Esperanza Resources 20F 2011 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

[ ]

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedDecember 31, 2011

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to __________

[ ]

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission File Number:

0-50824

ESPERANZA RESOURCES CORP.

(Exact name of Registrant as specified in its charter)

__________British Columbia, Canada_____________

(Jurisdiction of incorporation or organization)

Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada V6C 1X8

(Address of principal executive offices)

Securities to be registered pursuant to Section 12(b) of the Act:

Title of each class Name on each exchange on which registered

None None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 56,767,221

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ___ No _X_

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ___ No _X_

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 12 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes_X_ No ____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ___Accelerated filer Non-accelerated filer X

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP [ ]

International Financial Reporting Standards as issued

Other [ ]

by the International Accounting Standards Board [ X ]

Indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 X Item 18 ___

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X N/A

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ESPERANZA RESOURCES CORP.

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS


	PART I	Page

Item 1.	Identity of Directors, Senior Management and Advisors	5
Item 2.	Offer Statistics and Expected Timetable	6
Item 3.	Key Information	6
Item 4.	Information on the Company	12
Item 5.	Operating and Financial Review and Prospects	25
Item 6.	Directors, Senior Management and Employees	43
Item 7.	Major Shareholders and Related Party Transactions	56
Item 8.	Financial Information	57
Item 9.	The Offer and Listing	58
Item 10.	Additional Information	60
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	71
Item 12.	Description of Other Securities Other Than Equity Securities	71

	PART II

Item 13.	Defaults, Dividend Arrearages and Delinquencies	72
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	72
Item 15.	Controls and Procedures	72
Item 16.	Reserved	73
Item 16A.	Audit Committee Financial Expert	73
Item 16B.	Code of Ethics	73
Item 16C.	Principal Accountant Fees and Services	74
Item 16D.	Exemptions from Listing Standards for Audit Committees	74
Item 16E.	Purchase of Equity Securities by the Issuer and Affiliated Purchasers	74
Item 16F.	CORPORATE Governance	74
Item 16G.	MINE SAFETY DISCLOSURE	74

	PART III

Item 17.	Financial Statements	74
Item 18.	Financial Statements	75
Item 19.	Exhibits	75

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INTRODUCTION

Esperanza Resources Corp (formerly Esperanza Silver Corporation) (“Esperanza”, the “Company” or the “Issuer”) was formed by the amalgamation under the British Columbia Act on December 1, 1990 of Magellan Resources Corp. (“Magellan”), Goldsil Resources Ltd. (“Goldsil”) and International Mahogany Corp. (“Mahogany”) into one company known as “International Mahogany Corp.”

Magellan was incorporated under the British Columbia Act on May 4, 1983. Goldsil was incorporated under the British Columbia Company Act on May 18, 1983. Mahogany was incorporated under the British Columbia Company Act on March 17, 1980 as “Mahogany Mining Company Ltd.” and changed its name to “Mahogany Mineral Resources Inc.” on November 10, 1981. On July 7, 1987 Mahogany amalgamated with Canadian Premium Resource Corporation into one company known as “Mahogany Mineral Resources Inc.”. On September 8, 1988 Mahogany changed its name to “International Mahogany Corp.”.

Effective June 2, 2000 the Issuer consolidated its common shares on the basis of 10 old shares for one new share and the name of the Issuer was changed to “Reliant Ventures Ltd.”. On May 29, 2003 the name of the Issuer was changed to “Esperanza Silver Corporation.

On July 19, 2010, the Company changed its name to Esperanza Resources Corp.

BUSINESS OF ESPERANZA RESOURCES CORP.

Esperanza Resources Corp. is principally a mineral company engaged in the acquisition and exploration of mineral properties.

There are no known proven reserves of minerals on the Issuer’s properties. The Issuer does not have any commercially producing mines or sites, nor is the Issuer in the process of developing any commercial mines or sites. The Issuer has not reported any revenue from operations since incorporation. As such, the Issuer is defined as an “exploration-stage company”.

FINANCIAL AND OTHER INFORMATION

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“CDN$” or “$”). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, principally in ITEM #4, “Information on the Company” and ITEM #5, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These statements may be identified by the use of words like “plan”, “expect”, “aim”, “believe”, “project”, “anticipate”, “intend”, “estimate”, “will”, “should”, “could” and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. In particular, these include statements about the Issuer’s strategy for growth, property exploration, mineral prices, future performance or results of current or anticipated mineral production, interest rates, foreign exchange rates, and the outcome of contingencies, such as acquisitions and/or legal proceedings.

Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other things, the factors discussed in this Registration Statement under ITEM #3, “Key Information, Risk Factors” and factors described in documents that we may furnish from time to time to the Securities and Exchange Commission. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

1.A.1. Directors

Table No. 1 lists as of 04/20/2012 the names of the Directors of the Issuer.

Table No. 1

Directors


Name	Age	Date First Elected of Appointed

William J. Pincus (4)	58	September 30, 2002
Brian E. Bayley (1)(2)(3)(5)	59	December 14, 1999
Steve Ristorcelli (1)(2)(3)(6)	55	June 2, 2005
George Elliott (1) (2) (3) (7)	69	August 29, 2008

(1) Member of Audit Committee. (2) Member of the Compensation Committee (3) Member of Corporate Governance Committee (4) Suite 680 – 1580 Lincoln Avenue, Denver, Colorado, 80203-1501 (5) Suite 1028-550 Burrard Street, Vancouver, BC V6C 2B5 (6) 393 Fricke Ct., Gardenville, NV 89460 (7) 57 Joicey Blvd., Toronto, ON M5M 2T2

1.A.2. Senior Management

Table No. 2 lists, as of 04/20/2012, the names of the Senior Management of the Company. The Senior Management serves at the pleasure of the Board of Directors.

Table No. 2

Senior Management


Name and Position	Age	Date of First Appointment

William J. Pincus, President & CEO	58	September 30, 2002
Kim Casswell, Corporate Secretary	55	April 2, 2004
William Bond, Vice President, Exploration	61	August 1, 2003
David L. Miles, Chief Financial Officer	61	June 10, 2004
J Stevens Zuker, Senior Vice-President	58	September 23, 2005
Paul Bartos, Vice President, Chief Geologist	54	January 22, 2007

Mr. Pincus’ business functions, as President of the Company and Chief Executive Officer, include strategic planning, business development, operations, financial administration, accounting, liaison with auditors-accountants-lawyers-regulatory authorities-financial community/ shareholders; and preparation/payment/organization of the expenses/taxes/ activities of the Company, and reporting to the Board of Directors.

Ms. Casswell’s business functions, as Corporate Secretary, include attending and being the secretary of all meetings of the Board, shareholders and committees of the Board and entering or causing to be entered in records kept for that purpose minutes of all proceedings thereat; gives or causes to be given, as and when instructed, all notices to shareholders, Directors, officers, auditors and members of committees of the Board; is the custodian of the stamp or mechanical device generally used for affixing the corporate seal of the Company and of all books, records and instruments belonging to the Company, except when some other officer or agent has been appointed for that purpose; and in the future can have such other powers and duties as the Board of the chief executive officer may specify. Ms. Caswell may delegate all or part of her duties as Corporate Secretary to a nominee from time to time.

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Mr. Bond’s business functions, as Vice President Exploration, include responsibility for overseeing all of the Issuer’s exploration efforts. This includes hiring additional consultants to assist in exploration efforts; planning future exploration work on the Issuer’s mineral properties; assessing exploration reports; and, budgeting exploration expenses. Mr. Bond reports directly to Mr. Pincus.

Mr. Miles’ business functions, as Chief Financial Officer, include responsibility for overseeing all of the Issuer’s financial administration, accounting, liaison with auditors-accountants and preparation/payment/ organization of the expenses/taxes/ activities of the Company, and reporting to the Board of Directors. Mr. Miles may delegate all or part of his duties as Chief Financial Officer to a nominee from time to time.

Mr. Zuker’s business functions, as Senior Vice President include responsibility for assisting the President in investor relations activity, management of all technical databases related to exploration information, supervision of new generative exploration activities and assistance in day to day management of the issuer’s business. Mr. Zuker reports directly to Mr. Pincus.

Mr. Bartos’ business functions as Vice President, Chief Geologist include responsibility for assisting the President.

1.B. Advisors

The Company’s Canadian Legal Counsel:

Northwest Law Group

Contact: Michael Provenzano

650 West Georgia Street, Suite 950

Vancouver, British Columbia V6B 4N8

Telephone: 604-687-5792

Facsimile: 604-687-6650

The Company’s bank is:

Bank of Montreal

First Bank Tower, Bentall 3

595 Burrard Street

Vancouver, British Columbia V7X 1L7

Contact: Colleen Saimoto

Telephone: 604-665-2692

Facsimile: 604-668-1450

1.CAuditors

The Company’s auditor is:

De Visser Gray, Chartered Accountants

401 – 905 West Pender Street

Vancouver, B.C. CANADA V6C 1L6

Telephone: 604-687-5447

Facsimile: 604-687-6737

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.

--- No Disclosure Necessary ---

ITEM 3. KEY INFORMATION.

3.A.1. and 3.A.2 Selected Financial Data

The selected financial data of the Company for Fiscal 2011/2010 ended December 31^st was derived from the financial statements of the Company that have been audited by De Visser Gray, independent Chartered Accountants, as indicated in their audit reports, which are included elsewhere in this Annual Report.

The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain all available funds for use in its operations and the expansion of its business.

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Table No. 3 is derived from the financial statements of the Company, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and Canadian/USA Generally Accepted Auditing Standards (GAAS).

Table No. 3

Selected Financial Data

(CDN$ in 000, except per share data)


IFRS	Year Ended 12/31/11	Year Ended 12/31/10

Revenue⁽¹⁾	$26,012	$Nil
Income (Loss) for the Period	16,545	($5,959)
Basic Income (Loss) Per Share	$0.30	($0.11)
Dividends Per Share	Nil	Nil
Wtd. Avg. Shares (000)	54,592	52,420
Period-end Shares	51,032	56,767

Working Capital	$19,236	$10,034
Mineral Properties	$1,748	$1,748
Long-Term Debt	$Nil	$Nil
Capital Stock	$36,634	$45,137
Shareholders’ Equity	$22,323	$14,719
Total Assets	$22,934	$15,182

⁽¹⁾ ^{In 2011 the Company realized a gain of $26,012,289 on the sale of the San Luis property.}

3.A.3. Exchange Rates

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of five most recent fiscal years ended December 31^st, the average rates for the period, and the range of high and low rates for the period. The data for each month during the most recent six months is also provided.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar. The average rate means the average of the exchange rates on the last day of each month during the period.

Table No. 4

U.S. Dollar/Canadian Dollar


Period	Average	High	Low	Close

March 2012	.99	1.00	.98	1.00
February 2012	1.00	1.00	0.99	0.99
January 2012	1.01	1.03	1.00	1.01
December 2011	1.02	1.04	1.01	1.02
Fiscal Year Ended 12/31/2011	0.99	1.06	0.94	1.02
Fiscal Year Ended 12/31/2010	1.03	1.08	1.00	1.00
Fiscal Year Ended 12/31/2009	1.14	1.30	1.03	1.05
Fiscal Year Ended 12/31/2008	1.07	1.30	0.97	1.22
Fiscal Year Ended 12/31/2007	1.07	1.19	0.92	0.99

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3.B. Capitalization and Indebtedness

Table No. 5 sets forth the capitalization and indebtedness of the Company as of 12/31/2011. As of 12/31/2011, the Company has cash and cash equivalents totaling $19,394,059 and short-term investments totaling $Nil. The Company has no significant debt outstanding as of 12/31/2011 and had issued and outstanding common shares of 51,032,321.

Table No. 5

Capitalization and Indebtedness


SHAREHOLDERS’ EQUITY
51,032,321 shares issued and outstanding	$36,633,992
Other Reserves	$8,629,988
Retained Earnings (deficit)	($22,940,507)
Net Stockholders’ Equity	$22,923,250

Stock Options Outstanding (At December 31, 2011):	3,826,000
Warrants Outstanding (At December 31, 2011)):	7,057,646
Preference Shares Outstanding:	Nil
Capital Leases:	Nil
Guaranteed Debt	Nil
Secured Debt:	Nil

3.C. Reasons For The Offer And Use Of Proceeds

--- No Disclosure Necessary ---

3.D. Risk Factors

Cumulative Unsuccessful Exploration Efforts By Esperanza Personnel Could

Result In the Company Having to Cease Operations:

The expenditures to be made by Esperanza in the exploration of its properties as described herein may not result in discoveries of mineralized material in commercial quantities. Most exploration projects do not result in the discovery of commercially mineable ore deposits and this occurrence could ultimately result in Esperanza having to cease operations.

Esperanza May Not be Granted Mining Access to Certain Claim Areas:

One of the Company’s projects is near a known archeological site. The Company has worked with the appropriate government archaeological authority to determine any impacts proposed mining operations may have. As a result the majority of the property has been declared open for mining activity. A portion has been designated for further study. A small area, which will have little or no effect on exploration and proposed mining programs, is now unavailable.

Esperanza Has No Reserves on the Properties in Which It Has an Interest and If Reserves Are Not Defined the Company Could Have to Cease Operations:

The properties in which Esperanza has an interest or the concessions in which Esperanza has the right to earn an interest are in the exploratory stage only and are without a known body of ore. If Esperanza does not ultimately find a body of ore, it would have to cease operations.

Mineral Prices May Not Support Corporate Profit for Esperanza:

The resource exploration industry is intensely competitive and even if commercial quantities of mineral resources are developed (which is not guaranteed), a profitable market may not exist for the sale of same. If a profitable market does not exist, Esperanza could have to cease operations.

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There has been no recent history of significant earnings. Therefore the Company is dependent upon public and private distributions of equity to obtain capital in Order to Sustain Operations. Public distributions of capital result in dilution to existing shareholders.

Esperanza has generally had minimal positive cash flow except that in 2011 the Company had a gain of $26,012,289 on the sale of its San Luis property and received $17,000,000 in cash as part of that sale. None of the Issuer’s properties have advanced to the commercial production stage and the Issuer has no history of earnings or positive cash flow from operations. However, Esperanza has published a Preliminary Economic Assessment which indicates that Cerro Jumil may be shown to have a commercial ore deposit upon completing a pre-feasibility or feasibility study. The cumulative loss since the Issuer’s inception of the development stage, according to IFRS, is ($22,940,507). The Issuer does not know if it will ever generate material revenue from mining operations or if it will ever achieve self-sustaining commercial mining operations. Historically, the only source of funds available to the Issuer has been through the sale of its common shares or by seeking joint venture partners to share in the cost of project development. Any future additional equity financing would cause dilution to current stockholders.

Esperanza currently has 3,826,000 share purchase options and 3,062,846 share purchase warrants outstanding. If all of the share purchase options and warrants were exercised, the number of common shares issued and outstanding would increase from 51,432,321 (as of April 19, 2012) to 58,321,167.

This represents an increase of 13.4% in the number of shares issued and outstanding and would result in significant dilution to current shareholders.

The Amount of Capital Necessary to Meet All Environmental Regulations Associated with the Exploration Programs of the Issuer Could Be In An Amount Great Enough to Force Esperanza to Cease Operations:

The current and anticipated future operations of the Issuer, including further exploration activities require permits from various Mexican and Peruvian Federal and state governmental authorities. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, mine safety and other matters. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in resource exploration may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.

Large increases in capital expenditures resulting from any of the above factors could force Esperanza to cease operations.

Operating Hazards and Risks Associated with the Mining Industry Could Result in Esperanza Having to Cease Operations:

Resource exploration activities generally involve a high degree of risk. Operations in which the Issuer has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of precious and base metals, any of which could result in work stoppages, damage to or destruction of exploration facilities, damage to life and property, environmental damage and legal liability for any or all damage. Esperanza may become subject to liability for cave-ins and other hazards for which it cannot insure or against which it may elect not to insure where premium costs are disproportionate to the Company’s perception of the relevant risks. The payment of such insurance premiums and of such liabilities would reduce the funds available for exploration activities and could force Esperanza to cease operations.

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The Risks Associated with Penny Stock Classification Could Affect the Marketability of the Common Stock of Esperanza And Shareholders Could Find It Difficult to Sell Their Stock:

The Issuer’s stock is subject to “penny stock” rules as defined in 1934 Securities and Exchange Act rule 3a51-1. The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. The Issuer’s common shares are subject to these penny stock rules. Transaction costs associated with purchases and sales of penny stocks are likely to be higher than those for other securities. Penny stocks generally are equity securities with a price of less than U.S. $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the Company’s common shares in the United States and shareholders may find it more difficult to sell their shares.

Esperanza is Dependent on Key Personnel and the Absence of Any of These Individuals Could Result in the Company Having to Cease Operations:

While engaged in the business of exploiting mineral properties, the nature of Esperanza’s business, its ability to continue its exploration of potential exploration projects, and to develop a competitive edge in the marketplace, depends, in large part, on its ability to attract and maintain qualified key management personnel. Competition for such personnel is intense and the Company may not be able to attract and retain such personnel. Esperanza’s growth will depend on the efforts of its Senior Management particularly its President, William Pincus; its Senior Vice President, Mr. J. Stevens Zuker; its Chief Financial Officer, Mr. David Miles; its Vice President - Exploration, Mr. William Bond; its Vice President - Exploration, and Vice President - Chief Geologist, Dr. Paul Bartos and its Corporate Secretary, Ms. Kim Casswell. The issuer also relies on Mr. Steve Ristorcelli, a member of the Board of Directors, for advice pertaining to exploration work. In the area of capital issues, the Issuer relies on Brian Bayley and George Elliott because of their expertise in this area. Loss of these individuals could have a material adverse effect on the Company. Esperanza has no key-man life insurance with the Senior Officers or the Directors.

Dilution Through Employee/Director/Consultant Options Could Adversely Affect Esperanza’s Stockholders

Because the success of Esperanza is highly dependent upon its respective employees, the Company has granted to some or all of its key employees, Directors and consultants options to purchase common shares as non-cash incentives. To the extent that significant numbers of such options may be granted and exercised, the interests of the other stockholders of the Company may be diluted. As at 04/19/2012 there are 3,826,000 share purchase options outstanding which, if exercised, would result in an additional 3,826,000 common shares being issued and outstanding. (For a breakdown of dilution, refer to the risk factor entitled: “Esperanza Has Minimal Positive Cash Flow and No Recent History of Significant Earnings and Is Dependent Upon Public and Private Distributions of Equity to Obtain Capital in Order to Sustain Operations. Public distributions of capital result in dilution to existing shareholders”)

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U.S. Investors May Not Be Able to Enforce Their Civil Liabilities Against Us or Our Directors, Controlling Persons and Officers

It may be difficult to bring and enforce suits against Esperanza. The Issuer is a corporation incorporated in the province of British Columbia under the British Columbia Company Act (the “Old Act”). Effective March 29, 2004, theBusiness Corporations Act(British Columbia) (the “New Act”) replaced the Old Act. As a consequence, all British Columbia companies are now governed by the New Act. There are no residency requirements for directors under the New Act, however, two of the Company's directors are residents of Canada, and all or substantial portions of their assets are located outside of the United States, predominately in Canada. As a result, it may be difficult for U.S. holders of our common shares to affect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them. In addition, a shareholder should not assume that the courts of Canada (i) would enforce judgments of U.S. courts obtained in actions against us or such persons predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States, or (ii) would enforce, in original actions, liabilities against us or such persons predicated upon the U.S. federal securities laws or other laws of the United States.

However, U.S. laws would generally be enforced by a Canadian court provided that those laws are not contrary to Canadian public policy, are not foreign penal laws or laws that deal with taxation or the taking of property by a foreign government and provided that they are in compliance with applicable Canadian legislation regarding the limitation of actions. Also, a Canadian court would generally recognize a judgment obtained in a U.S. Court except, for example:

where the U.S. court where the judgment was rendered had no jurisdiction according to applicable Canadian law;

the judgment was subject to ordinary remedy (appeal, judicial review and any other judicial proceeding which renders the judgment not final, conclusive or enforceable under the laws of the applicable state) or not final, conclusive or enforceable under the laws of the applicable state;

the judgment was obtained by fraud or in any manner contrary to natural justice or rendered in contravention of fundamental principles of procedure;

a dispute between the same parties, based on the same subject matter has given rise to a judgment rendered in a Canadian court or has been decided in a third country and the judgment meets the necessary conditions for recognition in a Canadian court;

the outcome of the judgment of the U.S. court was inconsistent with Canadian public policy;

the judgment enforces obligations arising from foreign penal laws or laws that deal with taxation or the taking of property by a foreign government; or

there has not been compliance with applicable Canadian law dealing with the limitation of actions.

As a "foreign private issuer”, Esperanza is exempt from the Section 14 proxy rules and Section 16 of the 1934 Securities Act May Result in Shareholders Having Less Complete and Timely Data

The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K may result in shareholders having less complete and timely data. The exemption from Section 16 rules regarding sales of common shares by insiders may result in shareholders having less data.

RISKS AND UNCERTAINTIES

There is a risk that the Company may not be able to satisfy all of its commitments on option agreements to acquire mineral properties.

From time to time Esperanza earns interests in properties through an option agreement and acquisition of title to the property is only completed when the option conditions have been met. These conditions generally include making property payments and incurring exploration expenditures on the properties. If the Company does not satisfactorily complete the option conditions in the time frame laid out in the option agreement, the Company’s title to the related property will not vest and the Company will have to write-off the previously capitalized costs related to that property.

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The Company is affected by political and foreign currency risks.

The Company is operating in countries that currently have varied political environments. Changing political situations may affect the manner in which the Company operates. The Company’s equity financings are sourced in Canadian dollars but it incurs a significant portion of its expenditures in local currencies or in US dollars. At this time there are no currency hedges in place. Therefore a weakening of the Canadian dollar against the US dollar, Mexican peso or Peruvian sol could have an adverse impact on the amount of exploration conducted.

The activities of the Company are subject to environmental regulations issued and enforced by government agencies.

Environmental legislation is evolving in a manner that will require stricter standards and enforcement and involve increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. There can be no assurance that future changes in environmental regulation, if any, will not adversely affect Esperanza’s operations. Environmental hazards may exist on properties in which the Company holds interests which are unknown to the Company at present.

The Company will be subject to competition from other exploration and mining companies.

The Company will compete with many companies and individuals that have substantially greater financial and technical resources than the Company for the acquisition and development of its projects as well as for the recruitment and retention of qualified employees.

ITEM 4. INFORMATION ON THE COMPANY

4.A. History and Development of the Company

Introduction

The Issuer’s executive office is located at:

Suite 501, 543 Granville Street

Vancouver, British Columbia, Canada V6C 1X8

Telephone: (604) 685-2242

Facsimile: (604) 688-1157.

Website:www.epzresources.com

Email:kcasswell@seabordservices.com

The contact person is: Mr. William Pincus, President and Chief Executive Officer.

The Issuer's fiscal year ends December 31^st.

The Issuer's common shares trade on the TSX Venture Exchange under the symbol: “EPZ”.

Effective June 6, 2005, the authorized capital of the Issuer was changed to an unlimited number of common shares without par value. At 12/31/2011, the end of the Company's most recent fiscal year, there were 51,032,321 common shares issued and outstanding.

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$).

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Incorporation and Name Changes

Esperanza Resources Corp. (Formerly Esperanza Silver Corporation) (“Esperanza” or the “Issuer”) was formed by the amalgamation under the British Columbia Act on December 1, 1990 of Magellan Resources Corp. (“Magellan”), Goldsil Resources Ltd. (“Goldsil”) and International Mahogany Corp. (“Mahogany”) into one company known as “International Mahogany Corp.”

On July 19, 2010, the Company changed its name to Esperanza Resources Corp.

Financings

The Company has financed its operations through funds raised in public/private placements of common shares, shares issued for property, shares issued in debt settlements, and shares issued upon exercise of stock options and share purchase warrants.


Fiscal Year	Nature of Share Issuance	Number of Shares	Amount

Fiscal 2007	Private Placement (10) Issued for property option (11) Exercise of Broker Share Purchase Warrants (8) Exercise of Share Purchase Warrants(2) Exercise of Share Purchase Warrants(1) Exercise of Stock Options (5) Exercise of Stock Options (3) Exercise of Stock Options (4) Exercise of Stock Options (7) Exercise of Stock Options (9) Exercise of Stock Options (6)	4,110,000 40,000 406,750 15,742 1,515,484 60,000 50,000 25,000 25,000 57,000 15,000	$15,001,500 $85,000 $610,125 $23,613 $1,288,160 $24,000 $29,000 $13,250 $18,750 $88,920 $5,325
Fiscal 2008	Exercise of options (5) Exercise of options (12) Exercise of options (3) Issued for property (11) Exercise of options (7)	100,000 1,000,000 10,000 45,000 40,000	$40,000 $250,000 $5,800 $56,550 $30,000

Fiscal

2009

Exercise of options (13)

Exercise of options (5)

Exercise of options (4)

37,700

125,000

250,000

$26,016

$50,000

$132,500

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Fiscal

2010

Private Placement (14)

Exercise of options (6)

Exercise of options (13)

Exercise of options (15)

Exercise of options (5)

Private Placement (16)

Exercise of options (9)

Exercise of options (17)

Exercise of options (18)

Exercise of options (19)

Exercise of options (20)

Exercise of options (21)

Exercise of Share Purchase Warrants(14)

Exercise of Share Purchase Warrants (16)

Private Placement (22)

4,000,000

5,000

437,300

152,500

300,000

500,000

110,500

75,000

41,500

10,000

21,500

42,500

200,000

2,926,900

$5,000,000

$1,777

$301,737

$106,750

$120,000

$625,000

$172,380

$48,750

$58,100

$7,300

$6,900

$30,745

$74,375

$350,000

$6,000,145

Fiscal

2011

Exercise of Share Purchase Warrants (14)

Exercise of options (23)

Exercise of options (9)

Exercise of options (13)

Exercise of options (21)

262,700

200,000

250,000

10,000

2,000

$459,725

$280,000

$390,000

$6,900

$2,860

Fiscal

2012 (YTD)

Exercise of Share Purchase Warrants (14)

400,000

$700,000

(1)

Exercise of Broker Warrants and Warrants pursuant to a private placement consisted of the sale of 5,660,000 units at a price of $0.60 per unit. Each unit consisted of one common share and one-half share purchase warrant; each whole warrant entitling the holder to purchase a further share at a price of $0.85 until November 2, 2007. If, after the expiry of all resale restrictions, the closing price of the Shares on the TSX Venture Exchange is $1.15 or greater for a period of 20 consecutive trading days, the Company may provide notice of an earlier expiry of the Warrants, in which case the Warrants shall expire 21 trading days after giving such notice. A Finder’s Fee of 7% was paid in units, at a deemed price of $0.60 per unit to certain finders in consideration of their efforts in locating investors. In addition, brokers received broker warrants entitling them to purchase that number of shares which is equal to 10% of the number of units sold by them. The broker warrants are exercisable at $0.65 per share and expire on May 2, 2007. The shares and any shares issued on exercise of the warrants or broker warrants are subject to restrictions on transfer for a period of four months from closing.

(2)

This private placement consisted of the sale of 1,500,000 units at a price of $1.20 per unit. Each unit consisted of one common share and one-half share purchase warrant. These warrants were issued pursuant to a private placement. Each whole warrant entitles the holder to purchase a further share at a price of $1.50 until August 21, 2007.

(3)

These shares were issued pursuant to the grant of incentive stock options on May 6, 2004 exercisable at $0.58 per share for a period of five years to certain directors, officers, employees and consultants of the Company.

(4)

These shares were issued pursuant to the grant of incentive stock options on September 9, 2004 exercisable at $0.53 per share for a period of five years to certain directors, officers, employees and consultants of the Company.

(5)

These shares were issued pursuant to the grant of incentive stock options on June 14, 2005 exercisable at $0.40 per share for a period of five years to certain directors, officers, employees and consultants of the Company.

(6)

These shares were issued pursuant to the grant of incentive stock options on July 5, 2006 exercisable at $0.355 per share for a period of five years to consultants of the issuer.

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(7)

These shares were issued pursuant to the grant of incentive stock options on September 1, 2003 exercisable at $0.75 per share for a period of five years to an officer and certain consultants of the issuer.

(8)

These shares were issued to certain brokers as a finder’s fee pursuant to the private placement described in (4) above.

(9)

These shares were issued pursuant to the grant of incentive stock options on May 18, 2006 exercisable at $1.56 per share for a period of five years to directors, officers and consultants of the issuer.

(10)

This Private Placement consisted of the sale of 4,110,000 units at a price of $3.65 per unit. Each unit consisted of one common share and one-half of a common share purchase warrant. Each full common share purchase warrant entitles the holder to purchase one common share at an exercise price of $4.35 per share for a period of two years. Agent’s received agent’s options entitling them to purchase 7% of the number of units sold at $3.65 per unit for a period of one year. As well, Agent’s received agent’s options to purchase an additional 15,135 units (3.5% on 432,240 units) at $3.65 per unit for a period of one year.

(11)

The Issuer entered into an agreement with Exploraciones del Altiplano S.A. de C.V. and Compania Minera Terciario S.A. de C.V. to acquire a four year option on 7 gold and silver exploration properties in Mexico.

(12)

These shares were issued pursuant to the grant of incentive stock options on August 18, 2003 exercisable at $0.25 per share for a period of five years to directors of the Issuer.

(13)

These shares were issued pursuant to the grant of incentive stock options on May 22, 2009 exercisable at $0.69 per share for a period of five years to directors, officers, employees and consultants of the Issuer.

(14)

This private placement consisted of the sale of 4,000,000 units. Each unit consisted of one common share and one common share purchase warrant. The warrants are exercisable for a period of two years at a price of $1.75 per share.

(15)

These shares were issued pursuant to the grant of incentive stock options on June 10, 2009 exercisable at $0.70 per share for a period of five years to certain consultants and employees of the Issuer.

(16)

This private placement consisted of the sale of 500,000 units. Each unit consisted of one common share and one common share purchase warrant. The warrants are exercisable for a period of two years at a price of $1.75 per share.

(17)

These shares were issued pursuant to the grant of incentive stock options on September 23, 2005 exercisable at $0.65 per share for a period of five years to an officer of the Issuer.

(18)

These shares were issued pursuant to the grant of incentive stock options on February 8, 2008 exercisable at $1.40 per share for a period of five years to directors, officers, employees and consultants of the Issuer.

(19)

These shares were issued pursuant to the grant of incentive stock options on August 20, 2008 exercisable at $0.73 per share for a period of five years to an employee of the Issuer.

(20)

These shares were issued pursuant to the grant of incentive stock options on October 6, 2008 exercisable at $0.69 per share for a period of five years to a director of the Issuer.

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(21)

These shares were issued pursuant to the grant of incentive stock options on June 8, 2010 exercisable at $1.43 per share for a period of five years to directors, officers, employees and consultants of the Issuer.

(22)

This private placement consisted of the sale of 2,926,900 units. – at a price of $2.05 per unit. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to acquire one additional share at $2.75 per share until February 16, 2012. If the closing price of the Company’s shares on the TSX Venture Exchange is $2.20 or greater for a period of 20 consecutive trading days, the Company may accelerate the expiry of the warrants, to 21 days after giving notice thereof.

(23)

These shares were issued pursuant to the grant of incentive stock options on February 27, 2008 exercisable at $1.40 per share for a period of three years to a consulting company of the Issuer.

Capital Expenditures


	Fiscal Year

	Fiscal 2007	$138,975
	Fiscal 2008	$9,794
	Fiscal 2009	-
	Fiscal 2010	$30,214
	Fiscal 2011	$77,959

4.B. BUSINESS OVERVIEW

Historical Corporate Development

Prior to 1999, the Issuer was engaged in the exploration of mineral properties. The Issuer was inactive from 1999 until October 16, 2002 when it announced the appointment of William Pincus as President/CEO and Director and the election to the Board of Directors of Robert Quartermain. At that time, the Issuer announced that it would seek to obtain and explore mineral properties in Mexico, Peru, Bolivia and elsewhere. The Issuer also planned to concentrate its exploration efforts on silver prospects.

On April 8, 2003, the Issuer announced that it had reached an agreement to acquire the Esperanza (later renamed Cerro Jumil) silver/gold exploration project from Recursos Cruz del Sur, S.A. de C.V., an unrelated private company. On May 16, 2003, the Issuer announced that it had entered into a formal option agreement to acquire the interest in this property.

Also on May 16, 2003, the Issuer changed its name from Reliant Ventures Ltd. to Esperanza Silver Corporation. The Issuer also completed the private placement financing from which it raised $535,000. These funds were used for exploration work on the Esperanza Project, new project generation and general corporate purposes.

On August 18, 2003, the Issuer began trading on the TSX Venture Exchange under the trading symbol, “EPZ”.

On September 7, 2005, the Issuer announced the formation of a joint-venture to explore the newly discovered San Luis prospect in Peru together with Silver Standard. Silver Standard also informed the Issuer that in accordance to pre-agreed terms, it was increasing its participation from 50% to 55% by funding the next US$500,000 in exploration work.

In August of 2011 the Company completed the sale of its minority interest in the San Luis joint-venture to Silver Standard Resources Inc., (“SSRI”) the majority owner and operator of San Luis. The transaction was approved by the Boards of Directors of both companies and by Esperanza’s shareholders. The Company received a payment of $17 million, the return of 6,459,600 Esperanza shares owned by SSRI and a one percent royalty on all production from the property.

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The Issuer is an exploration stage company and there is no assurance that a commercially viable mineral deposit exists on any of its properties. Further evaluation will be required on each property before a final evaluation as to the economics and legal feasibility of the property is determined.

Plan Of Operations

Source of Funds for Fiscal 2012

The Issuer’s primary source of funds since incorporation has been through the issuance of common shares. The Issuer began 2011 with cash resources of $10,179,671. During the year Esperanza received additional cash of $1,139,485 from the exercise of stock options and share purchase warrants and $17,000,000 in cash on the sale of its San Luis property. At December 31, 2011 the Company had cash resources of $19,394,059 and working capital of $19,235,210 available to fund operations in 2012.

Use of Funds for Fiscal 2012

During Fiscal 2011 the Issuer expended $6,839,561 excluding stock based compensation on operating expenses including administrative expenses and exploration costs, and estimates that it will expend $1,420,000 during Fiscal 2012 on administration and up to $7,000,000 on exploration and development.

Anticipated Changes to Facilities/Employees

Management of the Issuer anticipates that some additional personnel with mine development experience will be needed in order to advance the Cerro Jumil project.

United States vs. Foreign Sales/Assets

Except for the sale of its San Luis property in 2011 the Issuer has had no revenue during the past five fiscal years.

At 12/31/2011, 12/31/2010, 12/31/2009, the Issuer’s assets were located in North America, Mexico and Peru.

Material Effects of Government Regulations

The current and anticipated future operations of the Issuer, including further exploration activities, require permits from various Mexican, Peruvian and Provincial governmental authorities. Such operations are subject to various laws governing land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, well safety and other matters. Unfavorable amendments to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a materially adverse impact on the Issuer and cause increases in capital expenditures which could result in a cessation of operations by the Issuer. The Issuer has had no material costs related to compliance and/or permits in recent years, and anticipates no material costs in the next year.

Seasonality

Dependency upon Patents/Licenses/Contracts/Processes

Sources/Availability of Raw Materials

--- No Disclosure Necessary ---

4.C. Organization Structure

The Issuer was formed by the amalgamation under the British Columbia Act on December 1, 1990 of Magellan Resources Corp. (“Magellan”), Goldsil Resources Ltd. (“Goldsil”) and International Mahogany Corp. (“Mahogany”) into one company knows as “International Mahogany Corp.”

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The Issuer has wholly-owned subsidiary companies located in Mexico (Esperanza Silver de Mexico, S.A. de C.V.), Peru (Esperanza Silver Peru S.A.C.), British Virgin Islands (Esperanza Exploration (BVI) Inc.), and Colorado (Esperanza Services, Inc.).

The Company also held a 26.8% interest in Global Minerals Ltd. after Global’s financing which completed on March 22,2012.

4.D. Property, Plant and Equipment

The Issuer’s executive offices are located in rented premises of approximately 4,200 sq. ft., shared by seven other companies at 543 Granville Street, Suite 501, Vancouver, British Columbia CANADA V6C 1X8. The Issuer began occupying these facilities on May 1, 2011.

The Issuer’s mineral properties are located in the following areas:

The Pucarana, Abra Roja, Sayrirosa, Colqui Orcco, Cori Rumi, Sante Fe, Guadelupe and Utcucocha projects are located in Peru. The Cerro Jumil (formerly La Esperanza), Gallos Blancos, Biricu and Providencia projects are located in Mexico.

It is important to note that even if the Issuer completes its exploration programs on its properties and is successful in identifying mineral deposits, a substantial amount of capital will still have to be spent on each deposit on further drilling and engineering studies before management will know that the Issuer has a commercially viable mineral deposit (a reserve) on the property.

The terms “measured resource”, “indicated resource” and “inferred resource” used in this report are Canadian geological and mining terms as defined in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators using the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council as may be amended from time to time by the CIM. We advise U.S. investors that while such terms are recognized and permitted under Canadian regulations, the SEC does not recognize them. U.S. investors are cautioned not to assume that any part or all of the mineral deposits in the measured and indicated categories will ever be converted into reserves.

“Inferred resources” have a greater amount of uncertainty as to their existence, and greater uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that any part or all of an inferred resource exists, or is economically or legally mineable.

Disclosure of gold and silver resources expressed in ounces in the mineral resource categories in this document are in compliance with Canadian National Instrument 43-101, but does not meet the requirements of Industry Guide 7, Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations, of the SEC, which will accept only the disclosure of tonnage and grade estimates for non-reserve mineralization.

1. The San Luis Property Disclosure - current royalty interest and sale terms

The joint-venture arose from the Peru Prospecting Joint Venture. Under the terms of the agreement Silver Standard Resources Inc. (“Silver Standard”) increased its ownership to 55 percent by spending the US$500,000 in December 2006. The subsequent US$1,500,000 was spent by the partners according to their ownership interests during the first quarter of 2007. Silver Standard elected to increase its interest in the joint venture to 70% by funding costs required to complete a feasibility study. Thereafter, Silver Standard had the right to increase its interest to 80% by funding the property through to production.

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Location

The San Luis project is located in central Ancash Department, Peru. It is located approximately 25 kilometers northwest of Barrick Gold Corporation’s Pierina gold mine. See the following San Luis Property Map.

The property consists of 36 mineral concessions covering approximately 25,038 hectares.

2011 Activities

In the third quarter of 2011 the Company sold its minority interest in the San Luis project to Silver Standard Resources Inc. and received a cash payment of $17 million, the return of approximately 6.5 million Esperanza shares which Silver Standard owned, for cancellation and a 1 percent net smelter return royalty on all production.

2. The Cerro Jumil Property

The Cerro Jumil Property is without known reserves and the work being done by the Issuer is exploratory in nature. The Issuer’s interest in the Cerro Jumil Property stemmed from earlier exploration work, as described below, that was done in the area.

Acquisition of Interest

The property is owned 100% by Esperanza.

The property was acquired from Recursos Cruz del Sur S.A. de C.V., (Recursos or the “vendor”) an unrelated Mexican corporation. Esperanza entered into an option agreement whereby it could acquire a 100 percent ownership interest subject to a 3 percent Net Smelter Return Royalty by making payments totaling US $105,000, issuing 170,000 shares over 4 years with a balloon payment of US $1,895,000 due on the 5th anniversary of the agreement and completing US $225,000 in expenditures in the initial two years.

On October 2, 2006 the Company announced that it had reached agreement with Recursos Cruz del Sur S.A. de C.V. ("RCS") to amend its existing agreement to allow for the early exercise of its option to purchase the Cerro Jumil gold property in Morelos State, Mexico. Esperanza paid CDN$417,375 in cash and issued 500,000 common shares of the Company to RCS. Under the original terms, Esperanza had remaining payments of US$25,000 due on May 7, 2007 and US$1,895,000 due on May 7, 2008. RCS will maintain a 3% net smelter return royalty on production from the property.

The property consists of the following concessions:


Mining Concession	Title No.	Area (Hectares)	Title Validity
Mining Concession	Title No.	Area (Hectares)	Issued	Expires
Esperanza	215624	437	5 March 2002	4 March 2052
Esperanza II	220742	1,270	30 September 2003	29 September 2053
Esperanza III	228265	1,359	20 October 2006	19 October 2056
Esperanza IV	231734	1,338	15 April 2008	14 April 2058
Esperanza V	234011	278	15 May 2009	14 May 2059
Esperanza VI	234755	9,704	11 August 2009	10 August 2059
Esperanza VII	234784	639	14 August 2009	13 August 2059

Location

The property, centered at 18O46’N, 99O16’W, is located 80 kilometers south of Mexico City, and 12 kilometers from Cuernavaca in the State of Morelos.

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[esperanza20fannual_11001.jpg]

Accessibility, Climate, Infrastructure and Physiography

Access to the property is by paved road to 7 kilometers north of Alpuyeca along Morelos Highway 55 to where a dirt road turns off to the landfill, and then continues 2.75 kilometers onto the property. The road is passable year round by 2-wheel drive vehicles.

Topography is relatively rugged, varying from 1,100 to 1,450 meters. Outcrop exposure is excellent on the slopes of the hills and float is abundant on the flats. Vegetation in the form of trees and shrubs is extensive in the wet season that occurs from June to October. It is possible to work on the property year round.

Workers are available at the village of Tetlama and Cuernavaca; a city of over 1 million people provides all supplies and services that might be required.

History and Previous Work

Recursos carried out reconnaissance geology in 1993 and acquired an exploration concession over the area in 1994. Rock chip sampling and geological mapping were carried out in 1994 and in late 1995 the property was optioned to Teck Cominco Ltd. (Teck), an unrelated public company. Teck carried out line cutting, surface mapping and rock chip sampling, trenching, airborne magnetic and radiometric surveys, and a limited Induced Polarization Survey in 1996.

Teck cleaned and sampled the old trenches A to F, in addition to excavating four new trenches, J to M, in an area of skarn alteration. Teck took a total of 184 grab and channel samples.

In 1998 Teck completed four diamond drill holes totaling 822 meters. Teck returned the property to Recursos in 1998.

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Prior to the expiry date of the exploration concession in 2000, Recursos applied for an exploitation concession that was granted on March 5, 2002.

Recursos carried out two programs of rock chip sampling in 1994 and 2002. A total of 118 samples were taken from outcrop and float.

In 2002 Geo Associados S.A. de C.V. completed 20 kilometers of gradient time domain Induced Polarization and Resistivity surveys for Recursos. The survey extended the previous geophysical survey to the north and south. The lines cross the east and west contact zones at a good angle but are parallel to the north and south areas.

The 1997 survey indicates that the interpreted anomalies are at a depth of 200-300 meters and the 2002 survey was designed to look at similar depths.

Total expenditures are reported to have been US$272,500 expended by Teck and US $94,000 expended by Recursos.

2005 Activities

The Company initiated a 1200 meter drilling program on February 1, 2005 and completed all drill holes on March 5, 2005. A total of eight drill holes were completed. The first six drill holes tested the West Zone (described above). The final two drill holes tested targets to the south and southeast of the West Zone.

The Issuer also conducted preliminary metallurgical tests on material collected from drill hole DDH-01.

Beginning in November of 2005 and continuing into April of 2006 the Company began a second program of diamond core drilling. Through April of 2006 a grand total of 4850 meters of drill hole were completed.

2006 Activities

Following the April 2006 completion of the drill program begun in 2005 a geophysical survey was conducted during July and August. In December of 2006 the Company began a third phase of drilling with two drill rigs. This consisted of a combination of exploration drilling and “in-fill” drilling to collect sufficient information necessary to complete a resource estimate.

2007 Activities

The drilling begun in 2006 continued through the year and into the first quarter of 2008. By that time a total of 31,420 meters in 66 diamond core and 101 reverse-circulation drill-holes had been completed.

The company had also conducted additional metallurgical testing indicating 72-73% recovery of gold under simulated heap-leach conditions (column tests).

2008 Activities

In 2008 the Company completed 8,200 meters of drilling on the Cerro Jumil project leading to a grand total of 32,300 meters now completed for the project. This led to the publication of an initial resource estimate which has been superseded by a subsequent estimate in 2010 and based on significantly more drilling.

2009 Activities

The Company completed a Preliminary Economic Assessment of the project incorporating the results of the resource estimate, preliminary metallurgical test work, a preliminary mine design and initial operating and capital cost estimates. This has been superseded by an Updated PEA published in 2011.

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2010 Activities

During 2010 the Company completed a drilling program of approximately 10,000 meters. On September 16 it announced an updated Resource estimate. The newly calculated independent estimate includes 935,000 gold equivalent ounces in the measured and indicated categories and 233,000 gold equivalent ounces in the inferred category. Esperanza is now seeking drill permits for new exploration adjacent to the defined resource zones to test for extensions of mineralization.

Cautionary Note to U.S. Investors concerning estimates of Indicated Resources

This section uses the term “indicated resources”. We advise U.S. investors that while those terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize them. U.S. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.

Cautionary Note to U.S. Investors concerning estimates of Inferred Resources

This section uses the term “inferred resources”. We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. “Inferred resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules estimates of Inferred Mineral Resources may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.


Cerro Jumil Resource Estimate September 2010
Category		Tonnes (000)		Au g/t	Ag g/t	Au Eq* g/t	Au oz (000)	Ag oz (000)	Au Eq* oz (000)
Measured		10,111	0.87		0.9	0.88	282	296	285
Indicated		24,295	0.81		2.1	0.83	630	1,655	649
M&I Total		34,406	0.83		1.8	0.85	913	1,951	935

Inferred	8,596		0.83		6.9	0.84	230	1,904	233
*Gold equivalent (AuEq) values are based upon an Ag:Au price ratio of 56:1, and an Ag:Au metal recovery ratio of 0.62. Totals may not sum to 100% due to rounding.

The Cerro Jumil geologic and resource models were based upon an independent field review of the property as well as checks on and assessment of the drilling data, quality assurance/quality control results, and geologic interpretation of the gold-silver mineralized and skarn altered zones. The modeling procedures, grade estimation parameters, and resulting mineral resource estimate and classification were based upon 1) 32,244 total meters of drilling in 177 drill holes, 2) a three-dimensional geologically constrained grade block model, 3) drill hole defined grade continuity verified through variogram analysis, 4) capping of assay grades over 10 grams/tonne gold and 125 grams/tonne silver, 5) a gold equivalent cutoff grade of 0.3 grams/tonne, and 6) gold grade estimation by ordinary kriging and silver grade estimation by inverse distance interpolation. The independent resource estimate complies with N.I. 43-101 and Canadian Institute of Mining (CIM) guidelines for reporting mineral resources. Dean Turner, P.Geo., a Qualified Person as defined by National Instrument 43-101 and an independent consulting geologist, is responsible for the Cerro Jumil mineral resource estimate. The Qualified Person (QP), as defined by Canadian National Instrument 43-101, for the Cerro Jumil project is William Bond, VP Exploration of Esperanza.

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The Company also began pilot-scale metallurgical testing. The tests were completed in 2011. The Company in collaboration with the Mexican National Institute of Archeology and History (the government entity with jurisdiction over archeological matters) conducted a detailed review of the Cerro Jumil project area. Certain areas were identified for follow-up excavation and salvage.

2011 Activities

During 2011 the Company completed an updated Preliminary Economic Assessment based upon the 2010 resource estimate, results from metallurgical testing and preliminary engineering studies. The company foresees an open-pit, heap-leach mine recovering approximately 100,000 ounces of gold per year. The results of the PEA are summarized in the table below.


Cerro Jumil PEA Summary September 2011
Base Case Assumptions	50 mm Crush	Run-of-Mine
Mineral Resources in Mine Plan Au (000 ounces) Ag (000 ounces)	M&I Inf. 741 82 1,635 3,114	Same
Average Grade Au g/tn Ag g/tn	0.72 0.40 1.6 15.2	Same
Annual Throughput (million tn/yr)	7.3	7.3
Mine Life (yrs)	6	6
Average Annual Production (gold ounces 000)	106	92
Gold Recovery	75%	65%
Silver Recovery	25%	25%
Waste to Ore Strip ratio	2.2	2.2
Gross Revenue ($1150 Au) ($ million)	$735	$640
Operating Costs - net of silver credit ($/ oz Au)	$499	$477
Total Capital (excludes initial working capital) ($ million)	$120.6	$106.6
Economic Indicators (After Tax)
Gold Price ($/oz)	$1150	$1150
Silver Price ($oz)	$21	$21
Royalty Rate	3%	3%
NPV (0%) ($ million)	$186	$161
NPV (5%) ($ million)	$122	$107
IRR	27%	26%
For mine planning purposes as used in this Preliminary Economic Assessment a 0.20 g/tn cut-off-grade was used.

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The preliminary economic assessment is preliminary in nature, and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the preliminary economic assessment will be realized.

Continued investigation of the archeological significance of the site as well as reconstruction and inventory activities were done under the supervision of Mexican National Institute of Archeology and History. As a result most site areas were approved for mining purposes. A small area was excluded from mining but the Company doesn’t expect any significant impact on proposed mining activities. Further areas were identified for additional investigation prior to their release for mining.

2012 Activities

As a result of the positive PEA the Company made the decision to take the project to the feasibility level of design. On-going activities consist of continued drilling to develop new resources, extensive metallurgical sampling and testing, geotechnical/pit-slope stability studies and negotiations with the local community for long-term access agreements.

3. Other Exploration Properties

The Company also maintains a portfolio of other early-stage exploration projects.

Continuing or new properties consist of: Pucarana, Colqui Orcco, Guadalupe, Lourdes, Paúcar, Pucará, Santa Lucia, Navidad, Santo Tomás and Utcucocha in Peru. The Abra Rojo property was transferred to SSO in the San Luis sale and the Sayrirosa, Cori Rumi, Cangalle and Santa Fe properties have been abandoned. Its exploration property position in Mexico consists of Biricu, Gallos Blancos, and El Canario.

On Dec 30, 2010 the Company reached an agreement with Votorantim Metais – Cajamarquilla S.A. to provide Votorantim a purchase-option for Esperanza’s Guadalupe property in Peru. Under the terms of the agreement, Votorantim must spend $1.85 million over the four year option period. To exercise the option Votorantim must pay $2 million. Esperanza will retain a 2.5 percent net smelter return royalty on all production from the property. During 2011, Votorantim met the minimum expenditure requirements to continue the agreement in 2012.

In May 2007, the Company announced that it had finalized an earn-in agreement whereby Esperanza can earn up to a 60% interest in Estrella Gold’s Pucarana Gold Property (“Pucarana”), located in southern Peru. Esperanza has the right to earn a 60% interest in Pucarana by expending US$1,300,000 over a four year period commencing upon receipt of a drill permit (the “Effective Date”), and by making payments of US$80,000 to Gallant Minerals Peru Ltd. S.A. (Canadian Shield’s Peruvian subsidiary). Esperanza had to make the following expenditures: US$200,000 prior to the first anniversary of the Effective Date; US$450,000 prior to the second anniversary of the Effective Date; US$325,000 prior to the third anniversary of the Effective Date; and US$325,000 prior to the fourth anniversary of the Effective Date. Esperanza had to make the following cash payments: US$30,000 upon signing the agreement (paid) and US$50,000 upon exercising the option to earn an additional 9% interest.

The work commitments for the first twelve months from the Effective Date and the first payment are a firm commitment and all additional work commitments and payments are at the sole discretion of Esperanza. Upon Esperanza earning either its 51% interest, or 60% interest if it so elects, the two companies will form a joint venture in which all future expenditures shall be made on a prorated basis, with standard dilution formulas applied if either party elects not to participate in funding further exploration expenses. In the event either party is diluted to a joint venture interest of 10% or less, that interest will be converted to a 2% NSR with the right of the other party to purchase each 0.5% interest in the NSR for US$500,000. If the price of gold exceeds US$500, the purchase price for the NSR increases proportionately to the price of gold.

- 24 -

On March 22, 2011 the Company received the drilling permit for Pucurana. The Company completed an initial drilling campaign in the first half of 2011. The company notified Estrella Gold on November 1^st, that it had met the work expenditures and has elected to Exercise the First Option of earn-in to 51%, and through continued expenditures has earned a 60% interest in the property.

In December, 2011 the Company signed a purchase option agreement with Citation Resources Inc concerning the Biricu property. Under the terms of the agreement Citation has the right to acquire 100% of the property by making exploration expenditures of $4 million and the issue of 1,050,000 common Citation shares to Esperanza over a four-year period. In addition, Citation will grant a 2% net smelter return royalty on all metal production. It will also make a one-time payment, upon completion of a definitive feasibility study, of $10 per ounce of defined gold resource payable in Citation shares or cash.

On October 18, 2011, Esperanza signed an option to purchase agreement with Rene Zuazua Guzman, owner of two key mining concessions in the El Canario project area. Terms of the agreement which cover 100% of the concessions and which can be terminated at any time are property payments totaling $490,000 over 5 years. Esperanza will grant Mr. Zuazua a 2% net smelter return royalty over mineral production from the property. It can be purchased at any time for $1 million. Agreements with all surface holders have now been successfully completed and drill permits are in process.

In 2009 the Company abandoned the Cori Jirca project in Peru.

In 2010 the company abandoned the Providencia property in Mexico.

In 2011 the company abandoned the Cangalle, Cori Rumi, Santa Fe, and Sayrirosa properties in Peru.

In 2011 the company transferred the Abra Rojo property to SSO in the sale of San Luis to SSO.

Appropriate charges have been taken and are described in the accompanying financial statements.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Years Ended December 31, 2011 and 2010

GENERAL

This discussion and analysis of financial position and results of operations is prepared as at April 25, 2012 and should be read in conjunction with the audited annual consolidated financial statements of Esperanza Resources Corp. (the “Company” or “Esperanza”) for the years ended December 31, 2011 and 2010 and the related notes thereto.

Those consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These are Esperanza’s first annual consolidated financial statements presented in accordance with IFRS. Previously the Company prepared its consolidated annual and consolidated interim financial statements in accordance with Canadian GAAP. All dollar amounts included therein and in the following management’s discussion and analysis (“MD&A”) are in Canadian dollars except where noted.

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NEW ACCOUNTING POLICIES

International Financial Reporting Standards (“IFRS”)

On January 1, 2011 Canadian publicly listed entities were required to prepare their financial statements in accordance with IFRS. Due to the requirement to present comparative financial information the effective transition date is January 1, 2010. Notes 2 and 17 to the condensed consolidated annual financial statements provide more detail on the significant Canadian GAAP to IFRS differences, accounting policy decisions and IFRS 1, First-Time Adoption of International Financial Reporting Standards and optional exemptions for significant or potentially significant issues that have an impact on the Company’s financial statements on transition to IFRS. There was no significant impact on the statement of cash flows.

Below are the financial statements as prepared under GAAP for 2010 and reconciled to IFRS:

Reconciliation of Assets, Liabilities and Equity as at January 1, 2010


	GAAP	IFRS Adjustments	Notes	IFRS


Assets
Current
Cash	$ 5,584,553	$ -		$ 5,584,553
Receivables	255,987	-		255,987
Prepaid expenses and deposits	17,739	-		17,739
	5,858,279	-		5,858,279

Furniture and equipment	49,076	-		49,076
Mineral properties	13,363,266	(11,615,242)	(a)	1,748,024
	$ 19,270,621	$ (11,615,242)		$ 7,655,379

Liabilities
Current
Accounts payable and accrued liabilities	$ 260,135	$ -		$ 260,135


Shareholders' Equity
Share capital	34,960,559	-		34,960,559
Other reserves	5,961,586	-		5,961,586
Deficit	(21,911,659)	(11,615,242)	(a)	(33,526,901)
		-
	19,010,486	(11,615,242)		7,395,244

	$ 19,270,621	$ (11,615,242)		$ 7,655,379

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Reconciliation of Assets, Liabilities and Equity as at December 31, 2010


	GAAP	IFRS Adjustments	Notes	IFRS


Assets
Current
Cash	$ 10,179,671	$ -		$ 10,719,671
Receivables	273,675	-		273,675
Prepaid expenses and deposits	43,703	-		43,703
	10,497,049	-		10,497,049

Furniture and equipment	44,070	-		44,070
Investment in associated company	2,894,157			2,894,157
Mineral properties	15,593,745	(13,846,735)	(a)	1,747,010
	$ 29,029,021	$ (13,846,735)		$ 15,182,286


Liabilities
Current
Accounts payable and accrued liabilities	$ 463,007	$ -		$ 463,007
		-

Shareholders' Equity		-
Share capital	45,137,136	-		45,137,136
Other reserves	9,067,990	-		9,067,990
Deficit	(25,639,112)	(13,846,735)	(a)	(39,485,847)

	28,566,014	-		14,719,279
		$ -		9,067,990
	$ 29,029,021	$ (13,846,735)		$ 15,182,286

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Reconciliation of Loss and Comprehensive Loss for the year ended December 31, 2010:


	GAAP	IFRS Adjustments	Notes	IFRS

OPERATING EXPENSES
Accounting and legal	$ 281,481	$ -		281,481
Amortization	15,633	-		15,633
Directors’ fees	99,606	-		99,606
Exploration expenses	805,001	2,257,209	(a)	3,062,210
Foreign exchange	(10,640)	-		(10,640)
Investor relations and shareholder information	448,688	-		448,688
Office costs	266,453	-		266,453
Salaries and administration fees	721,486	-		721,486
Share-based compensation	1,003,744	-		1,003,744
Transfer agent and regulatory fees	87,541	-		87,541
Travel and related costs	21,887	-		21,887
LOSS FROM OPERATIONS	(3,740,880)	(2,257,209)		(5,998,089)

OTHER ITEMS
Equity in loss of associated company	(11,808)	-		(11,808)
Interest income	54,999	-		54,999
Miscellaneous income	2,850	-		2,850
Write-off of mineral properties	(32,614)	25,716	(a)	(6,898)
	13,427	25,716		39,143

LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD	(3,727,453)	(2,231,493)		(5,958,946)

Basic and diluted loss per share	$ (0.07)	$ (0.04)		$ (0.11)

Weighted average number of shares outstanding, basic and diluted	52,419,610			52,419,610

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Reconciliation of Cash Flows for the year ended December 31, 2010:


	GAAP	IFRS Adjustments	Notes	IFRS

CASH FLOWS FROM (TO)

OPERATIONS
Net loss for the year	$ (3,727,453)	$ (2,231,493)		$ (5,958,946)
Items not affecting cash:
Amortization	25,261	-		25,261
Amortization included in exploration expense	-	9,959		9,959
Equity in loss of associated company	11,808	-		11,808
Share based payments	1,003,744	-		1,003,744
Write-off of mineral property costs	32,614	(25,716)		6,898

Changes in non-cash working capital items:
Receivables	(17,688)	-		(17,688)
Prepaid expenses	(25,964)	-		(25,964)
Accounts payable and accrued Liabilities	164,815	38,057		202,872
	(2,532,863)	(2,209,193)		(4,742,056)

INVESTING
Investment in associated company	(2,905,965)	-		(2,905,965)
Mineral properties	(2,215,077)	2,209,193		(5,884)
Equipment	(30,214)	-		(30,214)
	(5,151,256)	2,209,193		(2,942,063)

FINANCING
Shares issued for cash	12,279,237	-		12,279,237
	12,279,237	-		12,279,237


Change in cash and cash equivalents in the year	4,595,118	-		4,595,118

Cash and cash equivalents, beginning of year	5,584,553	-		5,584,553

Cash and cash equivalents, end of year	$ 10,179,671	$ -		$ 10,179,671

Note to Reconciliations

Under GAAP, the Company followed the policy of capitalizing mineral property acquisition, exploration and development costs. Upon the adoption of IFRS the Company has decided to capitalize only mineral property acquisition costs and expense exploration and development costs. All of the changes on the preceding reconciliations of balance sheets, statements of loss and comprehensive loss and statements of cash flows are the result of this change in accounting policy.

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FORWARD-LOOKING INFORMATION

This MD&A may contain “forward looking statements” that reflect the Company’s current expectations and projections about its future results. When used in this MD&A, words such as “estimate”, “intend”, ”expect”, ”anticipate” and similar expressions are intended to identify forward-looking statements, which, by their very nature, are not guarantees of the Company’s future operational or financial performance, and are subject to risks and uncertainties and other factors that could cause Esperanza’s actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this MD&A or as of the date otherwise specifically indicated herein. Due to risks and uncertainties identified elsewhere in this MD&A, actual results may differ materially from current expectations. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

DESCRIPTION OF BUSINESS

Esperanza is a mineral exploration company focused on advancing the development of its principal property, the wholly-owned (subject to a 3% net smelter return royalty) Cerro Jumil gold project in Morelos State, Mexico. In October of 2010 it announced a strategic investment which resulted in a 36% interest in Global Minerals Ltd. (TSX-V: CTG), owner of the Strieborná silver/copper/antimony project in Roznava, Slovakia. This interest has subsequently declined to approximately 27%. The Company continues to identify and explore new precious metal projects in Mexico and Peru.

EXPLORATION REVIEW

Cerro Jumil, Mexico

In September 2011 the Company completed an updated Preliminary Economic Assessment (“PEA”) on the property. The results of the of the study provide confidence that the project can be economically viable and Esperanza now plans to initiate a full feasibility study with a goal of ultimately advancing Cerro Jumil to production (refer to the news release dated September 13, 2011).As a result the Company has made the decision to continue expansion drilling, optimize metallurgical testing and design and otherwise continue efforts to advance the project and prepare a full feasibility study. In February of 2011 the Company received agreement from the competent archaeological authorities in Mexico to allow mining activity in the Cerro Jumil project area subject to a program to excavate and salvage minor sites that had previously been identified. That program was completed and as a result additional areas have been approved for mining. Certain areas have been excluded from mining but the Company does not anticipate any significant impact on proposed operations. A final program will review certain additional areas for final release for mining purposes.

San Luis Project, Peru

In the third quarter of 2011 Esperanza completed the sale of its interest in the project to Silver Standard for $17 million in cash, the return and cancellation of the approximately 6.5 million Esperanza shares owned by Silver Standard and a 1 percent net smelter return royalty on all production from the property. As a result of the completion of the sale, the Company awarded a bonus of $651,325 to certain members of management and staff.

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Pucarana, Peru

On March 5, 2007 the Company reached an agreement on the Pucarana, Peru mineral property with Estrella Gold Corporation (“Estrella”). Pursuant to the agreement, Esperanza had an option to earn a 51% interest by expending US$650,000 over a two year period commencing upon receipt of drill permits, with a commitment to fund US$200,000 in exploration expenditures in the first year. A cash payment of US$30,000 was paid on signing of the definitive agreement and a second payment of US$50,000 was due if Esperanza elected to exercise the right to earn the additional 9% interest.

Esperanza completed a first phase of trenching and sampling over potential mineral zones. Then the Company reached an agreement with the Chilcaymarca Community to conduct exploration and drilling and a drill program began on the Pucarana project in April of 2011. The Company drilled 1,482 meters in the first half of this year. Results did not meet the requirements of the joint-venture partners to continue exploration activities and they are considering their alternatives. The Company incurred exploration expenditures in excess of the US$650,000 requirement within the prescribed time limits and exercised its option to acquire a 51% interest in the property. The exploration expenditures in excess of US$650,000 were subject to proportionate contribution rules (51% Esperanza – 49% Estrella). Estrella decided not to contribute their 49% share of the excess expenditures and as a result Esperanza’s interest in the property increased to 60% and Estrella was diluted to 40%.

Other Exploration

The Company has active prospecting programs in Mexico and Peru. In Mexico it controls three concessions totaling 44,333 hectares in the Guerrero-Morelos gold belt, three concessions plus an option on two other concessions totaling 9521 hectares in the El Canario project, Nuevo Leon, and three concessions totaling 12510 hectares in the Gallos Blancos project, San Luis Potosi. Agreements with all surface owners for the El Canario and Gallos Blancos projects have been made and drill permits have been applied for. All properties are early-stage exploration and are as yet undrilled.

In Peru the Company controls 10 projects totaling 16,853 hectares. Votorantim Metais has an option to purchase agreement concerning the Guadelupe property. At the Pucarana property the company has earned a 60% ownership and is considering continued exploration and strategic alternatives. The Colqi Orcco property has been drill tested and will be abandoned in 2012. The remaining seven properties are early stage exploration, 100% owned by the company, and are being advanced through surface exploration to drill status.

RESULTS OF OPERATIONS

Year Ended December 31, 2011

The Company recorded net income of $16,545,340 for the year ended December 31, 2011 (2010 - loss of $5,958,946). The net income for 2011 compared to the loss in 2010 was due to the gain on the sale of the San Luis property and lower share based compensation which were partially offset by higher exploration expenses and a higher loss on its equity position in an associated company. Share based compensation was lower in 2011 because fewer options were granted than in the prior year and the grant date fair value was less per option. Exploration expenses were higher in 2011 due to increased activity on Cerro Jumil which included an update to the initial PEA and higher activity on both the Colqui Orcco and Pucarana projects which included drilling. Esperanza incurred a greater loss on its equity in Global Minerals Ltd. (“Global”) in 2011 because it held its investment in that company for the entire year and therefore picked up a full year’s operating loss whereas in 2010 the Company only acquired its equity position in Global in December of 2010 and picked up less than one month of Global’s annual loss.

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SIGNIFICANT INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

In October and November 2010, Esperanza made a strategic investment of approximately $2.9 million in Global Minerals Ltd. (“Global”). Global’s primary asset is the Strieborna silver-copper deposit in Slovakia. This is an advanced-stage exploration project. In October 2011 Esperanza exercised all 2,079,951 of its Global share purchase warrants for a total cash investment of $1,143,973. Esperanza now owns 25,573,184 Global common shares which represented an approximate interest of 32%. In March of 2012 Esperanza purchased 3,333,333 units of a Global Minerals private placement at a price of $0.45 per unit for a total investment of $1,500,000. Each unit was comprised of one common share and one common share purchase warrant. As a result of this financing, the Company’s interest in Global was reduced to 27%.

During the quarter ended December 31, 2011 Esperanza held an equity interest in Global of approximately 32%. This investment is being accounted for by the equity method. The table below summarizes Global’s financial position as at December 31, 2011 and 2010.


	December 31, 2011 $	December 31, 2010 $


Cash and cash equivalents	3,011,000	4,088,000
Other current assets	811,000	185,000
Long-term assets	3,668,000	2,356,000
Current liabilities	(404,000)	(162,000)
Future income tax liability	-	-
Net Assets	7,086,000	6,467,000

LIQUIDITY AND CAPITAL RESOURCES

The Company started 2011 with working capital of $10,034,042 and had working capital of $19,235,210 at December 31, 2011. The significant increase in working capital was due to the receipt of $17,000,000 on the sale of the San Luis property partially offset by the costs of disposal, the loss from operations and its investment in Global. Subsequent to year end, Esperanza received $700,000 on the exercise of share purchase warrants and invested $1,500,000 in a Global private placement. The net result was a reduction of capital resources by $800,000. However, the Company currently has sufficient capital resources to cover its exploration expenses and administrative costs for the next twelve months.

OUTSTANDING SHARE DATA

There are 51,432,321 common shares issued and outstanding and 3,826,000 stock options outstanding with exercise prices ranging between $0.69 and $1.91 per option and which expire from September 12, 2012 through to November 22, 2016. All of the outstanding options have vested except for 125,000 options which were granted on November 22, 2011. The Company has 3,062,846 common share purchase warrants outstanding with an exercise price of $2.75 per warrant. These warrants expire on December 22, 2012.

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SELECTED ANNUAL FINANCIAL INFORMATION


	December 31,	December 31,
	2011	2010
Operating Expenses	$ (7,371,087)	$ (5,998,089)
Net Income (Loss)	16,545,340	(5,958,946)
Net Income (Loss) per Share – Basic and Diluted	0.30⁽¹⁾	(0.11)
Total Assets	22,933,881	15,182,286

Cash Flows (Used In):
Operating	$ (6,706,943)	$ (4,742,056)
Investing	14,781,846	(2,942,063)
Financing	1,139,485	12,279,237
Net Increase (Decrease) in Cash	9,214,388	4,595,118

₍₁₎

_{Diluted income per share was $0.29 in 2011.}

2011

For 2011, the Company had net income compared to a loss in 2010 due to the significant gain on sale of the San Luis property in 2011 and due to lower share based compensation. These favorable variances were partially offset by higher exploration expenses and an increase in the equity in the loss of Global.

In 2011 cash was generated from investing activities due to the sale of the San Luis property partially offset by an additional investment in Global whereas in 2010 the use of $2.9 million in investing activities was almost entirely due to the initial investment in Global. Cash generated by financing activities was much lower in 2011 because the Company had three private placements in 2010 which raised gross proceeds of $11.6 million, whereas there were no equity financings in 2011.

2010

For 2010, Esperanza had a higher net loss than in 2009 due to higher costs for: stock-based compensation, exploration, accounting and legal and investor relations. The loss was also higher due to lower interest earned due to lower interest rates on invested cash balances. Exploration costs were higher for two reasons. When the Company converted to IFRS, it changed its accounting policy with respect to the capitalization of exploration costs and under IFRS decided to expense these costs. The information presented above for 2009 is based on Canadian GAAP (“GAAP”) and under GAAP the Company capitalized exploration costs $1,785,562 which would have been expensed under IFRS. The second reason that exploration expenditures were higher in 2010 compared to 2009 was due to more regional reconnaissance work being conducted in Peru and Mexico. Investor relations costs were higher due to an increased activity level in activity and costs for advertising, investor conferences, consultants and management’s time. These higher costs were partially offset by a favorable exchange variance from the prior year, mainly because the value of the Mexican peso was less volatile compared to the Canadian dollar in 2010 than in 2009.

Cash used in investing activities was higher than for 2009 due to the investment in Global Minerals. Cash proceeds from financing activities were much greater than in 2009 due to the three private placements completed during the year and also due to option and warrant exercises.

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Critical Accounting Policies and Estimates

Statement of Compliance and Conversion to International Financial Reporting Standards

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These are Esperanza’s first consolidated annual financial statements presented in accordance with IFRS. Previously the Company prepared its consolidated annual financial statements in accordance with Canadian GAAP.

Basis of Presentation

These consolidated annual financial statements have been prepared on a historical cost basis and have been prepared using the accrual basis of accounting, except for cash flow information. The preparation of financial statements requires management to make judgments estimates and assumptions that affect the application of the policies and reported amounts of assets and liabilities, revenue and expenses. Actual results may differ from these estimates. The preparation of these consolidated annual financial statements resulted in changes to the accounting policies as compared to the most recent annual financial statements prepared under Canadian GAAP (“GAAP”).

The accounting policies set out below have applied consistently to all periods presented in these consolidated annual financial statements. They also have been used in preparing an opening IFRS balance sheet at January 1, 2010 for the purposes of the transition to IFRS, as required by IFRS 1, “First Time Adoption of International Financial Reporting Standards (IFRS 1). The impact of the transition from Canadian GAAP to IFRS is explained in Note 17.

Basis of Consolidation

These consolidated financial statements include the accounts of the Company and the following 100% owned subsidiaries:


Name	Place of Incorporation	Principal Activity
Esperanza Services Inc.	Colorado, United States of America	Service company
Esperanza Silver de Mexico SA de CV	Mexico	Exploration company
Esperanza Exploration (BVI) Inc.	British Virgin Islands	Holding company
Esperanza Silver Peru S.A.C.	Peru	Exploration company

Inter-company balances and transactions, including any unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the consolidated annual financial statements.

Business Combinations

Business combinations that occurred prior to January 1, 2011 were not accounted for in accordance with IFRS 3,Business Combinations (“IFRS 3”) or IAS 27,Consolidated and Separate Financial Statements, in accordance with the IFRS 1 exemption discussed in Note 17.

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity investments issued by the Company in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognized at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5,Non-current Assets Held for Sale and Discontinued Operations, which are recognized and measured at fair value less costs to sell. The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders’ proportion of the net fair value of the assets, liabilities and contingent liabilities recognized.

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Foreign Currencies

The functional and presentation currency of the Company is the Canadian dollar. Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on dates of transactions. At each financial position reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. The Company has determined that the functional currency of its foreign subsidiaries is the Canadian dollar. Exchange differences arising from the translation of the net investment in its subsidiaries are recorded as a gain or loss on foreign currency translation in the statement of comprehensive income.

Financial Instruments

Financial Assets

All financial assets are initially recorded at fair value and designated upon inception into one of the following four categories: held‐to‐maturity, available‐for‐sale, loans‐and receivables or at fair value through profit or loss (“FVTPL”). Financial assets classified as FVTPL are measured at fair value with unrealized gains and losses recognized through earnings. FVTPL has two categories: designated and held for trading. The Company’s cash and short‐term money market investments are classified as FVTPL. Cash and cash equivalents in the statement of financial position comprise of cash at banks and on hand, and short term deposits with an original maturity of three months or less, which are readily convertible into a known amount of cash. The company’s cash and cash equivalents are invested with major financial institutions in business accounts and term deposits which are available on demand by the Company for its exploration programs and administrative expenses, and are not invested in any asset backed securities.

Financial assets classified as loans‐and‐receivables and held‐to‐maturity are measured at amortized cost. The Company’s trade and other receivables are classified as loans and receivables. Financial assets classified as available‐for‐sale are measured at fair value with unrealized gains and losses recognized in other comprehensive income (loss) except for losses in value that are considered other than temporary.

Transactions costs associated with FVTPL financial assets are expensed as incurred, while transaction costs associated with all other financial assets are included in the initial carrying amount of the asset.

Financial Liabilities

All financial liabilities are initially recorded at fair value and designated upon inception as FVTPL or other financial liabilities. Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. The Company’s trade and other payables are classified as other financial liabilities.

Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Fair value changes on financial liabilities classified as FVTPL are recognized through the statement of comprehensive income.

Impairment of Financial Assets

Financial assets are assessed for indicators of impairment at each financial position reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For unlisted shares classified as available for sale (“AFS”), a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

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For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or

default or delinquency in interest or principal payments; or

it becoming probable that the borrower will enter bankruptcy or financial re-organization.

For certain categories of financial assets, such as amounts receivable and assets that are assessed not to be impaired indirectly are subsequently assessed for impairment on a collective basis. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of amounts receivable, where the carrying amount is reduced through the use of an allowance account. When an amount receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit and loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect of AFS equity securities, impairment losses previously recognized through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized directly in equity. The Company does not have any derivative financial instruments.

Exploration and Evaluation Assets and Expenditures

Acquisition costs for mineral properties, net of recoveries, are capitalized on a property-by-property basis. Acquisition costs include cash consideration and the value of common shares, based on recent issue prices, issued for mineral properties pursuant to the terms of the agreement. Exploration expenditures, net of recoveries, are charged to operations as incurred. After a property is determined by management to be commercially feasible, exploration and development expenditures on the property will be capitalized. The costs related to a property from which there is production, together with the costs of production equipment, will be depleted and amortized using the unit-of-production method.

A mineral property acquired under an option agreement where payments are made at the sole discretion of the Company, is capitalized at the time of payment. Option payments received are treated as a reduction of the carrying value of the related acquisition cost for the mineral property until the payments are in excess of acquisition costs, at which time they are then credited to operations. Option payments are at the discretion of the optionee and, accordingly, are accounted for when receipt is reasonably assured.

Capitalized acquisition costs are assessed for impairment if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. When there is little prospect of further work on a property being carried out by the Company or its partners, when a property is abandoned, or when the capitalized costs are no longer considered recoverable, the relatedproperty costs are written down to management’s estimate of their net recoverable amount.

The recoverability of the carrying amount of mineral properties is dependent on successful development and commercial exploitation, or alternatively, the sale of the respective areas of interest.

- 36 -

Property, Plant and Equipment

Property, plant and equipment (“PPE”) are carried at cost, less accumulated depreciation and accumulated impairment losses. The cost of an item of PPE consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Depreciation is provided at rates calculated to write off the cost of property, plant and equipment, less their estimated residual value, using the straight-line method at various rates ranging from 10% to 33 1/3% per annum.

An item of PPE is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss in the consolidated statement of comprehensive income or loss.

Where an item of plant and equipment comprises major components with different useful lives, the components are accounted for as separate items of plant and equipment. Expenditures incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditures are capitalized.

Equity Investments

Equity investments are carried on the consolidated balance sheet at cost, adjusted for post-acquisition changes in the Company’s share of entity’s net assets less any impairment in the value of the investment. Losses in excess of the Company’s interest in the entity are recognized only to the extent that the Company has incurred legal obligations on behalf of the entity.

Impairment

At each financial position reporting date the carrying amounts of the Company’s assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is established to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the profit or loss for the period. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Share Capital

Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects.

- 37 -

Share-based Payment Transactions

The share option plan allows Company employees and consultants to acquire shares of the Company. The fair value of options granted is recognized as an employee or consultant expense with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee.

The fair value is measured at grant date and each tranche is recognized over the period during which the options vest. The fair value of the options granted is measured using theBlack-Scholes option pricing model taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.

Income Taxes

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a future tax asset will be recovered, it provides a valuation allowance against the excess.

Additional income taxes that arise from the distribution of dividends are recognized at the same time as the liability to pay the related dividend.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to the offset of current tax assets against current tax liabilities and when they relate to income taxes levied by thesame taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Restoration, Rehabilitation and Environmental Obligations

An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the exploration, development or ongoing production of a mineral property interest. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalized at the start of each project to the carrying amount of the asset, as soon as the obligation to incur such costs arises. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. These costs are charged against profit or loss over the economic life of the related asset, through amortization using either the unit-of-production or the straight line method. The related liability is adjusted for each period for the unwinding of the discount rate and for changes to the current market-based discount rate, amount or timing of the underlying cash flows needed to settle the obligation. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and charged against profits as extraction progresses.

The Company has no material restoration, rehabilitation and environmental costs as the disturbance to date is minimal.

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Earnings (Loss) per share

The Company presents basic and diluted earnings (loss) per share data for its common shares, calculated by dividing the earnings (loss) attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares.

Segment Reporting

The Company operates in a single reportable operating segment – the acquisition, exploration and development of mineral properties.

Significant Accounting Judgments and Estimates

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The consolidated annual financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects both current and future periods.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the balance sheet date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

the recoverability of amounts receivable and prepayments which are included in the consolidated annual statements of financial position;

the carrying value of the investment in mineral properties and the recoverability of the carrying value which are included in the consolidated annual statement of financial position;

the estimated useful lives of property, plant and equipment which are included in the consolidated annual statements of financial position and the related depreciation included in the annual consolidated statement of comprehensive income (loss) for the year ended December 31, 2011;

the inputs used in accounting for share purchase option expense in the consolidated annual statements of comprehensive income (loss); and

the nil provision for income taxes which is included in the consolidated annual statements of comprehensive income (loss) and composition of deferred income tax assets and liabilities included in the consolidated annual statement of financial position at December 31, 2011.

FUTURE ACCOUNTING CHANGES

The following are IFRS changes that have been issued by the International Accounting Standards Board, which may affect the Company, but are not yet effective:

IAS 12, Income taxes, was amended in December 2010 to remove subjectivity in determining on which basis an entity measures the deferred tax relating to an asset. The amendment introduces a presumption that an entity will assess whether the carrying value of an asset will be recovered through the sale of the asset. The amendment to IAS 12 is effective for reporting periods beginning on or after January 1, 2012.

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IAS 27, Separate Financial Statements, replaced the existing IAS 27 “Consolidated and Separate Financial Statements”. IAS 27 contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. IAS 27 requires an entity preparing separate financial statements to account for those investments at cost or in accordance with IFRS 9 Financial Instruments. IAS 27 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

IAS 28, Investments in Associates and Joint Ventures, was amended in 2011 and prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. IAS 28 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

IFRS 9, Financial Instruments, was issued in November 2009 and is the first step to replace current IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2013.

IFRS 10, Consolidated Financial Statements, establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 supersedes IAS 27, Consolidated and Separate Financial Statements, and SIC-12, Consolidation—Special Purpose Entities, and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

IFRS 11, Joint Arrangements, establishes principles for financial reporting by parties to a joint arrangement. IFRS 11 supersedes current IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers, and is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

IFRS 12, Disclosure of Interests in Other Entities, applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

IFRS 13, Fair Value Measurements, defines fair value, sets out in a single IFRS framework for measuring fair value and requires disclosures about fair value measurements. The IFRS 13 applies to IFRSs that require or permit fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements), except in specified circumstances. IFRS 13 is to be applied for annual periods beginning on or after January 1, 2013. Earlier application is permitted.

IFRS 7 Financial Instruments: Disclosures, introduces additional disclosures, designed to allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. This revised standard applies to annual periods beginning on or after January 1, 2013.

IAS 12 Deferred Tax: Recovery of Underlying Assets amends the current standard to provide a presumption that recovery of the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property will, normally be through sale. As a result of the amendments, SIC-21 Income Taxes – Recovery of Revalued Non-depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is accordingly withdrawn. This revised standard applies to annual periods beginning on or after January 1, 2012.

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IAS 1 Presentation of Items of Other Comprehensive Income (“OCI”) revises the current standard regarding the way other comprehensive income is presented. The amendments are as follows:

Preserve the amendments made to IAS 1 in 2007 to require profit or loss and OCI to be presented together, i.e. either as a single “statement of profit or loss and comprehensive income” or a separate statement of profit or loss and a statement of comprehensive income – rather than requiring a single continuous statement as was proposed in the exposure draft

Require entities to group items presented in OCI based on whether they are potentially re-classifiable to profit or loss subsequently, i.e. those that might be reclassified and those that will not be reclassified

Require tax associated with items presented before tax to be shown separately for each of the two groups of OCI items (without changing the option to present items of OCI either before tax or net of tax.

The revised standard is applicable to annual reporting periods beginning on or after July 1, 2012.

The Company has not yet begun the process of assessing the impact that the new and amended standards will have on its financial statements or whether it will early-adopt any of the new requirements.

FINANCIAL INSTRUMENTS

Financial Risk Management

Esperanza’s strategy with respect to cash is to safeguard this asset by investing any excess cash in very low risk financial instruments such as term deposits or by holding funds in the highest yielding savings accounts with major Canadian banks. By using this strategy the Company preserves its cash resources and is able to marginally increase these resources through the yields on these investments. The Company’s financial instruments are exposed to certain financial risks, which include currency risk, credit risk, liquidity risk and interest rate risk.

Currency Risk

The Company is exposed to financial risk related to the fluctuation of foreign exchange rates. The Company operates in Canada, the United States, Mexico and Peru. The Company funds cash calls to its subsidiary companies outside of Canada in US dollars and a portion of its expenditures are also in the local currencies. The risk is that there could be a significant change in the exchange rate of the Canadian dollar relative to the US dollar, the Mexican peso and the Peruvian sol. A significant change in these rates could have an adverse effect on the Company’s results of operations, financial position or cash flows. The Company has not hedged its exposure to currency fluctuations.

Based on the net exposures as at December 31, 2011 and assuming that all other variables remain constant, a 10% change in the value of the Canadian dollar against the above foreign currencies would result in an increase / decrease of approximately $ 2,700 in the loss from operations.

Credit Risk

The Company’s cash and cash equivalents are mainly held through large Canadian or US financial institutions and at December 31, 2011 are mainly held in savings accounts and accordingly credit risk is minimized. The Company’s receivables are mainly VAT receivable from the Mexican government.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital resources as outlined in note 14 (b) of the December 31, 2011 annual consolidated financial statements.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. The Company’s cash is held mainly in term deposits and therefore there is currently minimal interest rate risk.

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OUTSTANDING SHARE DATA

RELATED PARTY TRANSACTIONS

During the year ended December 31, 2011 the Company paid $196,800 (2010 - $196,800) to Seabord Services Corp. (“Seabord”), a management company with two officers in common, for office space and administrative services. At December 31, 2011, the Company was indebted to Seabord in the amount of $nil (2010 - $2,480). At December 31, 2011 Esperanza had a deposit for future services with Seabord amounting to $10,000 (2010 - $10,000) which was included in prepaid expenses. These transactions were in the normal course of operations and are measured at the exchange amount which is the amount established and agreed to by the related parties. All balances due to related parties are included in accounts payable and accrued liabilities.

During the year ended December 31, 2011, Esperanza recorded the following amounts as salaries and bonuses to senior management: Bill Pincus, President - $484,853, Steve Zuker, Vice-President - $219,377, Bill Bond, Vice-President - $219,377 and Paul Bartos, Vice-President - $219,377. David Miles, the chief financial officer and Kim Casswell, the corporate secretary, are employees of Seabord and received no management compensation directly from Esperanza. Esperanza’s directors who are not part of management are paid directors’ fees. For the year ended December 31, 2011 directors’ fees were accrued or paid in the following amounts to: George Elliott - $25,000, Brian Bayley - $23,500, Steve Ristorcelli - $22,500 and Geoff Chater - $9,912.

5.E

Off-Balance Sheet Arrangements

The Company has no Off-Sheet Balance Arrangements.

5.F

Tabular Disclosure of Contractual Obligations

The Company has the following Contractual Obligation:

Total

Less Than

1 Year

2-3

Years

3-5

Years

Denver Office Lease

$ 36,400

$ -

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

6.A. Directors and Senior Management

Table No. 6

Directors and Senior Management

04/25/12


Name	Position	Age	Date of First Election Or Appointment
William J. Pincus	President, CEO, Director	58	September 30, 2002
Brian E. Bayley (1)(2)(3)	Director	59	December 14, 1999

Steve Ristorcelli (1)(2)(3)	Director	56	June 2, 2005
George Elliott (1)(2)(3)	Director	69	August 29, 2009

J. Stevens Zuker	Senior Vice President	58	September 23, 2005
David L. Miles	Chief Financial Officer	61	June 10, 2004
Kim Casswell	Corporate Secretary	55	April 2, 2004
William Bond	V. P. Exploration	60	August 1, 2003
Paul Bartos	Vice President, Chief Geologist	54	January 22, 2007

(1) Member of Audit Committee. (2) Member of the Compensation Committee (3) Member of Corporate Governance Committee

William Pincus (President, CEO and Director)

Mr. Pincus has over 30 years of industry experience. He holds the designation of Certified Professional Geologist. Most recently he was the Vice President of Sunshine Mining Company, an unrelated public company, where he oversaw the development of the Pirquitas silver deposit. Previously, Mr. Pincus was the Executive Vice President of the mining consultancy Pincock, Allen and Holt, Inc. Prior experience includes time with FMC Gold (now called Meridian Gold) and Atlas Corporation where he was involved in the successful exploration and acquisition of various precious metal projects. He graduated from the University of Colorado with a B.A. in geology in 1975 and the Colorado School of Mines with a M.Sc. in geology and an M.Sc. in mineral economics in 1981 and 1986 respectively. Mr. Pincus is a Certified Professional Geologist by the American Institute of Professional Geologists.

Brian Bayley (Director)

Mr. Bayley is a director and Resource Lending Advisor for Sprott Resource Lending Corp. (formerly Quest Capital Corp.), a TSX and NYSE Amex listed resource lending corporation. Mr. Bayley also serves as the President and Director of Ionic Management Corp., a private management company, providing various consulting, administrative, management and related services to publicly traded companies.

Steve Ristorcelli (Director)

Mr. Ristorcelli has been the Principal Geologist with Mine Development Associates (Reno, Nevada) since 1990. In total, Mr. Ristorcelli has 34 years of experience in the mining industry, in both exploration and development, mainly in North America and Latin America. Presently his primary area of interest is resource evaluation using methods that synthesize geology and statistics. Mr. Ristorcelli is a registered geologist with the American Institute of Professional Geologists, the State of California and the State of Wyoming Board of Professional Geologists.

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George Elliott (Director)

Mr. Elliott has over 35 years of experience in legal and corporate affairs as well as broad mining knowledge. He served as Chairman and CEO of Titanium Corporation from 2000 to 2007. Earlier he was senior counsel at Gowling, Lafleur & Henderson, one of Canada’s leading diversified law firms. He also serves as Director of a number of other corporations including Gammon Gold Inc.

J. Stevens Zuker (Senior Vice President)

Mr. Zuker has been the Senior Vice President for the Issuer since September 2005. Mr. Zuker is an exploration geologist with more than 23 years of experience in metals exploration. Mr. Zuker holds both a B.Sc. Degree and a M.Sc. Degree in Geology. During the past seven years, Mr. Zuker was Vice President Exploration for Gallant Minerals, a private company and was responsible for managing and performing grass roots exploration for base and precious metals in Peru and Mongolia, culminating in the generation of over 60 new projects, and venturing those projects to both major and junior mining companies.

Paul J. Bartos (Vice President and Chief Geologist)

Dr. Bartos joined the company in January 2007 to assist in overseeing its exploration activities in Mexico and South America as the Company expands its programs, and the Cerro Jumil bulk-tonnage gold deposit in Mexico. In 2005 and 2006 Dr. Bartos served on the Company's Executive Advisory Committee.

Dr. Bartos is a noted authority on epithermal deposits and was with ASARCO Inc. for 20 years, latterly as its Latin American Exploration and Business Development Manager. Among other exploration accomplishments, he was responsible for the discovery and development of mineral resources of the San Bartolome silver deposit in Bolivia. Most recently Dr. Bartos was Director of the Geology Museum at the Colorado School of Mines where he also earned his doctorate in geology

David Miles (Chief Financial Officer)

Mr. Miles has been the Chief Financial Officer for the Issuer since June 2004. Mr. Miles is a Chartered Accountant with a B.Sc. in Geology who has over 20 years of experience in a large multinational corporate environment, primarily with Cominco Ltd. While with Cominco, he held various positions in corporate finance and was most recently Exploration Controller, responsible for the financial reporting of the corporation’s eight international exploration subsidiaries as well as reporting for Canadian based exploration. From 2002 to 2004, Mr. Miles was the corporate controller for Viceroy Resource Corporation, which changed its name to Quest Capital Corp. after merging with Quest Investment Corp. in June of 2003. In March of 2004, Mr. Miles left Quest Capital Corp. to become Chief Financial Officer of Eurasian Minerals Inc., Sanu Resources Ltd. and Esperanza Resources Corp., all of which are listed on the TSX Venture Exchange. He subsequently resigned as CFO of Sanu in 2007 and Eurasian in 2008 and has become CFO of Colombian Mines Corporation (2006) Nevgold Resource Corp. (2008), Lara Exploration Ltd. (2009), and Inca Pacific Resources Inc. (2010). All of these companies are listed on the TSX Venture Exchange.

William Bond (Vice President of Exploration)

Mr. Bond has been the Principal Geologic Consultant for the Issuer since October 2002 and was appointed a Vice President on August 1, 2003. He holds the designation of Professional Geologist. Mr. Bond has been involved with precious metals exploration and production for the past 26 years. Previous positions held include Mines Operations Geologist for Homestake Mining Company, an unrelated public company; Chief Geologist for Asamera Minerals (U.S.) Inc., an unrelated public company; and, Chief Geologist for Sunshine Mining & Refining Company, Inc., an unrelated public company. Mr. Bond has been involved in the discovery and exploration of several major mineral deposits including the West Chance silver deposit at the Sunshine Mine and the Pirquitas deposit. Mr. Bond earned a B.A. in geology from Winona State University and an M.S. in geology from the South Dakota School of Mines and Technology.

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Kim Casswell (Corporate Secretary)

Ms. Casswell has been the Corporate Secretary since April 2, 2004. She has held several corporate secretary positions with public companies listed on both the TSX Venture Exchange and the Toronto Stock Exchange since 1990.

The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles/By-Laws of the Company.

The Senior Management serves at the pleasure of the Board of Directors.

No Director and/or Senior Management had been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or Senior Management, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct/practice/employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

There are no family relationships between any two or more Directors or Senior Management.

There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.

6.B. Compensation

Cash Compensation

Total cash compensation accrued and/or paid (directly and/or indirectly) to all Directors/Senior Management during Fiscal 2011 ended 12/31/2011 was $716,434paid to William Pincus, the President, J. Stevens Zuker, the Vice President, David Miles, the Chief Financial Officer, William Bond, the Senior VP Exploration, Paul Bartos, VP, Chief Geologist and Kim Casswell, Corporate Secretary of the Issuer. William Pincus, J. Stevens Zuker, William Bond and Paul Bartos became employees effective November 1, 2007 and accordingly two months of their annual remuneration was earned as salary.

Summary Compensation Table

Long-Term

Compensation

Annual Compensation

Awards

Payouts

Name and Principal Position

Year

Salary

Bonus

Other

Annual Compensation

Securities Under Options/SARs Granted

Restricted Shares or Restricted Share Units

LTIP Payouts

All Other Comp.⁽⁵⁾

William Pincus,

President

2011

2010

2009

160,762

153,722

171,352

50,995

50,010

52,470

Nil

100,000

300,000

100,000

Nil

273,096

Nil

Michael⁽¹⁾

Halvorson,

Director

2011

2010

2009

Nil

9,863

20,000

Nil

75,000

50,000

Nil

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Brian Bayley, Director	2011 2010 2009	Nil Nil Nil		Nil Nil Nil	23,500 25,000 20,000	50,000 75,000 50,000	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil

Steven Ristorcelli, Director	2011 2010 2009	Nil Nil Nil		Nil Nil Nil	22,500 25,342 22,500	50,000 75,000 50,000	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil

George⁽²⁾ Elliott, Director	2011 2010 2009	Nil Nil Nil		Nil Nil Nil	25,000 25,500 22,000	50,000 75,000 50,000	Nil Nil Nil	Nil Nil Nil	Nil Nil Nil

Geoffrey⁽³⁾ Chater, Director	2011 2010 2009	Nil Nil N/A	Nil Nil N/A		Nil 13,795 N/A	75,000 100,000 N/A	Nil Nil N/A	Nil Nil N/A	Nil Nil N/A

William Bond, V.P. Exploration	2011 2010 2009	117,892 112,729 125,658		25,498 25,005 26,235	Nil Nil Nil	75,000 150,000 75,000	Nil Nil Nil	Nil Nil Nil	75,988 Nil Nil

Kim Casswell,⁽⁴⁾ Corporate Secretary	2011 2010 2009	Nil Nil Nil		Nil Nil Nil	Nil Nil Nil	49,500 45,000 42,100	Nil Nil Nil	Nil Nil Nil	10,000 Nil Nil

David L.⁽⁴⁾ Miles Chief Financial Officer	2011 2010 2009	Nil Nil Nil		Nil Nil Nil	Nil Nil Nil	49,500 45,000 43,200	Nil Nil Nil	Nil Nil Nil	10,000 Nil Nil

J. Stevens Zuker Senior Vice President	2011 2010 2009	117,892 112,729 125,658		25,498 25,005 26,235	Nil Nil Nil	75,000 150,000 75,000	Nil Nil Nil	Nil Nil Nil	75,988 Nil Nil

Paul Bartos Vice President, Chief Geologist	2011 2010 2009	117,892 112,729 125,658		25,498 25,005 26,235	Nil Nil Nil	75,000 200,000 75,000	Nil Nil Nil	Nil Nil Nil	75,988 Nil Nil

(1)

Mr. Halvorson ceased to be a director on June 8, 2010.

(2)

Mr. Elliott was elected to the board of directors on August 29, 2008

(3)

Mr. Chater was elected as a director on June 8, 2010 but did not stand for re-election at the Annual General Meeting of shareholders held on June 8, 2011.

(4)

Pursuant to a Management Services Agreement between the Corporation and Seabord Services Corp. (“Seabord”), Ms. Casswell’s and Mr. Miles’s remuneration is paid by Seabord.

(5)

These amounts represent a discretionary cash bonus that was paid in recognition of the significant efforts and contributions made by senior management towards the discovery and development of the San Luis Project (the “Project”) in Peru and the subsequent sale of the Corporation’s interest in the Project to Silver Standard Resources Inc. in 2011.

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Table No. 7

Stock Option Grants in Fiscal 2011 Ended 12/31/2011


Name	Number of Options Granted	% Of Total Options Granted	Exercise Price per Share	Grant Date	Expiration Date	Mkt. Value of Securities Underlying Options on Date of Grant

William Pincus	100,000	12.83%	$1.49	06/10/2011	06/10/2016	$1.49



Brian Bayley	50,000	6.41%	$1.49	06/10/2011	06/10/2016	$1.49

Steven Ristorcelli	50,000	6.41%	$1.49	06/10/2011	06/10/2016	$1.49

George Elliott	50,000	6.41%	$1.49	06/10/2011	06/10/2016	$1.49

	Nil	N/A	N/A	N/A	N/A	N/A

William Bond	75,000	9.62%	$1.49	06/10/2011	06/10/2016	$1.49

Paul Bartos	75,000	9.62%	$1.49	06/10/2011	06/10/2016	$1.49

Kim Casswell	49,500	6.35%	$1.49	06/10/2011	06/10/2016	$1.49

David Miles	49,500	6.35%	$1.49	06/10/2011	06/10/2016	$1.49

J. Stevens Zuker	75,000	9.62%	$1.49	06/10/2011	06/10/2016	$1.49

Consultants	205,500	26.36%	$1.49	06/10/2011	06/10/2016	$1.49

The following table gives certain information concerning stock option exercises during Fiscal 2010 by our Senior Management and Directors. It also gives information concerning stock option values.

- 47 -

Table No. 8

Aggregated Stock Options Exercises in Fiscal 2011

Fiscal Yearend Unexercised Stock Options

Fiscal Yearend Stock Option Values

Senior Management/Directors


Name	Number of Shares Acquired on Exercise	Aggregate Value Realized⁽¹⁾	Number of Unexercised Options at Fiscal Year-End Exercisable/Unexercisable	Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable/Unexercisable⁽²⁾
David Miles	Nil	Nil	49,500/0 @ $1.49 45,000/0 @ $1.43 50,000/0 @ $1.40	$0 $0 $0
Kim Casswell	Nil	Nil	49,500/0 @ $1.49 45,000/0 @ $1.43 50,000/0 @ $1.40	$0 0 0
William Bond	Nil	Nil	75,000/0 @ $1.49 150,000/0 @ $1.43 75,000/0 @ $1.40	$0 0 0
Paul Bartos	Nil	Nil	75,000/0 @ $1.49 200,000/0 @ $1.43 75,000/0 @ $1.40	$0 0 0
J. Stevens Zuker	10,000	$9,500	75,000/0 @ $1.49 150,000/0 @ $1.43 65,000/0 @ $0.69 75,000/0 @ $1.40	$0 0 32,500 0
William Pincus	100,000	$15,000	100,000/0 @ $1.49 300,000/0 @ $1.43 100,000/0 @ $0.69 100,000/0 @ $1.40	$0 0 50,000 0
Brian Bayley	Nil	Nil	50,000/0 @ $1.49 75,000/0 @ $1.43 50,000/0 @ $0.69 75,000/0 @ $1.40	$0 0 25,000 0
Steven Ristorcelli	75,000	$23,250	50,000/0 @ $1.49 75,000/0 @ $1.43 50,000/0 @ $0.69 75,000/0 @ $1.40	$0 0 25,000 0
George Elliott	Nil	$61,100	50,000/0 @ $1.49 75,000/0 @ $1.43 90,000/0 @ $0.69	$0 64,500 144,000

(1)

Calculated using the closing market price of the common shares on the date(s) of exercise less the exercise price of the stock options multiplied by the number of shares acquired.

(2)

The closing price of the Issuer’s common shares on the TSX Venture Exchange on December 31, 2011 was $1.19.

- 48 -

Director Compensation.

The fees payable to the independent directors of the Issuer are for their services as directors and as members of committees of the Board as follows:

Board or

Committee Name

Annual Retainer

($)

Meeting Stipend

($)

Per diem fees

($)

Board of Directors

15,000

500 per meeting

Nil

Audit Committee

5,000 (Chairman)

2,500 (Member)

Nil

Compensation Committee

2,000 (Chairman)

1,000 (Member)

Nil

Corporate Governance Committee

2,000 (Chairman)

1,000 (Member

Nil

Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Issuer other than services ordinarily required of a Director. Other than indicated above no Director received any compensation for special assignments.

Stock Options. The Issuer may grant stock options to Directors, Senior Management and employees. As at April 20, 2012, 3,826,000 stock options have been granted and 462,000 were exercised during Fiscal 2011. Refer to ITEM #6.E., "Share Ownership" and Table No. 8 for information about stock options outstanding.

Change of Control Remuneration.

The Issuer does not have written contracts with any of its employees (collectively, the “Covered Employees”) respecting the resignation, retirement or other termination of employment of any Covered Employee resulting from a Change of Control (as described below) of the Corporation (“Termination of Employment”). To provide for the compensation of Covered Employees on Termination of Employment, the Issuer has implemented an Employment Termination Compensation Plan (the “TerminationPlan”).

The Termination Plan provides that upon a Change of Control of the Issuer which results in a Termination of Employment of a Covered Employee within the six months following the Change of Control, such Covered Employee shall be entitled to compensation, payable within five days of such Termination of Employment, as follows:


Covered Employee	Compensation
Chief Executive Officer (CEO)	2 times Base Salary
Vice-President (VP)	1 times Base Salary
Any other Covered Employee	1/6 of Base Salary for each year of employment not to exceed 1 times base salary

For the purposes of the Termination Plan, the following terms have the following meanings:

“Base Salary” means the annual salary of the Covered Employee in effect immediately prior to the Change of Control or Termination of Employment, whichever is greater, excluding any bonus or other payment in respect of merit or the Covered Employee’s job performance which is paid or became payable within the preceding 12 months but excluding any stock options and health, pension and other benefits.

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“Change of control” means any change in the beneficial ownership of the voting shares of the Corporation as a result of which a person, a group of persons ‘acting jointly or in concert’ or persons ‘associated’ or ‘affiliated’ with any such person(s) or group(s), as such words and phrases are used in theSecurities Act(British Columbia), are in a position to exercise effective control of the Corporation, and any such person(s) or group(s) directly or indirectly owning or controlling voting shares of the Corporation in excess of 20% of the votes attaching to all voting shares of the Corporation shall be deemed to be in a position to exercise effective control of the Corporation.

“Termination of Employment” means any voluntary, involuntary or coerced resignation, retirement or other termination of employment of any Covered Employee directly or indirectly resulting from a Change of Control and includes the occurrence of any of the following events after a Change of Control, if the Covered Employee does not consent thereto:

(a)

a material change in office held or employment;

(b)

a material change in the nature or scope of duties;

(c)

a requirement to change the place of employment by more than 45 miles;

(d)

a reduction in remuneration;

(e)

a withdrawal of benefits or privileges of employment; or

(f)

exclusion from any incentive compensation plans in which the Covered Employee was a participant.

A Termination of Employment shall not be deemed to occur if part of the Issuer’s business is ‘spun out’ or ‘spun off’ in a transaction where employees are invited to join a new corporation with substantially the same duties and terms of employment as with the Issuer where the new corporation has substantially the same management and shareholder structure as the Corporation and is formed to acquire some or all of the Issuer’s assets.

The following table sets out the payments to which each Covered Employee would be entitled if a Termination of Employment had occurred on December 31, 2011.


Covered Employee	Compensation
William J. Pincus CEO	$336,567
J. Stevens Zuker Senior Vice-President	$123,408
Paul Bartos Vice-President & Chief Geologist	$123,408
William Bond Vice-President, Exploration	$123,408
Non NEOs	$419,416

Other Compensation. No Senior Management/Director received “other compensation” in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Senior Management/Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.

Bonus/Profit Sharing/Non-Cash Compensation. Except for the stock option program discussed in ITEM #6.E., the Issuer had no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Issuer's Directors or Senior Management.

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Pension/Retirement Benefits. No funds were set aside or accrued by the Issuer during Fiscal 2011 to provide pension, retirement or similar benefits for Directors or Senior Management.

6.C. Board Practices

6.C.1. Terms of Office. Refer to ITEM 6.A.1.

6.C.2. Directors’ Service Contracts. --- No Disclosure Necessary ---

6.C.3. Board of Director Committees.

The Issuer has an Audit Committee, which recommends to the Board of Directors the engagement of the independent auditors of the Issuer and reviews with the independent auditors the scope and results of the Issuer’s audits, the Issuer’s internal accounting controls, and the professional services furnished by the independent auditors to the Issuer. The current members of the Audit Committee are: Steven Ristorcelli, George Elliott and Brian Bayley. The Audit Committee met four times during Fiscal 2011.

The Issuer has a Compensation Committee, which recommends to the Board of Directors the amount of compensation paid to the officers of the Issuer and then subsequently reviews this compensation. The current members of the Compensation Committee are: George Elliott, Steven Ristorcelli and Brian Bayley.

The Issuer has a Corporate Governance Committee, which identifies individuals qualified to become Board Members and recommends candidates to fill Board vacancies and newly created Director positions. The Committee also recommends whether incumbent Directors should be nominated for re-election to the Board upon expiration of their terms. The Committee will supervise and evaluate the Company’s securities compliance procedures and report to the Board on any necessary changes to such procedures and on the recommended adoption of any additional procedures. The current members of the Corporate Governance Committee are: George Elliott, Steven Ristorcelli and Brian Bayley.

6.D. Employees

As of April 20, 2012, the Issuer had a total of 9 employees based in Peru: one General Manager and Senior Geologist, one Chief Geologist, two Project Geologists, one Logistician and Community Relations Manager, two Field Assistants, one Administrative Assistant and one Janitor. The President, VP and Chief Geologist, Senior Vice-President, Vice-President of Exploration, Corporate Communications Manager, and 3 field technicians as based out of the Issuer’s Denver, Colorado office. The remaining staff are hired as independent contractors. In November 2007, the Corporation, through its wholly-owned United States subsidiary located in Denver, Colorado, Esperanza Services, Inc., retained Mr. Pincus to act as its President, J. Stevens Zuker to act as its Senior Vice-President, Paul Bartos to act as its Vice-President & Chief Geologist and William Bond to act as its Vice-President. See Item 6 – Directors, Senior Management & Employees for a description of their job responsibilities. Esperanza Services, Inc. also employs two geologists and two administrative staff.

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6.E. Share Ownership

Table No. 9 lists, as of April 20, 2012, Directors and Senior Management who beneficially own the Issuer's voting securities, consisting solely of common shares, and the amount of the Issuer's voting securities owned by the Directors and Senior Management as a group.

Table No. 9

Shareholdings of Directors and Senior Management

Shareholdings of 5% Shareholders


Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class

Common	William Pincus (1)	1,886,568	3.67%
Common	Brian Bayley (2)	575,000	1.12%
Common	Steve Ristorcelli (3)	392,000	0.76%
Common	George Elliott (4)	220,000	0.43%
Common	William Bond (5)	414,600	0.65%
Options	Kim Casswell (6)	144,500	0.28%
Options	David Miles (7)	144,500	0.28%
Common	J. Stevens Zuker (8)	512,877	1.00%
Common	Paul Bartos (9)	425,100	0.83%

(1)

Of these shares, 600,000 are represented by currently exercisable share purchase options.

(2)

Of these shares, 250,000 are represented by currently exercisable share purchase options.

(3)

Of these shares, 250,000 are represented by currently exercisable share purchase options.

(4)

Of these shares, 215,000 are represented by currently exercisable share purchase options.

(5)

Of these shares, 300,000 are represented by currently exercisable share purchase options.

(6)

Of these shares, 144,500 are represented by currently exercisable share purchase options.

(7)

Of these shares, 144,500 are represented by currently exercisable share purchase options.

(8)

Of these shares, 365,000 are represented by currently exercisable share purchase options.

(9)

Of these shares, 350,000 are represented by currently exercisable share purchase options.

# Based on 51,432,321 shares outstanding as of 04/20/2012

Stock Options. The Board has established an incentive stock option plan (the “Option Plan”). The purpose of the Option Plan is to attract and motivate the directors, officers and employees of the Corporation (and any of its subsidiaries), employees of any management corporation and consultants to the Corporation (collectively the “Optionees”) and thereby advance the Corporation’s interests by providing them an opportunity to acquire an equity interest in the Corporation through the exercise of stock options granted to them under the Option Plan.

Pursuant to the Option Plan, the Board may grant options to Optionees in consideration of them providing their services to the Corporation or a subsidiary. The number of shares subject to each option is determined by the Board within the guidelines established by the Option Plan. The options enable the Optionees to purchase shares of the Corporation at a price fixed pursuant to such guidelines. The options are exercisable by the Optionee giving the Corporation notice and payment of the exercise price for the number of shares to be acquired.

- 52 -

The Option Plan authorizes the Board to grant stock options to the Optionees on the following terms:

The number of shares subject to issuance pursuant to outstanding options, in the aggregate, cannot exceed 10% of the Corporation’s issued shares.

The number of shares subject to issuance upon the exercise of options granted under the Option Plan by one Optionee or all Optionees providing investor relations services is subject to the following limitations

(a)

no Optionee can be granted options during a 12 month period to purchase more than

(i)

5% of the issued shares of the Corporation unless disinterested shareholder approval has been obtained(such approval has not been sought), or

(ii)

2% of the issued shares of the Corporation, if the Optionee is a consultant, and

(b)

the aggregate number of shares subject to options held by all Optionees providing investor relations services cannot exceed 2% in the aggregate.

Unless the Option Plan has been approved by disinterested shareholders (such approval has not been obtained), options granted under the Option Plan, together with all of the Corporation’s previously established and outstanding stock options, stock option plans, employee stock purchase plans or any other compensation or incentive mechanisms involving the issuance or potential issuance of its shares, shall not result, at any time, in

(a)

the number of shares reserved for issuance pursuant to stock options granted to insiders exceeding 10% of the shares outstanding at the time of granting,

(b)

the grant to insiders, within a one year period, of options to purchase that number of shares exceeding 10% of the outstanding shares, or

(c)

the issuance to any one insider and such insider’s associates, within a one year period, of shares totaling in excess of 5% of the outstanding shares.

The exercise price of the options cannot be set at less than the greater of $0.10 per share and the closing trading price of the Corporation’s shares on the day before the granting of the stock options. If the Optionee is subject to the tax laws of the United States of America and owns (determined in accordance with such laws) greater than 10% of the Corporation’s shares, the exercise price shall be at least 110% of the price established as aforesaid.

The options may be exercisable for up to ten years.

There are not any vesting requirements unless the Optionee is a consultant providing investor relations services to the Corporation, in which case the options must vest over at least 12 months with no more than one-quarter vesting in any three month period. However, the Board may impose additional vesting requirements and, subject to obtaining any required approval from the Exchange, may authorize all unvested options to vest immediately. If there is a potential ‘change of control’ of the Corporation due to a take-over of the Corporation or a similar event, all unvested options, subject to obtaining any required approval from the Exchange, shall vest immediately.

- 53 -

The options can only be exercised by the Optionee (to the extent they have already vested) for so long as the Optionee is a director, officer or employee of, or consultant to, the Corporation or any subsidiary or is an employee of the Corporation’s management corporation and within a period thereafter not exceeding the earlier of:

(a)

the original expiry date;

(b)

90 days after ceasing to be a director, officer or employee of, or consultant at the request of the Board or for the benefit of another director or officer to, the Corporation unless the Optionee is subject to the tax laws of the United States of America, in which case the option will terminate on the earlier of the 90^th day and the third month after the Optionee ceased to be an officer or employee; and

(c)

if the Optionee dies, within one year from the Optionee’s death.

If the Optionee is terminated ‘for cause’, involuntarily removed or resigns (other than at the request of the Board or for the benefit of another director or officer) from any such positions, the option will terminate concurrently.

The options are not assignable except to a wholly-owned holding company. If the option qualifies as an ‘incentive stock option’ under the United StatesInternal Revenue Code, the option is not assignable to a holding company.

No financial assistance is available to Optionees under the Option Plan.

10.

Disinterested shareholder approval must be obtained prior to the reduction of the exercise price of options granted to insiders of the Corporation.

Any amendments to the Option Plan or outstanding stock options are subject to the approval of the Exchange and, if required by the Exchange, of the shareholders of the Corporation, possibly with only ‘disinterested shareholders’ being entitled to vote. The amendment to an outstanding stock option will also require the consent of the Optionee.

No options have been granted under the Option Plan which are subject to shareholder approval.

The Option Plan does not permit stock options to be transformed into stock appreciation rights.

The names and titles of the Directors/Executive Officers of the Issuer to whom outstanding stock options have been granted and the number of common shares subject to such options are set forth in Table No. 10 as of 04/20/2012, as well as the number of options granted to Directors and independent contractors.

Table No. 10

Stock Options Outstanding


Name	Number of Shares of Common Stock	Exercise Price	Grant Date	Expiration Date

Officers/Directors:

William Pincus	100,000 300,000 100,000 100,000	$1.49 $1.43 $0.69 $1.40	6/10/2011 6/08/2010 5/22/2009 2/08/2008	6/11/2016 6/08/2015 5/22/2014 2/08/2013

- 54 -


Brian Bayley	50,000 75,000 50,000 75,000	$1.49 $1.43 $0.69 $1.40	6/10/2011 6/08/2010 5/22/2009 2/08/2008	6/10/2016 6/08/2015 5/22/2014 2/08/2013

Steven Ristorcelli	50,000 75,000 50,000 75,000	$1.49 $1.43 $0.69 $1.40	6/10/2011 6/08/2010 05/22/2009 2/08/2008	6/10/2016 6/08/2015 5/22/2014 2/08/2013

George Elliott	50,000 75,000 90,000	$1.49 $1.43 $0.69	6/10/2011 6/08/2010 10/06/2008	6/10/2016 6/08/2015 10/06/2013

William Bond	75,000 150,000 75,000	$1.49 $1.43 $1.40	6/10/2011 6/08/2010 2/08/2008	6/10/2016 6/08/2015 2/08/2013

Kim Casswell	49,500 45,000 50,000	$1.49 $1.43 $1.40	6/10/2011 6/08/2010 2/08/2008	6/10/2016 6/08/2015 2/08/2013

David Miles	49,500 45,000 50,000	$1.49 $1.43 $1.40	6/10/2011 6/08/2010 2/08/2008	6/10/2016 6/08/2015 2/08/2013


J. Stevens Zuker	75,000 150,000 65,000 75,000	$1.49 $1.43 $0.69 $1.40	6/10/2011 6/08/2010 5/22/2009 2/08/2008	6/10/2016 6/08/2015 5/22/2014 2/08/2013

Paul Bartos	75,000 200,000 75,000	$1.49 $1.43 $1.40	6/10/2011 6/08/2010 2/08/2008	6/10/2016 6/08/2015 2/08/2013

Consultants/Employees	200,000 205,500 261,500 35,000 60,000 245,000 200,000	$1.01 $1.49 $1.43 $0.70 $0.69 $1.40 $1.91	11/22/2011 6/10/2011 6/08/2010 6/10/2009 5/22/2009 2/08/2008 9/12/2007	11/22/2016 6/10/2016 6/08/2015 6/10/2014 5/22/2014 2/08/2013 9/12/2012

Total Officers/Directors

2,619,000

Total Employees/Consultants

1,207,000

Total Officers/Directors/Etc.

3,826,000

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A. Major Shareholders.

7.A.1.a. Holdings By Major Shareholders.

The Company is aware of 1 persons/companies who beneficially own 5% or more of the Registrant's voting securities. The table below lists as of 04/20/2012, persons and/or companies holding 5% or more beneficial interest in the Company’s outstanding common stock.

5% or Greater Shareholders


Title of Class	Name of Owner	Amount and Nature of Beneficial Ownership	Percent of Class

Common	Sprott Inc.	8,346,563	14.57%

Based on shares outstanding as of 04/20/2012.

7.A.1.b. Significant Changes in Major Shareholders’ Holdings.

---No Disclosure Required---

7.A.1.c. Different Voting Rights. The Issuer’s major shareholders do not have different voting rights.

7.A.2. Canadian Share Ownership.

On 04/20/2012, the Issuer’s shareholders’ list showed 51,432,321 common shares outstanding and 3,577 registered shareholders. The Issuer has researched the indirect holdings by depository institutions and other financial institutions estimates that there are: 510 holders of record" resident in Canada, 3,047 “holders of record" resident in the USA, and 20 “holders of record” resident elsewhere.

The Issuer has researched the indirect holding by depository institutions and other financial institutions; based on this research and other research into the indirect holdings of other institutions, the Issuer believes that it has approximately 6,724 beneficial owners of its common shares.

7.A.3. Control of the Company

The Issuer is a publicly owned Canadian corporation, the shares of which are owned by U.S. residents, Canadian residents and other foreign residents. The Issuer is not controlled by any foreign government or other person(s) except as described in ITEM #4.A., “History and Growth of the Company”, and ITEM #6.E., “Share Ownership”.

7.A.4. Change of Control of Company Arrangements.

No Disclosure Necessary

7.B. Related Party Transactions

None

- 56 -

Indirect Payments to William Pincus, President

Pursuant to a Consulting Agreement dated September 15, 2002, as amended July 25, 2003, and January 1, 2007, with William J. Pincus, the Corporation retained Mr. Pincus as its President and Chief Executive Officer at the rate of US$150,000 per annum plus medical and dental benefits. The agreement had a term of five years. Effective November 1, 2007, the Corporation and Mr. Pincus terminated the agreement and the Corporation, through its wholly-owned United States subsidiary, Esperanza Services, Inc., retained Mr. Pincus to act as its President for the same remuneration and benefits. The new agreement may be terminated on reasonable notice by either party.

Shareholder Loans

---No Disclosure Required---

Amounts Owing to Senior Management/Directors

At 12/31/2011 $Nil was owed to senior management and directors for consulting services.

Other than as disclosed above, there have been no transactions since 12/31/2011, or proposed transactions, which have materially affected or will materially affect the Issuer in which any director, executive officer, or beneficial holder of more than 5% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest. Management believes the transactions referenced above were on terms at least as favorable to the Issuer as the Issuer could have obtained from unaffiliated parties.

7.C. Interests of Experts and Counsel --- No Disclosure Necessary ---

ITEM 8. FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial Information

The Issuer's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The audit reports of De Visser Gray, Independent Chartered Accountants, are included herein immediately preceding the financial statements.

Audited Financial Statements:

Fiscal 2011 and 2010 Ended December 31^st

8.A.7. Legal/Arbitration Proceedings

The Directors and the management of the Issuer do not know of any material, active or pending, legal proceedings against them; nor is the Issuer involved as a plaintiff in any material proceeding or pending litigation.

The Directors and the management of the Issuer know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Issuer.

8.B. Significant Changes

There have been no significant changes to the Issuer’s financial condition since the end of the fiscal year.

- 57 -

ITEM 9. THE OFFER AND LISTING

9.A. Common Share Trading Information

The Company's common shares trade on the TSX Venture Exchange in Vancouver, British Columbia, Canada, under the symbol "EPZ". The Issuer applied for listing on the TSX Venture Exchange on began trading on the TSX Venture Exchange on August 18, 2003.

Table No. 13 lists the high and low sales prices on the TSX Venture Exchange for the last six months, last three fiscal quarters, and last fiscal year.

Table No. 13

TSX Venture Exchange (formerly the Canadian Venture Exchange)

Common Shares Trading Activity

- Sales -

Canadian Dollars


Period	High	Low

Month Ended 03/31/12	$1.66	$1.27
Month Ended 02/28/12	$1.75	$1.52
Month Ended 01/31/12	$1.82	$1.19
Month Ended 12/31/11	$1.37	$1.04

Fiscal Year Ended 12/31/2011	$2.27	$1.00

Fiscal Quarter Ended 12/31/11	$1.50	$1.00
Fiscal Quarter Ended 09/30/11	$1.80	$1.30
Fiscal Quarter Ended 06/30/11	$2.14	$1.40
Fiscal Quarter Ended 03/31/11	$2.27	$1.56

9.A.5. Common Share Description

Registrar/Common Shares Outstanding/Shareholders

The Issuer has only one class of shares authorized, namely, common shares without par value. There are an unlimited number of common shares authorized. As of April 20, 2012 a total of 51,432,321 shares were issued and outstanding.

All shares are initially issued registered in the name of the shareholder or its nominee. There are no restrictions on the transferability of the shares imposed by the Issuer’s constating documents.

Computershare Investor Services Inc. (located at 510 Burrard Street, Vancouver, British Columbia, Canada V6C 3B9) is the registrar and transfer agent for the common shares.

Common Share Description

All of the authorized common shares of the Issuer are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets.

Holders of common shares are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders. Holders of common shares are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefor.

- 58 -

No shares have been issued subject to call or assessment. There are no pre-emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds.

Provisions as to the modification, amendment or variation of such shareholder rights or provisions are contained in theBusiness Corporations Act (British Columbia). Unless the Act or the Issuer's Articles otherwise provide, any action to be taken by a resolution of the shareholders may be taken by an ordinary resolution, being approval by a vote of a majority of the votes cast in respect of the matter at the shareholders' meeting.

There are no restrictions on the repurchase or redemption of common shares of the Issuer while there is any arrearage in the payment of dividends or sinking fund installments.

Stock Options

Refer to ITEM 6.E. and Table No. 8 for additional information.

Share Purchase Warrants

As at April 20, 2012, the following share purchase warrants are outstanding:


Number of Warrants Outstanding	Exercise Price	Expiry Date

2,926,900	$2.75	December 22, 2012

Share Purchase Broker’s Warrants

As at April 20, 2012, the following share purchase broker’s warrants are outstanding:


Number of Broker’s Warrants Outstanding	Exercise Price	Expiry Date
135,946	$2.75	December 22, 2012

9.A.6. Differing Rights

9.A.7.a. Subscription Warrants/Right

9.A.7.b. Convertible Securities/Warrants

--- No Disclosure Necessary ---

9.C. Stock Exchanges Identified

The common shares trade on the TSX Venture Exchange in Vancouver, British Columbia.

Refer to ITEM #9.A.4.

- 59 -

ITEM 10. ADDITIONAL INFORMATION

10.A. Share Capital

10.A.1. Authorized/Issued Capital.

Effective March 29, 2004, theBusiness Corporations Act(British Columbia) (the “New Act”) replaced the previousCompanyAct (British Columbia) (the “Old Act”). As a consequence, all British Columbia companies are now governed by the New Act. The New Act is intended to modernize and streamline company law in British Columbia. The New Act permits an unlimited authorized share capital whereas the Old Act required that the authorized capital be fixed at a number approved by shareholders. At the Company’s Annual and Special General Meeting held on June 2, 2005, shareholders of the Company passed a special resolution allowing for the number of common shares authorized to be issued be increased to an unlimited number of common shares without nominal or par value and that the Company’s Notice of Articles be altered accordingly. On June 6, 2005, a Notice of Alteration was filed with the British Columbia Registrar of Companies allowing for the increase of the Company’s authorized share capital to an unlimited number of common shares. As of April 20, 2012 there were 51,432,321 common shares issued and outstanding.

As of 12/31/2011, 12/31/2010, and 12/31/2009 there were an unlimited number of common shares without par value authorized.

During the last five years, less than 10% of the capital has been “paid for” with assets other than cash.

10.A.2. Shares Not Representing Capital.

10.A.3. Shares Held By Company.

--- No Disclosure Necessary ---

10.A.4. Stock Options/Share Purchase Warrants

10.A.5. Stock Options/Share Purchase Warrants

--- Refer to Table No. 8 and Table No. 10. ---

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10.A.6. History of Share Capital

The Issuer has financed its operations through funds raised in public/private placements of common shares and Special Warrants; and shares issued upon conversion of Special Warrants.


Fiscal Year	Nature of Share Issuance	Number of Shares	Amount

Fiscal 2007	Issued for Property Option Exercise of Stock Options Exercise of Share Purchase Warrants Private Placement Agent’s options issued on private placement Reclassification on exercise of stock options Reclassification on exercise of Agent’s warrants	40,000 232,000 1,937,976 4,110,000 - - -	$85,000 $179,245 $1,921,898 $14,073,312 $(346,211) $79,392 $8,457

Fiscal 2008 Fiscal 2009 Fiscal 2010 Fiscal 2011	Exercise of stock options Issued for Property Option Reclassify contributed surplus on exercise of options Exercise of stock option Reclassification on exercise of stock options Private placements Exercise of stock options Exercise of warrants Reclassification on exercise of stock options Reclassification on exercise of stock warrants Exercise of stock options Exercise of warrants Reclassification on exercise of stock options Reclassification on exercise of stock warrants	1,150,000 45,000 - 412,700 - 7,426,900 1,163,300 242,500 462,000 262,700	$325,800 $56,550 $216,598 $208,516 $140,122 $11,000,425 $854,437 $424,375 416,789 68,451 $679,760 $459,725 298,060 67,129
Fiscal 2012	Exercise of warrants	400,000	$700,000

10.A.7. Resolutions/Authorizations/Approvals

--- No Disclosure Necessary ---

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10.B. Articles of the Company

New British Columbia Corporations Act

Background

Objects and Purposes

The Articles of Esperanza place no restrictions upon the type of business that the Company may engage in.

Disclosure of Interest of Directors,

Part 17 of the Articles

17.1 A director or senior officer who holds a disclosable interest (as that term is used in theBusiness Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and the extent provided in theBusiness Corporations Act.

17.2 A director who holds a disclosable interest in a contract into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

17.3 A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

17.4 A director of senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by theBusiness Corporations Act.

17.5 A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to their office of director for a period and on the terms (as to remuneration or otherwise)that the directors may determine.

17.6 No director or intended director is disqualified by their office from contracting with the Company either with regard to the holding or any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

17.7 A director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

17.8 A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and the director or officer is not accountable to the Company for any remuneration or other benefits received by them as director, officer or employee of, or from their interest in, such other person.

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Powers and Duties of Directors

Remuneration of Directors

Part 16 of the Articles

16.1 The directors must, subject to the Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by theBusiness Corporations Act or by the Articles, required to be exercised by the shareholders of the Company.

16.2 The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends)and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the director to sub-delegate all or any of the powers, authorities and discretions for the time being vested in them.

Borrowing Powers of Directors,

Part 8 of the Articles

8.1. The directors, if authorized by the directors, may:

(1)

borrow money in such manner and amount, on the security, from the sources and upon the terms and conditions as they consider appropriate;

(2)

issue bonds, debentures, and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;

(3)

guarantee the repayment of money by any other persons or the performance of any obligation of any other person; and

(4)

mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

Remuneration of Directors

Part 13 of the Articles

13.5 The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If they so decide, the remuneration, if any, of the directors will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer of employee of the Company as such, who is also a director.

13.6 The Company must reimburse each director for the reasonable expenses they may incur in and about the business of the Company.

13.7 If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, they may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that they may be entitled to receive.

13.8 Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to their spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

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Required Ownership of Capital by Directors

Part 13 of the Articles

13.4. A director is not required to hold a share in the capital of the Company as qualification for their office but must be qualified as required by theBusiness Corporations Act to become, act or continue to act as a director.

Dividend Rights

Part 22 of the Articles

22.2 The directors may from time to time declare and authorize payment of such dividends as they may deem advisable.

Special Rights and Restrictions

Part 9 of the Articles

9.2 The Company may by ordinary resolution:

(1)

create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, unless any of those shares have been issued in which case the Company may do so only be special resolution; or

(2)

vary or delete any special rights or restrictions attached to the shares of any class or series of shares, unless any of those shares have been issued in which case the Company may do so only be ordinary resolution.

Rules pertaining to annual general and special general meetings of shareholders are described in Sections Ten of the Company’s Articles. These rules are summarized as follows:

10.1 The Company must, unless an annual general meeting is deferred or waived in accordance with theBusiness Corporations Act, hold its first annual general meeting following incorporation, amalgamation or continuation within 18 months after the date on which it was incorporated or otherwise created and recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors; and

10.2 If all the shareholders entitled to vote at an annual general meeting consent by unanimous resolution under theBusiness Corporations Act to all of the business required to be transacted at that annual general meeting, the meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select the Company’s annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

10.3 The directors may, whenever they think fit, call a meeting of shareholders to be held in British Columbia, Calgary, Alberta or Toronto, Ontario or at such other location as may be approved by the Registrar of Companies at such time and place as may be determined by the directors.

10.4 The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided by these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been give or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

(1)

if and for so long the Company is a public company, 21 days;

(2)

otherwise, 10 days.

10.5 The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under theBusiness Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

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(1)

if and for so long as the Company is a public company, 21 days;

(2)

otherwise, 10 days.

If no record date is set, it is 5:00 p.m. on the business day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.6 The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under theBusiness Corporations Act, by more than four months. If no record date is set, the record date is 5:00 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.7 The accidental omission to send notice of any meetings to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of such meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting.

10.8 If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:

(1)

state the general nature of the special business; and

(2)

if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders:

(a)

at the Company’ records office, or at such other reasonably accessible location in British Columbia as is specified in such notice; and

(b)

during statutory business hours o any one or more specified days before the day set for the holding of the meeting.

Proceedings at Meetings of Shareholders

Part 11 of the Articles

11.1 At a meeting of shareholders, the following business is special business:

(1)

at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting;

(2)

at an annual general meeting, all business is special business except for the following:

(a)

business relating to the conduct or voting at the meeting;

(b)

consideration of any financial statements of the Company presented to the meeting;

(c)

consideration of any reports of the directors or auditor;

(d)

the setting or changing of the number of directors;

(e)

the election or appointment of directors;

(f)

the appointment of an auditor;

(g)

the setting of the remuneration of the auditor;

(h)

business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution; and

(i)

any other business under which, under these Articles or theBusiness Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

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11.2 The majority of votes required for the Company to pass a special resolution at a meeting of shareholders are two-thirds of the votes cast on the resolution.

11.3 Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is two shareholders present in person or represented by proxy.

11.4 If there is only one shareholder entitled to vote at a meeting of shareholders:

(1)

the quorum of one person who is, or who represents by proxy, that shareholder; and

(2)

that shareholder, present in person or by proxy, may constitute the meeting.

11.5

The directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, auditor of the Company and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.

1.6

No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

11.7

If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

(1)

in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and

(2)

in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

11.8

If, at the meeting to which the meeting referred to in Article 11.7(2) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

11.9

The following individuals are entitled to preside as chair at a meeting of shareholders:

(1)

the chair of the board, if any; or

(2)

if the chair of the board is absent or unwilling to act as chair of the meeting, the first of the following individuals to agree to act as chair: the president, if any.

11.10

If, at any meeting of shareholders, the chair of the board or president are not present within 15 minutes after the time set for holding the meeting, or if the chair of the board an the president are unwilling to act as chair of the meeting, or if the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, one of the chief executive officer, the chief financial officer, a vice-president, the secretary or the Company’s legal counsel may act as chair of the meeting and, failing them, the directors present must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose of if no director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person at the meeting to chair the meeting.

11.11

The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

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11.12

It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at any adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.

11.13

Every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.

11.14

The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered into the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favor of or against the resolution.

11.15

No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

11.16

In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

11.17

Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:

(1)

the poll must be taken:

(a)

at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and

(b)

in the manner, at the time and at the place that the chair of the meeting directs;

(2)

the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and

(3)

the demand for the poll may be withdrawn by the person who demanded it.

11.18

A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

11.19

In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and their determination made in good faith is final and conclusive.

11.20

On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

11.21

No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

11.22

The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll had been demanded.

11.23

The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting at its records office, and, during that period, makes them available for inspection during normal business hours by any shareholder or proxy holder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

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Votes of Shareholders

Part 12 of the Articles

12.1

Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

(1)

on a vote by a show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and

(2)

on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

Other Issues

Neither the Company’s articles nor British Columbia law permit: staggered terms for Directors; cumulative voting; shareholder approval of corporate matter by written consent; the adoption of various “poison pill” measures precluding shareholders from realizing a potential premium over the market value of their shares. Neither the Company’s articles nor British Columbia law require retirement or non-retirement of directors under an age limit requirement.

There are no limitations on the rights to own securities.

There is no provision of the Company’s articles that would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company (or any of its subsidiaries).

Shareholder ownership must be disclosed to the British Columbia Securities Commission and the TSX Venture Exchange by any shareholder who owns more than 10% of the Company’s common stock.

10.C. Material Contracts

Consulting Agreement between the Issuer and William J. Pincus dated July 25, 2003.⁽¹⁾

Consulting Agreement between the Issuer and Mr. Aristides Chavez dated December 1, 2003.⁽¹⁾

Consulting Agreement between the Issuer and Mr. Julio Mendoza dated December 1, 2003.⁽¹⁾

Property Sale Agreement between the Issuer and General Minerals Corporation dated September 19, 2003.⁽¹⁾

Assignment Agreement between the Company and Esperanza Silver de Mexico, S.A. de C.V. dated October 1, 2003.⁽¹⁾

Option Agreement between the Issuer and Recursos Cruz Del Sur, S.A. De C.V. dated May 7, 2003. Amended October 2, 2006⁽¹⁾

Letter Agreement between the Issuer and Silver Standard Resources Inc. dated March 22, 2005.⁽²⁾

Joint-venture agreement between the Issuer and Silver Standard Resources dated Sept 6, 2005.⁽²⁾

Amended Option Agreement between the Issuer and Recursos Cruz Del Sur, S.A. De C.V. dated October 2, 2006.⁽³⁾

Amended Stock Option Plan dated April 30, 2007.⁽³⁾

Option Agreement between the Issuer and Canadian Shield Resources Inc. and Gallant Minerals (Peru) Limited S.A. dated May 7, 2007.⁽³⁾

Option Agreement between the Issuer and Compañia Minera Terciario S.A de C.V. dated September 14, 2007.⁽⁴⁾

Option Agreement between the Issuer and Exploraciones del Altiplano S.A. de C.V. dated September 14, 2007.⁽⁴⁾

Letter of Intent between the Issuer and Silver Standard Resources Inc. dated February 28, 2011.⁽⁵⁾

Share and Asset Purchase Agreement between the Issuer and Silver Standard Resources dated June 30, 2011⁽⁶⁾

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(1)

Filed as an exhibit on Form 20F Registration Statement pursuant to section 12 (b) or (g) of the Securities Exchange Act of 1934 in June 2004.

(2)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in 2005.

(3)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in 2007.

(4)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in 2008.

(5)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in 2011.

(6)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in 2012.

10.D. Exchange Controls

Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Issuer’s securities, except as discussed in ITEM 10, ”Taxation" below.

Restrictions on Share Ownership by Non-Canadians - There are no limitations under the laws of Canada or in the organizing documents of the Issuer on the right of foreigners to hold or vote securities of the Issuer, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of the Issuer by a "non-Canadian". The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Issuer. "Non-Canadian" generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians.

10.E. Taxation

Canadian Federal Income Tax Considerations

The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of common shares of the Issuer (a "U.S. Holder") who deals at arm's length with the Issuer, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) (the "Act") and the Canada – United States Income Tax Convention (the "Treaty"), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.

Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 15% withholding tax on dividends paid or credited or deemed by the Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10% of the voting shares of the Issuer and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities.

In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the Issuer unless (i) at any time in the five-year period immediately preceding the disposition, 25% or more of the shares of any class or series of the capital stock of the Issuer was owned by (or was under option of or subject to an interest of) the U.S. holder or persons with whom the U.S. holder did not deal at arm's length, and (ii) the value of the common shares of the Issuer at the time of the disposition derives principally from real property (as defined in the Treaty) situated in Canada. For this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits and other natural resources situated in Canada, rights to amounts computed by reference to the amount or value of production from such resources, certain other rights in respect of natural resources situated in Canada and shares of a corporation the value of whose shares is derived principally from real property situated in Canada.

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The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign corporation, such as the Issuer, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Issuer believes that it was a passive foreign investment company as at December 31, 2011.

Dividends

A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The Issuer will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.

Disposition of Common Shares

A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by theTax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Issuer. The Canadian Venture Exchange is a prescribed stock exchange under theTax Act. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada.

A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.

United States Taxation

For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain or loss on the sale of the Issuer's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or loss will be a capital gain or capital loss if the Issuer's common shares are a capital asset in U.S. Taxpayer's hands.

For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Issuer's common shares. A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability. A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Issuer's common shares.

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Under a number of circumstances, a United States Investor acquiring shares of the Issuer may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Issuer will be required to file such a return. Other filing requirements may apply, and United States Investors should consult their own tax advisors concerning these requirements.

10.F. Dividends and Paying Agents

The Issuer has not declared any dividends on its common shares for the last five years and does not anticipate that it will do so in the foreseeable future. The present policy of the Issuer is to retain future earnings for use in its operations and the expansion of its business.

Notwithstanding the aforementioned: the Issuer is unaware of any dividend restrictions; has no specific procedure for the setting of the date of dividend entitlement; but might expect to set a record date for stock ownership to determine entitlement; has no specific procedures for non-resident holders to claim dividends, but might expect to mail their dividends in the same manner as resident holders. The Issuer has not nominated any financial institutions to be the potential paying agents for dividends in the United States.

10.G. Statement by Experts

The Issuer’s auditors for its financial statements for each of the preceding three years, was De Visser Gray, Chartered Accountants. Their audit report for Fiscal 2011 and 2010 is included with the related financial statements in this Annual Report.

10.H. Documents on Display

Copies of the documents referenced in this annual report are available at the Company’s office located at Suite 501, 543 Granville Street, Vancouver, British Columbia, Canada.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

--- No Disclosure Necessary ---

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A. Debt Securities --- No Disclosure Necessary ---

12.B. Warrants and Rights --- No Disclosure Necessary ---

12.C. Other Securities --- No Disclosure Necessary ---

12.D. American Depository Shares -- No Disclosure Necessary ---

- 71 -

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

--- No Disclosure Necessary ---

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY

HOLDERS AND USE OF PROCEEDS --- No Disclosure Necessary ---

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management is responsible for establishing and maintaining disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to senior management, including Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), by others within those entities on a timely basis so that appropriate decisions can be made regarding public disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended) as of December 31, 2011. The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures as of December 31, 2011, were effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the Chief Executive Office and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for designing, establishing and maintaining a system of internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) to provide reasonable assurance that the financial information prepared by the Company for external purposes is reliable and has been recorded, processed and reported in an accurate and timely manner in accordance with GAAP. The Board of Directors is responsible for ensuring that management fulfills its responsibilities. The Audit Committee fulfills its role of ensuring the integrity of the reported information through its review of the interim and annual financial statements. Management reviewed the results of their assessment with the Company��s Audit Committee.

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

To evaluate the effectiveness of the Company’s internal control over financial reporting, Management has used the Internal Control - Integrated Framework, which is a suitable, recognized control framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has assessed the effectiveness of the Company’s internal control over financial reporting and concluded that such internal control over financial reporting is effective as of December 31, 2011.

- 72 -

Limitations on the Effectiveness of Controls

The Company's management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Attestation Report of the Registered Accounting Firm.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this Form 20-F annual report.

Changes in Internal Controls Over Financial Reporting

There has been no change in the Corporation’s internal control over financial reporting that occurred during the period covered by this Form 20-F, that has materially affected or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not have an audit committee financial expert at this time.

ITEM 16B. CODE OF ETHICS

The Board of Directors of the Corporation has responsibility for the stewardship of the Corporation including responsibility for strategic planning, identification of the principal risks of the Corporation’s business and implementation of appropriate systems to manage these risks, succession planning (including appointing, training and monitoring senior management), communications with investors and the financial community and the integrity of the Corporation’s internal control and management information systems. To facilitate meeting this responsibility, the Board of Directors seeks to foster a culture of ethical conduct by striving to ensure the Corporation carries out its business in line with high business and moral standards and applicable legal and financial requirements. In that regard, the Board has

adopted a written Code of Business Conduct and Ethics (the “Code”) for its directors, officers, employees and consultants.

established a whistleblower policy which details complaint procedures for financial concerns.

The Board must also comply with the conflict of interest provisions of the British ColumbiaBusiness Corporations Act, as well as the relevant securities regulatory instruments, in order to ensure that directors exercise independent judgment in considering transactions and agreements in respect of which a director or Executive Officer has a material interest.

- 73 -

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table discloses the fees billed to the Company by its external auditor during the last two financial years.


Financial Year Ending	Audit Fees⁽¹⁾	Non-Audit Related Fees⁽²⁾	Tax Fees⁽³⁾	All Other Fees
December 31, 2011	$34,000	13,000	0	0
December 31, 2010	$30,000	0	0	0

(1)

The aggregate fees billed by the Company’s auditor for audit fees.

(2)

The aggregate fees billed for assurance and related services by the Company’s auditor that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not disclosed in the ‘Audit Fees’ column. These fees are related to the auditor’s reviews of the Issuer’s Form 20F and the Issuer’s first quarter interim financial statements in relation to the compliance and conversion to International Financial Reporting Standards.

(3)

The aggregate fees billed for professional services rendered by the Company’s auditor for tax compliance, tax advice, and tax planning.

The audit committee has established policies and procedures that are intended to control the services provided by the Company’s external auditors and to monitor their continuing independence. Under these policies, no services may be undertaken by the auditors, unless the engagement is specifically approved by the audit committee or the services are included within a category which has been pre-approved by the audit committee. The maximum charge for services is established by the audit committee when the specific engagement is approved or the category of services pre-approved. Management is required to notify the audit committee of the nature and value of pre-approved services undertaken.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

ITEM 16E. PURCHASES OF EQUITY SECFURITIES BY THE ISSUER/AFFILIATED PURCHASERS

ITEM 16F. CORPORATE GOVERNANCE

ITEM 16G. MINE SAFETY DISCLOSURE

---Not Applicable---

PART III

ITEM 17. FINANCIAL STATEMENTS

The Issuer's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with International Financial Reporting Standards (IFRS), the application of which, in the case of the Issuer, conforms in all material respects for the periods presented with United States GAAP.

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The audit report of De Visser Gray, Chartered Accountants, is included herein immediately preceding the audited financial statements.

Audited Financial Statements

Consolidated Statements of Financial Position at 12/31/2011 12/31/2010, and 01/01/2010.

Consolidated Statements of Comprehensive Loss for the years ended 12/31/2011 and 2010.

Consolidated Statements of Cash Flows for the years ended 12/31/2011 and 2010.

Notes to Consolidated Financial Statements

- 74 -

ITEM 18. FINANCIAL STATEMENTS

The Issuer has elected to provide financial statements pursuant to ITEM #17.

ITEM 19. EXHIBITS

New Articles of the Company and Notice of Alteration⁽¹⁾

Material Contracts:

Consulting Agreement between the Issuer and William J. Pincus dated July 25, 2003.⁽¹⁾

Consulting Agreement between the Issuer and Mr. Aristides Chavez dated December 1, 2003.⁽¹⁾

Consulting Agreement between the Issuer and Mr. Julio Mendoza dated December 1, 2003.⁽¹⁾

Property Sale Agreement between the Issuer and General Minerals Corporation dated September 19, 2003.⁽¹⁾

Assignment Agreement between Esperanza Resources Corp. and Esperanza Silver de Mexico, S.A. de C.V. dated October 1, 2003.⁽¹⁾

Option Agreement between the Issuer and Recursos Cruz Del Sur, S.A. De C.V. dated May 7, 2003. Amended October 2, 2006⁽¹⁾

Letter Agreement between the Issuer and Silver Standard Resources Inc. dated March 22, 2005.⁽²⁾

Joint-venture agreement between the Issuer and Silver Standard Resources dated Sept 6, 2005.⁽²⁾

Amended Option Agreement between the Issuer and Recursos Cruz Del Sur, S.A. De C.V. dated October 2, 2006.⁽³⁾

Amended Stock Option Plan dated April 30, 2007.⁽³⁾

Option Agreement between the Issuer and Canadian Shield Resources Inc. and Gallant Minerals (Peru) Limited S.A. dated May 7, 2007.⁽³⁾

Option Agreement between the Issuer and Compañia Minera Terciario S.A de C.V. dated September 14, 2007.⁽⁴⁾

Option Agreement between the Issuer and Exploraciones del Altiplano S.A. de C.V. dated September 14, 2007.^(4)\

Letter of Intent between the Issuer and Silver Standard Resources Inc. dated February 28, 2011.⁽⁵⁾

Share and Asset Purchase Agreement between the Issuer and Silver Standard Resource dated June 30, 2011.⁽⁶⁾

(1)

Filed as an exhibit on Form 20F Registration Statement pursuant to section 12 (b) or (g) of the Securities Exchange Act of 1934 in June 2004.

(2)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in 2005.

(3)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in 2007.

(4)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 in 2008.

(5)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 in 2011.

(6)

Filed as an exhibit on Form 20F Annual Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 in 2012.

List of Foreign Patents – N/A

Calculation of earnings per share – N/A

Explanation of calculation of ratios – N/A

- 75 -

List of Subsidiaries –

Esperanza Services, Inc.

Incorporated November 20, 2007

Owned 100% by Esperanza Resources Corp.

Directors: William Pincus

Treasurer: William Pincus

Secretary: Teresa M. Casillas

1580 Lincoln Street, Suite 700

Denver, Colorado, 80203-1501

United States of America

Phone: 303-830-0988

Fax: 303-830-9098

Esperanza Exploration (BVI) Inc.

Incorporated February 2, 2007

Owned 100% by Esperanza Resources Corp.

Directors: William Pincus, J. Stevens Zuker

CFO: David Miles

Secretary: Kim C. Casswell

C/O Orbis Services (BVI) Limited

PO Box 650, Tropical Isle Building

Road Town, Tortola, British Virgin Islands

Phone: 284-494-5800

Fax: 284-494-2545

Esperanza Silver Peru S.A.C.

Incorporated March 19, 2007

Owned 100% by Esperanza Resources Corp.

Directors: No Officers or Directors

Ramirez Gaston 213 Miraflores

Lima, 18 – Peru

Phone: +51-1-358-6651

Fax: +51-1-358-6651

Esperanza Silver De Mexico SA DE CV

Incorporated October 24, 2003

Owned 100% by Esperanza Resources Corp.

Officers: William Pincus, William Bond

Legal Representative: Eduardo Robles

C/O Sonora No. 760 e/Gomez Farias y H de Independecia

Col Pueblo Nuevo CP23060

La Paz BCS

Phone: +52-(612)125-9005

Fax: Not Applicable

Global Minerals Ltd.

Incorporated January 1, 1992

Owned 26.7% by Esperanza Resources Corp.

Directors: William J. Pincus, George W. Heard, Ron Little, Stuart Tennant, Scott Brunsdon

CFO: Ann Fehr

Secretary: Jaqueline Collins

Address Suite 910, 475 Howe Street, City/Prov or State/Country Vancouver, British Columbia, Canada

Zip/Postal Code V6C 2B2

Telephone: 604 689-2599

Fax: 604 689-3609

- 76 -

Statement pursuant to the instructions to Item 8.A.4, regarding the financial statements filed in registration statements for initial public offerings of securities – N/A

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Avg


	Share capital		Other reserves	Accumulated	Deficit	Total
	Number of shares	Amount	Other reserves	other comprehensive loss	Deficit	Total
		$	$	$	$	$

Balance at January 1, 2010 (Note 17)	47,934,521	34,960,559	5,961,586	-	(33,526,901)	7,395,244

Issue of shares	7,426,900	8,971,273	2,653,872	-	-	11,625,145
Share issue costs	-	(481,349)	(143,371)	-	-	(624,720)
Agent’s warrants issued on private placement	-	(77,399)	77,399	-	-	-
Exercise of share options	1,163,300	854,437	-	-	-	854,437
Transfer of value on exercise of share options	-	416,789	(416,789)	-	-	-
Exercise of warrants	242,500	424,375	-	-	-	424,375
Transfer of value on exercise of warrants	-	68,451	(68,451)	-	-	-
Share based payments	-	-	1,003,744	-	-	1,003,744
Net loss for the year	-	-	-	-	(5,958,946)	(5,958,946)

Balance at December 31, 2010 (Note 17)	56,767,221	45,137,136	9,067,990	-	(39,485,847)	14,719,279


Balance at January 1, 2011	56,767,221	45,137,136	9,067,990	-	(39,485,847)	14,719,279

Exercise of share options	462,000	679,760	-	-	-	679,760
Transfer of value on exercise of options	-	302,622	(302,622)	-	-	-
Exercise of warrants	262,700	459,725	-	-	-	459,725
Transfer of value on exercise of warrants	-	67,129	(67,129)	-	-	-
Share based payment	-	-	531,526	-	-	531,526
Share cancellation	(6,459,600)	(10,012,380)	-	-	-	(10,012,380)
Share of other comprehensive loss of associate	-	-	-	(599,777)	-	(599,777)
Net income for the year	-	-	-	-	16,545,340	16,545,340

Balance at December 31, 2011	51,032,321	36,633,992	9,229,765	(599,777)	(22,940,507)	22,323,473


	Office	Computer	Vehicles	Camp	Total
Cost	$	$	$	$	$
As at January 1 2010	43,390	74,289	58,435	12,530	188,644
Additions	7,472	22,742	-	-	30,214
As at December 31, 2010	50,862	97,031	58,435	12,530	218,858
Additions	9,368	5,977	62,614	-	77,959
Disposal	-	-	(27,139)	-	(27,139)
De-recognition	-	(25,731)	(4,311)	(12,530)	(42,572)
As at December 31, 2011	60,230	77,277	89,599	-	227,106

Accumulated depreciation
As at January 1, 2010	18,853	64,163	44,021	12,530	139,567
Additions	8,445	12,362	14,414	-	35,221
As at December 31, 2010	27,298	76,524	58,435	12,530	174,788
Additions	6,789	9,328	7,521	-	23,638
Disposal	-	-	(21,562)	-	(21,562)
De-recognition	-	(25,731)	(4,311)	(12,530)	(42,572)
As at December 31, 2011	34,087	60,122	40,083	-	134,292

Net book value
As at January 1, 2010	24,537	10,126	14,414	-	49,076
As at December 31, 2010	23,564	20,506	-	-	44,070
As at December 31, 2011	26,143	17,155	49,516	-	92,814


	January 1, 2010	Additions	Reductions	December 31, 2010	Additions	Reductions	December 31, 2011

Cerro Jumil – Mexico	$ 1,643,358	$ -	$ -	$ 1,643,358	$ -	$ -	$ 1,643,358
El Canario - Mexico	-	-	-	-	50,328	-	50,328
San Luis – Peru	44,494	-	-	44,494	-	(44,494)	-
Pucarana – Peru	33,195	-	-	33,195	-	-	33,195
Utcucochia – Peru	10,330	-	-	10,330	-	-	10,330
Santa Fe – Peru	6,482	-	-	6,482	-	(6,482)	-
Other minor properties - Peru	10,165	5,884	(6,898)	9,151	4,980	(3,533)	10,598

	$ 1,748,024	$ 5,884	$ (6,898)	$ 1,747,010	$ 55,308	$ (54,509)	$ 1,747,809


	Mexico		Peru
	Cerro Jumil	Other	Pucarana	Colqui Orcco	Pucara	San Luis	Other & General	Total
	$	$	$	$	$	$	$	$
Acquisition costs	-	-	-	-	-	-	-	-
Assays	230,486	9,747	8,898	14,789	-	-	5,780	269,700
Community programs	1,240	-	2,043	6,102	2,582	-	5,679	17,646
Consulting	19,717	-	23,791	49,261	1,804	-	20,424	114,997
Contract services	561,629	135,577	-	43	-	-	-	697,249
Drilling	1,023,507	-	215,946	427,204	-	-	-	1,666,657
Engineering	46,936	-	-	-	-	-	-	46,936
Environmental / permitting	2,871	-	10,753	9,269	-	-	-	22,893
Feasibility Studies	83,489	-	-	-	-	-	-	83,489
Field costs	175,150	55,613	38,070	83,979	530	-	4,048	357,390
Field rent & utilities	48,415	-	-	-	-	-	-	48,415
Office & administrative	-	48	1,048	570	58	-	4,191	5,915
Property tax	29,617	41,796	20,070	9,600	-	-	21,790	122,873
Salaries and benefits	159,087	65,888	128,540	214,932	21,804	11,147	319,832	921,230
PEA	54,418	-	-	-	-	-	-	54,418
Road and access costs	99,965	-	-	-	-	-	1,213	101,178
Travel	5,814	9,372	33,884	24,111	1,696	5,609	40,717	121,203
Vehicles	85,448	13,714	23,179	18,071	1,879	-	41,705	183,996
	2,627,789	331,755	506,222	857,931	30,353	16,756	465,379	4,836,185
Exploration Cost Recovery	-	(14,714)	-	-	-	-	(1,639)	(16,353)

	2,627,789	317,041	506,222	857,931	30,353	16,756	463,740	4,819,832

Esperanza Resources (ESPZF) Inactive 20-F2011 FY Annual report (foreign)

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