30) consecutive dates; or

(b)

became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or has been subject to or instituted any proceedings, arrangement or compromise with any creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that corporation.

On March 25, 1999, Webb Bay Resources Ltd. (subsequently, National Gold Corporation), while a “Junior Capital Pool Company” pursuant to the policies of the Alberta Stock Exchange (“ASE”) (now, the TSXV), was suspended from trading on the ASE for failure to complete its “Major Transaction” under the policies of the ASE. Mr. James M. McDonald was a director of Webb Bay Resources Ltd. at the time of the suspension. The Major Transaction was subsequently completed in March 2000 and on March 15, 2000, trading resumed under the new name National Gold Corporation.

Mr. Richard W. Hughes was a director of Daren Industries Ltd. (“Daren”), formerly listed on the TSXV. In May of 2002, while Mr. Hughes was serving on the Board of Directors of Daren, it was placed into receivership and suspended from trading. Mr. Hughes since resigned as a director of Daren. Daren was subsequently delisted from the TSXV in November of 2002.

8.3

Penalties or Sanctions

No director or officer of the Company or a shareholder holding a sufficient number of common shares of the Company to affect materially the control of the Company has:

(a)

been subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; or

(b)

been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

8.4

Personal Bankruptcies

No director, officer or a shareholder holding a sufficient number of common shares of the Company to affect materially the control of the Company or a personal holding company of any such persons has, within the past ten (10) years before the date of this AIF, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of the director or officer.

AIF - 43

8.5

Conflicts of Interest

Certain directors and officers of the Company are also directors, officers or shareholders of other companies that are similarly engaged in the business of acquiring, developing and exploiting natural resource properties. The directors and officers of the Company, are also directors of other companies that are similarly engaged in the business of acquiring, developing and exploiting natural resource properties. These associations to other public companies in the resource sector may give rise to conflicts of interest from time to time. The directors and senior officers of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interest which they may have in a contract or transaction if the contract or transaction is material to the Company, the Company has entered, or proposes to enter, into the contract or transaction, and either the director or senior officer has a material interest in the contract or transaction or the director or senior officer is a director or senior officer of, or has a material interest in, a corporation which has a material interest in the contract or transaction. If a conflict of interest arises at a meeting of the Board of Directors, any director in a conflict is required to disclose his interest and abstain from voting on such matter. In determining whether or not the Company will participate in any project or opportunity, the directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at the time.

9.

ADDITIONAL INFORMATION

Upon request made by any person to the Secretary of the Company, the Company shall provide to that person the following:

(a)

when the securities of the Company are in the course of a distribution under a preliminary short form prospectus or a short form prospectus,

(i)

one copy of this AIF and if specifically requested, one copy of any document or the pertinent pages of any document, incorporated by reference in this AIF;

(ii)

one copy of the Company’s comparative financial statements for its most recently completed financial year, together with the accompanying report of the auditor, and one copy of any interim financial statements of the Company subsequent to the financial statements for the most recently completed financial year;

(iii)

one copy of the information circular of the Company in respect of its most recent annual meeting of shareholders that involved the election of directors; and

(iv)

one copy of any other documents that are incorporated by reference into the preliminary short form prospectus or short form prospectus;

(b)

at any other time, one copy of any documents referred to in clauses (a)(i), (ii) and (iii). The Company may require the payment of a reasonable charge for the documents set out in (i), (ii), (iii) and (iv) above, if the request is made by a person who is not a security holder of the Company.

Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities, options to purchase securities and interests of insiders in material transactions, where applicable, is contained in the information circular for its upcoming annual general meeting of shareholders; additional financial information is provided in the Company’s comparative financial statements for the Company’s most recently completed financial year.

AIF - 44